balancing debt and the housing market bubble

How The Pandemic Has Impacted The Canadian Housing Market

Despite the ongoing pandemic, Canadians have been borrowing money to buy real estate at an alarming rate.

In fact, residential mortgage credit hit a record high in 2020. For this reason, many experts fear Canada is experiencing a housing bubble, which could have serious implications for homeowners.


What’s a housing bubble?

A housing bubble happens when real estate prices are driven up so high that they become unsustainable. This rapid price increase is usually fuelled by demand rather than economic factors such as demographic changes, interest rates, or job creation.

The danger comes when the bubble bursts. When this happens, property prices come crashing down, leaving many borrowers with mortgage loans worth more than the value of their home.

 

What does this mean for Canadian households?

As it stands, Canadian households owe more than $1.65 trillion in mortgage debt. This number is up 7.1 per cent, or $110 billion, from last year. This rapid mortgage credit growth isn’t just fast; it’s monumental. In fact, it’s the highest mortgage growth rate Canada has seen since 2011.

For reference, the explosive price movement in Canada in 2017 was categorized as a mini housing bubble. That’s because the impact was limited to a few locations and segments of the market. Even though housing costs sharply increased, they were still manageable.
Today, the picture is less optimistic. Many experts say that if mortgage rates continue to rise or rapidly return to pre-pandemic levels, Canada is on track to be in a situation similar to the late-80s housing bubble. When that bubble burst, it led to increased debt, foreclosures, bankruptcies, reduced access to housing and a decline in economic activity.

 

What should you do if you want to buy a home?

If you want to buy property during this time, you should first research the housing market you’re interested in. For example, Canada has several real estate markets that can vary from city to city and from one neighbourhood to the next. That said, certain markets are at a higher risk than others of experiencing the aforementioned repercussions. In addition, the type of property you want to buy is also a factor. For example, the price of single-family homes has skyrocketed, while condos haven’t seen nearly as drastic of a price increase.

Lastly, before purchasing a home, you should always consider your personal financial situation. We recommend speaking with a financial advisor who can help you weigh your options and determine if now is the right time for you to purchase a home.


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If you and your family are experiencing financial hardship as a result of the pandemic, you’re not alone. At D. & A. MacLeod Company Ltd., our licensed insolvency trustees (LITs) provide credit counselling, personal bankruptcy and other debt help services to assist you on the path to financial security. Contact us today for a free consultation. We provide debt help in Ottawa, Kingston, Cornwall and elsewhere in Ontario.

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