According to a Feb. 28 article in Maclean’s magazine, homes in Canada are worth $3 trillion, nearly twice the country’s gross domestic product. Prices have doubled since 2002 and risen by 13 percent since 2008.
Home ownership stands at a record high of 64 percent. The average family debt load is $1.53 for every dollar of income, nearly the level it was in the U.S. before the housing market crashed. As of last year, Canadians had borrowed $220 billion in mortgage loans. Per capita, this is three times higher than it was in the U.S. at its peak.
The construction industry, including all the financial institutions involved in housing, employs 27 percent of the workforce, more than it did at the height of the U.S. boom.
“Overconfidence is what’s driving the market,” David Madani an analyst with Capital Economics, told MacLean’s. “It’s been fuelled by cheap credit. That just can’t keep going on forever.”
In June, Finance Minister James Flaherty announced stricter mortgage lending rules. Borrowers will be allowed to use up to 80 percent of their property’s value as collateral for home-equity loans, down from 85 percent. The maximum amortization period for government-incurred mortgages was reduced from 30 to 25 years.
Recently prices and sales of houses have begun to decline. On Sept. 24, Canadian Business published an article titled “Canada’s Housing Crash Begins” by Joe Castaldo. “For months, policy-makers have expressed concerns about the country’s two biggest real estate markets [Toronto and Vancouver],” he wrote. “The weakness in both cities marks the start of a reversal in the long boom for Canadian real estate.”
Meanwhile, the official unemployment rate for August was 7.3 percent, unchanged from the previous month. Headlines trumpeted the creation of 34,000 new jobs. But, similar to the official increase in the U.S., the increase is in part-time work. There were 46,700 more part-time jobs, while there were 12,500 fewer full-time jobs. Manufacturing dropped 36,400 workers and construction declined by 44,000.
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