The Unexpected Bubble of the Housing Boom

In 2008, during the year’s Great Recession, a highly risk-reluctant banking division and a strong and powerful regulatory propensities have relatively protected Canadians from the downturn. However, after 10 years, they can be relatively seen to be on the edge of financial crisis. And they refer to it as the 2018 Canadian housing bubble.

Due to the expansion of subprime lending, plus the skyrocketing combinations of debts and house prices, many experts believe that the housing market of Canada is near to an outbreak. As as professionals describe it, this situation could actually be even worse than the historical 6 years of recessionary period in the United States from 2006 to year 2012.

All the news of the Real Estate industry of Canada can’t help but talk about the worrying signs seen in consumer sentiments. And over the last 5 years, google trend for the search term “2018 housing crash” has hiked up a lot.

It all began as a housing boom with low interest rates, strong immigration, and foreign and global investments. However, for the past 5 years, the market outputs of the Real Estate industry have outrun the basics and the fundamentals.

And even though in the recent years, Canada-based lenders have decided to loosen up in the reviews and requirements for taking loans, a lot of millenials are still not buying their houses and properties.

Canada is known to have the largest number of debtors and has the highest debt levels in the world. When compared to other countries, Canadian citizens are really put into jittery grounds.

The factor to consider that makes the Canadian real estate market a different specie from US is the interest rate. While US can lock in their interest rate in the market for 15 to 30 years, Canadian lending doesn’t work that way.

Canadian housing markets resets the interest rate every 5 years. And the reset is based on current market rate. And sometime next year, 50% of the active homeowners in the country are on to a “reset”.

However, the Bank of Canada assured the public that they are only expecting a little increase during this “reset”. But due to the high levels of debt of most Canadian citizens, even a small increase can put them at risk by default.

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