bravo festival condos prices.Canadian real estate market. The Bank of Canada announced that it would raise the benchmark interest rate for the Canadian dollar from 0.5% to 0.75%. This is the first time in the past seven years that the Bank of Canada has raised its benchmark interest rate.Please Visit: bravo festival condos prices to Get Your VVIP Registration Today!
At a time when the outlook for global economic growth is uncertain, the Bank of Canada dares to “go against the tide” and tighten monetary policy, which means it is worth analyzing and discussing.
From the perspective of Canada’s macroeconomic environment, its real estate market is an area of great concern. It is even no exaggeration to say that Canada’s real estate market is one of the main reasons why the central bank raised its benchmark interest rate.
In May, the International Monetary Fund (IMF) issued a report warning that Canada’s household debt ratio is too high. One of the main reasons behind this is the rise in house prices in Canada.
Housing prices in Vancouver and Toronto have caused social problems, which has led to the disqualification of many young first-time buyers, IMF said in the report.
The average debt ratio of Canadian households (blue line) is rising, unaffected by the 2008 financial crisis. In the same period, the United States began to “deleverage” after the financial crisis. As a result, Canada’s household debt ratio surpassed that of the United States in 2010. By 2016, Canada’s household debt-to-GDP ratio had reached 100%, surpassing even the level of the United States before the 2008 financial crisis.
Historically, when a country’s debt ratio continues to rise above a certain level, it is often followed by the bursting of a bubble and the resulting economic crisis.
The table above summarizes several famous cases of the bursting of the real estate bubble in the world over the past 20 years. We can see that the real estate markets of these countries show some commonness.
First of all, the establishment of a bubble in the real estate market is a long process. Whether it is the United States, Greece, or Spain or Ireland, it took at least a decade for the housing market leverage cycle to reach a “high risk” state. Second, in the leveraging cycle, the economic leverage ratio of these countries has grown relatively fast. In popular terms, the country’s debt ratio is rising rapidly, and more people are buying houses through bank loans. Third, due to the rapid rise in leverage, the country’s total debt ratio is relatively high at the end of the leverage cycle, even exceeding 100% of GDP. Of course, these countries also experienced the pain of the bursting of the bubble in the end, and even many families went bankrupt as a result.
Judging from the current state of Canada’s economy, its leverage cycle has lasted for more than a decade (since 2001), with an annual leverage growth rate of 3.1%, similar to that before the collapse of the US real estate market. Since Canada already has a high debt-to-GDP ratio, after years of leverage, its total debt ratio has reached an alarming level.
House prices in Vancouver and Toronto, the two cities most favored by Chinese immigrants in Canada, have exceeded those in metropolises such as New York.
As shown in the picture above (Demographia, 2017), the price-to-income ratio in Vancouver, Canada is as high as 12 times. In other words, an ordinary working class needs not to eat or drink for 12 years before he can afford to buy a house. The house price / income ratio in Toronto is slightly better, but it is also about eight times higher. No wonder the International Monetary Fund has warned that high house prices in some big cities in Canada may cause a social crisis.
Over the past decade, housing prices in Vancouver and Toronto have soared, thanks to the contribution of immigrants from China, including Hong Kong.
For example, the figure above shows that the number of Chinese immigrants into Canada increased by about 64% in the 10 years from 2001 to 2011. More than half of Chinese immigrants live in Ontario, while the vast majority (84 per cent) live in the Greater Toronto area.
The second most popular Canadian destination for Chinese immigrants is BC, and the vast majority (95 per cent) of these immigrants choose to settle in Vancouver.
According to a population analysis report released by Canadian scholar Daniel Hiebert in 2012, the number of Chinese immigrants in Toronto and Vancouver will double by 2031, when the number of whites in both cities will fall below 50 per cent.
