The price of an average (benchmark) home in Vancouver, Canada is $1,400,000 which is 30.1% higher than it was a year ago. Yes, 30.1%! Everything seems rosy when riding a hot investment until one thing goes awry. We never seem to know what that'll be, but experienced money managers usually get the heebeejeebies just before it happens -and that's what is happening these days.
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Canadian households are heavily leveraged and with their level of debt in proportion to income now hovering at record levels, they are vulnerable to a range of economic shocks that could create a financial crisis. I am of the opinion, however, that the range of variables at play discussed in this article would mitigate any possibility of a meltdown of Canada's financial system. Let me explain.
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The Canadian housing market is deep into bubble territory. We all know that bubbles can go on for longer than most people think but with the crash in oil prices and people fully believing their own hype, the market is set up for a big fall from grace. Canadian households are deep into debt and make American households look like penny pinchers. Here are five charts showing that the implosion in Canada’s housing market is inevitable.
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