Canadian Housing Markets Are “Scarily Overpriced”

Observers outside Canada are taking a look at Canada’s inflated house prices.

Moody, a company that asses the credit worthiness of countries and businesses, along with The Economist magazine pointed fingers particularly at homes in Toronto and Vancouver.

Moody’s economist Paul Matsiras stated in his report that “the risks are less around the rapid house price appreciation per se than the fact that, relative to incomes, homes in Toronto and Vancouver are progressively becoming unaffordable either to own or to rent.

Since the year 2011, Canadian household debt has increased faster than disposable income, increasing the debt burden for consumers and the risks of a pullback in spending as interest rates rise.

Paul Matsiras warned of difficulties as the key measure of household debt to disposable income rises, now standing at nearly 165 per cent. The Economist Magazine fears that the unpredictable economy makes inflated debt and housing values more dangerous.

However, economists and Bank of Canada do not fear a housing crash. According to The Economist Magazine we shouldn’t fear a U.S.-style meltdown because Canadians are “relatively sober” with only approximately 5 per cent of mortgages deemed subprime and two-thirds are insured either by Canada Mortgage and Housing Corporation or private companies.

Reference: The Globe and Mail

http://www.theglobeandmail.com/…/economist…/article26841468/