The Canadian housing market hit an all-time record for the number of homes sold last month, according to CREA figures released Friday April 15, 2016.
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Housing markets hot, but talk of a bubble getting louder

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Housing markets in Toronto and Vancouver are blistering hot. Vancouver sets records almost weekly with stories and photos of astronomical prices paid for shacks. Meanwhile Toronto is currently one of the hottest luxury real estate markets in the world.

Two-speed housing market 

March 2016 was a record-selling month across Canada, but the figures are skewed by the activity in Vancouver and Victoria in British Columbia on the west coast, and in the Greater Toronto area to the east.

According to Hilliard MacBeth, however, this frenzy of buying is not going to last. MacBeth is an author and portfolio manager who advises a small group of Canadians His most recent book, “When the Bubble Bursts” forcasts some tough times ahead, and cautions people not to be taken in by the panic to get into the market now.

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MacBeth warned people about the dot.com crash in the late 1990’s .In his 1999 book, ‘Investment Traps and How to Avoid Them’  he advised against buying high in a bubble. In March of 2015 when his latest book came out, it didn’t seem possible the heady days of real estate would come to an end. But in his hometown of Edmonton, Alberta, and down the highway in Calgary, very quickly, the effect of the drop in the price of oil was becoming evidentt with thousands of people losing their jobs and hefty mortgages still to be paid.

“The original premise of the bubble is the fact that housing prices have gone up two-and-a-half to three times, pretty much all across Canada, the outrageous levels of Vancouver are a little bit more stretched, but really not that much different from Regina, Saskatchewan, for example, in terms of the pace of growth in the house prices, but wages have not!”

MacBeth explains, “because housing is bought out of wages and salaries there’s a point which is reached eventually where the household budget just can’t stretch anymore and we’re at that point in Alberta and Saskatchewan, and we will be at that point across Canada very soon.”

Hilliard MacBeth warns, that this real estate bubble will be much more painful. “There is so much debt involved that there are going to be some very, very difficult circumstances for families, including personal bankruptcy and that sort of thing.” He says the scale of trouble is very different this time.

He cautions boomers particularly, those with homes that are paid-off, not to be using them as ATM machines. He says we witnessed what happened in the United States where people were re-financing and got caught in the crash.

Boomer bankruptcies increasing

“One of the things that the boomers are doing, which is very worrisome, is they’re going deeper into debt, faster than any other age group in Canada.” In a recent conversation with a personal bankruptcy expert he was told “It’s the fastest increase in the number of bankruptcies and consumer proposals, of any age group, from about 50 to 65 and older.”

When it comes to household debt, private sector debt, Canada is among the countries with the highest rates. MacBeth wonders at all the concern about government debt, but few people are focusing on the danger of personal debt. It is mentioned as a factor in Bank of Canada announcements, but the prevailing wisdom seems to be that Canadians will deal with it eventually.

“The interesting thing about bubbles and booms is when you’re in the middle of them you can never see that they are bubbles, it always feels like it’s normal.” sys MacBeth.

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4 comments on “Housing markets hot, but talk of a bubble getting louder
  1. Avatar Tim says:

    People are so stupid. When has everyone ever been able to proper all doing the same thing? Its been so long in the making. Of course its a setup so you all loose your shirts. Thats how the rich stay rich. Stop taking the carrots they dangle like bad stocks and houses.

  2. Avatar Vallerie says:

    What a shame Canada!! These individuals don’t pay taxes and get govt checks for low income owning properties in Shaughnessy, are you serious?? What is going on with your real estate which listings barely reach the local market mainly selling overseas?!! Bringing in folks who don’t contribute a dime to your economy in the long run is so wrong. Think who are your main consumers that are actually buying products sold in Canada?? How is this still possible to flip now ‘assigning a contract’ after 1 month of sale?

    What job market are you talking about? Look at our salaries and job opportunities!! There are none and your stats are wrong! Many things have already been said on this topic. Where is our future? You need to think of growing your economy sustainably, changing your immigration laws to bring in more skilled and educated professionals from all over the world who can actually afford to settle here and work supporting and GROWING our economy. Let’s please not forget that we live in CANADA and remember all our great values that we share.Stop chasing after fake economical advantages! This money do not benefit us and our country at the end of the day and will not help us build our economy. Please understand the dangerous consequences of this all encompassing real estate ‘buy-out’-just simply put 2 and 2 together. Please think about those Canadians who have no escape route when your bubble bursts. People rely on your smart leadership. Please step out of this ignorant darkness and start making changes to taxation and real estate sale rules so that everyone who earns their income in BC or elsewhere in Canada can afford to buy a home WHERE THEY EARN LIVING and not struggle to pay for it.

  3. Avatar Sam says:

    housing crisis in areas like Lower Mainland & Metro Vancouver is a disaster affecting the quality of people lives, health, performance at work and career , their families and the way the kids are raised. It is sucking people salaries, thinking and their whole lives. Housing is a very basic need in life and when people are suffering from this issue, their lives will turn into hell. Clearly, in the last few months, dirty practices like money laundry use of buying thousands of properties by foreign investors most of which are empty have contributed hugely to the crisis in Lower Mainland and Metro Vancouver areas in BC. This has caused skyrocketing home prices and rentals as well as huge shortage of homes. The bad thing is that the BC and Federal governments are very well aware of these dirty practices but don’t seem to care despite all the pressure from national and international media, social media, university and expert economists’ studies and reports addressing the housing crisis. This is very bad, irresponsible, dirty, and disgusting.
    In the election companion, JT talked a lot about housing affordability and how his government (if elected) is going to improve it particularly for middle-class income people. Since this government came in October we saw housing affordability issues have become much worse particularly in the biggest and main two areas in Canada (Metro Vancouver and Greater Toronto areas): 30 % to 40 % increase of home prices in a matter of weeks and huge shortage of homes and rentals as a result of foreign buyers…big joke..!!!!.

    http://business.financialpost.com/personal-finance/mortgages-real-estate/foreign-buyers-are-crushing-home-dreams-in-vancouver-while-ottawa-b-c-do-nothing-study-charges

  4. Avatar Sterling says:

    Would be interesting to know if there are any accurate statistics for foreign ownership/purchases and what the vacancy rates are in places such as Vancouver. Coal Harbour was always quiet quiet even though there are dozens of towers.

    A better Canadian investor immigration policy is required whereby funds are paid into infrastructure projects by overseas investors in return for Canadian temporary residence. This will help create jobs in construction and engineering for Canadians.