On several key metrics, Canada's housing market has far surpassed the U.S. at its peak, this initially sounds benifitial but in reality this leads to a housing bubble. This bubble "'is on par with what we had in the States back in '05, '06, '07'". This comparison leads one to realize the dilemma when you see that the U.S. housing marked crashed significantly can implicate what could be in store for Canada. Canada's market is far beyond the U.S. incomes and average rent, "Canada, according to 'the economist', is 'severly overpriced'". A survey by HSBC found that over 37 percent of millennials could not afford their housing costs and had to seek financial help from their parents. This trend is not promising for the future of the Canadian housing market and the future of the canadian economy as a whole.
Real estate is like a crutch, holding up Canada's GDP growth. In the last year Canada's GDP has fallen on an average of 0.6% monthly, the real estate sector however has grown exponentially. This real estate sector makes up as much as half of the countries economic growth. In Vancouver the housing market has been extremly influenced by foreign investment forcing the majority of house prices to skyrocket. This massive increase in prices is unsustainable and will eventually lead to a market crash. As reliant as the Canadian Economy has become on this tender market for economic growth this is unsupportable. The instabilitiy of the market and thus the economy shows how the economy is in a bad way and needs to be helped. B.C recently announced a 15-per-cent Property Transfer Tax on foreign buyers that has already decreased Metro Vancouver home sales by as much as 75%. This problem is not only occuring in Vancouver, it is also pretty extreme in Toronto and marginally effective nation-wide
Stephen Poloz, the President of the Bank Of Canada speaks in this video about how the increase in housing prices is "unlikely to be sustained, given the underlying fundamentals". It is reccomended that prospective homebuyers and lenders do not "extrapolate recent real estate price performance" because of is fear potential for a "downturn in prices" is growing. House prices have grown exponentially especially in Vancouver and Toronto, this growth is unsustainable and thus Mr.Poloz beleives that these prices are unreliable and thus imminent change should be expected. From the reliance of the economy on the housing market, "it is unlikely that economic fundamentals will justify continued strong price increases". These 30% per year jumps are unsustainable and will eventually lead to the downfall of the market, the only question is when. There is no real way to determine how bad or how long it will take for the eventual crash to occur, there is even the chance that the market slowly deflates rather than a abrupt drop which is far more prefferable.
Housing helped keep the economy humming in 2016 while oil prices lagged, but an economist warns a long-term dependence on real estate is a crisis in the making. Though the increase in the housing market will make some rich and provide a short term boost in the economy, Canadian economists take this as a warning about the "long term impact on the country". The pairing of the oil shock of 2016 and the increase in the housing prices has served to balance the economy in the sort run though the long term effect could be worse. Loosening credit standards along with the size of an average home loan has ballooned as a proportion of houshold income leading to riskier lending and borrowing.