Hilliard MacBeth, a financial adviser and author, warns the Canadian housing market may moving toward its biggest crash ever thanks to soaring home prices.
MacBeth’s new book titled When the Bubble Bursts: Surviving the Canadian Real Estate Crash
looks into the country’s real estate market, predicting that it is set to see a 40 to 50 per cent drop in value when the “bubble" pops.
Data shows the average price of a home in the Greater Vancouver area jumped 6.4 per cent in February alone.
MacBeth said in an interview with Global News
that the bubble was caused by the availability of financing.
“Canada is unique in the world in the availability of government insurance through CMHC [Canada Mortgage and House Corp.], that’s allowed the lenders to lend a phenomenal amount of money. [Household] debt levels have gone from one trillion dollars to $1.8tn, just in 15 years.
“I think the government has genuinely tried to encourage the housing market and home ownership, which started after the Second World War. But in the last 15 years it’s kind of taken on a life of its own. It’s this monster that nobody can really tame. The reality is, lenders don’t really take any risk, so they keep on providing more and more [loans].”
He argued that the Canadian housing bubble could burst as interest rates soar, but this would not be anytime soon. MacBeth, also a portfolio manager for Richardson GMP in Edmonton, said the more likely cause is recession.
“Incomes would drop, and already Toronto is like six or seven times incomes [in average mortgage loan vs household income]. Some borrowers will get into the position where they can’t afford to keep the house they have,” he said.
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