Analysts are Holding Their Breath For the Collapse
The real estate market has been in constant growth in Canadian markets like Vancouver and Toronto for YEARS. Market analysts foresee a reversal, but it never comes. The factors that they predict jeopardize the market’s momentum are:
- The deceleration of the global economy means less minting of millionaires. The accessible pool of international investors seeking Canadian real estate has peaked.
- The decline of the oil and gas industry has two effects: Decreased demand – businesses fail, and the enterprises that depend on them also fail. This means less jobs, and weakens the demand for housing. Increased supply – as homeowners become unemployed and unable to maintain mortgage payments, they could be forced to sell which means an influx of housing supply.
- Also tied to the energy sector, more businesses and supporting businesses default on loans. This means the banks are increasingly vulnerable, and will likely tighten up loan policies, which in turn means it will be harder to finance homes through the banks.
- There is an enormous excess of supply nationwide. While the demand appears to nearly match the large supply in major markets, some of this originates from smaller Canadian cities where houses are put on the market in favour of migrating to the city. This intra-border exodus is not automatically accounted for.
Read the whole story at The Financial Post.