canadian property market still riding it out
News Posted On: 29 March 2011
With interest rates so low, Canadian’s have been buying up properties, which is continuing to push up property prices in the country. The continued increases in sales transactions is great for the property market, some economists are concerned about the rising debt levels in Canada.
Canadian economist at Capital Economics, David Madani, reports that house prices may decrease up to 25 percent in the next three years. Additionally, home prices have risen to around 5 and a half times the average worker's disposable income, well over the long term average of 3.5 percent.
Economists do not think that Canada will see an “American-style” house bubble due largely to tighter lending regulations, a stronger economy, and a robust labor market. The fourth quarter alone saw gross domestic product rise 3.3 percent and the unemployment rate is almost completely back to pre-recession levels.
Currently, the Bank of Canada interest rate is about 1 percent, which is very low. Should the interest rate rise a considerable amount, some Canadians that are steeped in debt will have a difficult time with the added debt. According to a recent survey, about 18 percent of Canadians would struggle to pay their mortgages if their payments increased.
Overseas property investment is also helping the Canada property market, with Chinese investors keen to buy property in such a stable economy.
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