Low interest rates in Canada over the last 12 years have helped propel its housing market to become one of the bubbliest in the world.
Canada’s Housing Market Ranked Among World’s Most Overheated Markets
The Canadian housing market has skyrocketed for 12 consecutive years. Tight inventory specifically in Vancouver and Toronto has rendered price appreciation and bidding wars in two those cities to be among the most aggressive worldwide.
Reminder it’s the New Year. You promised yourself you would become a HARRIS Coaching client. You are done wasting time and want to follow a proven path in 2022. Now, while you are here make the next natural step and join the 1000s of other agents as a HARRIS Real Estate University coaching member. No more waiting or procrastinating. Join now. Here is the quick and simple enrollment.—-> YES, Enroll Me Now In Premier Coaching. I WiLL make 2022 my best year ever!
According to Bloomberg Economics, Canada came in second of five in the world’s most bubbly housing markets. Take a look at the top five:
New Zealand
- Price to Rent Ratio – 211.1
- Price to Income Ratio – 166.6
- Real Price Growth – 13.2%
- Nominal Price Growth – 14.5%
Canada
- Price to Rent Ratio – 204.2 1
- Price to Income Ratio – 153.2
- Real Price Growth – 8.7%
- Nominal Price Growth – 10.0%
Sweden
- Price to Rent Ratio – 178.1
- Price to Income Ratio – 150.4
- Real Price Growth – 9.8%
- Nominal Price Growth13.0%
Norway
- Price to Rent Ratio –179.2
- Price to Income Ratio – 140.9
- Real Price Growth – 8.6%
- Nominal Price Growth – 10.9%
UK
- Price to Rent Ratio -152.0
- Price to Income Ratio – 131.4
- Real Price Growth – 7.2%
- Nominal Price Growth – 9.0%
Bank of Canada Expected to Lift Rates to Quash Soaring Inflation
Canadian homeowners have been playing a version of the refinancing game that Americans have been playing. The problem for Canadians, however, is that the “refinance” loans are variable-rate mortgages so the rates automatically rise with the country’s benchmark borrowing cost.
Traders in Toronto expect the Bank of Canada to raise rates by a point and a half. Industry experts say that any increase of more than one percentage point would drive current “refinanced” mortgages above current offers on conventional fixed-rate loans.
David Rosenberg, an economist who rightly predicted the 2008 US housing crash and founder/manager of his own analytics firm, Rosenberg Research & Assocs., said, “If the Bank of Canada goes at least as far as what the rates market has priced in, you’re going to have arithmetically at least a -25% plunge in residential real estate values.”
Variable Rate Mortgage Holders Betting Central Bank Won’t Go Overboard
The most recent data from Canada’s banking regulator indicates that variable or floating-rate mortgages represented more than 50% of all home loans issued each month from July to November in 2021. As a comparison, the Mortgage Bankers Association indicated that floating-rate mortgages in the US accounted for only 3% of new mortgage applications in November.
Variable-rate loans are always hard to pass up because they’re cheaper and in Canada, that “discount” is the largest it’s been in a decade. Bloomberg Economics estimates that Canadian homeowners could save about C$8,000 in interest payments in their first year if rates remain the same.
Right now, a record 27.2% of the banks’ outstanding residential loans, or C$372B, are variable-rate mortgages.
Are you ready to learn what your DISC personality style is? You know it’s critical that you understand what your natural personality style is. Once you have obtained this knowledge everything in your business and personal life will change for the better. Tim and Julie Harris are making it super simple for you to have this powerful info. Now, text the word YOU to 47372, and when you do you will instantly receive a special exclusive text link. Next, you will complete your own DISC personality test.. the results will be shared with you instantly once you complete the simple and fun test, no strings attached. Simply text the word YOU to 47372 and click the link.
P.S. (Limited time: no charge to take the complete test)
* 4 Msgs/Month. Reply STOP to cancel, HELP for help. Msg&data rates may apply. Terms & Privacy: slkt.io/JWQt
Investors are betting that the Bank of Canada won’t do more than four rate hikes of a quarter-point each. If traders are correct that the Bank of Canada will increase rates by 1.5 percentage points instead of the 1.0 investors are betting on, then all bets are off.
Thanks to Bloomberg.
