If the public reaction to The Huffington Post Canada’s report on income inequality and housing prices is anything to go by, Canadians are growing worried about a housing bubble, and about the influence of foreign investors on major real estate markets.
In the first article in its Mind The Gap series, HuffPost reported on the apparent effect that growing income inequality is having on housing prices in Canada. As the country’s wealthy grow richer and middle class wages stagnate, house prices rise, meaning ever-larger debt burdens for working Canadians.
Among commenters, not everyone agreed that income inequality is at the heart of the problem.
“Home ownership in [C]anada is at 70 per cent -- the highest it has ever been,” wrote Guy Smiley Too. “This stat alone seems to debunk the income gap theory.”
The commenter went on to suggest that Canada is in the midst of a housing bubble.
“Canadians are up to their eyeballs in dangerous debt and the banks are complicit. And why wouldn't they be when all the loans they give are insured by the government (read “public”) via the CMHC? Everyone has seen the studies showing how many people could not afford a rise in interest rates. Yes Virginia, there IS subprime lending in Canada. It's your neighbors and friends. … It looks like a classic bubble, it walks like a classic bubble...”
More at Mind The Gap: Why You Should Care About Income Inequality.. What $350,000 Will Buy You In House Markets Across Canada.. 1 In 5 Vancouver Homes Now Sell For More Than $1 Million.. Full Coverage..
Readers zeroed in on Canada’s prolonged period of low interest rates as contributing to the problem.
“The Bank of Canada should have raised interest rates ten years ago and kept them going up steadily,” wrote Peacefrogg. “I've seen homes go up as much as 200 to 500 [per cent] in less [than] two years, this was not done by demand but by greedy speculators, developers and realtors.”
Yet others suggested the whole issue makes a mountain out of a mole hill.
“The difference is Canada is not the US, we have a better banking system that keeps watching for bubbles and corrects the problems as they happen,” wrote Grizzly Bear55. “I know misery loves company, but it's not going to happen in Canada.”
“But it is happening here in Canada, albeit at a slower rate,” responded commenter Phreaked.
Others said the focus on Canada’s large markets is skewing perceptions.
“Extrapolating national trends from regional markets is ridiculous. Vancouver has a number of factors affecting its property market that do not apply in any way to the rest of Canada, yet all the alarmism seems based on that one market, or how it's numbers have affected the national average,” wrote Gender Nonspecific.
Yet others pointed to an aspect of the issue that has been gaining attention of late.
“What the article overlooks is the amount of real estate in Vancouver that is purchased by off shore money especially from China which has greatly inflated housing prices,” wrote BritishColumbian.
A recent report indicates that 20 per cent of Vancouver’s housing stock is being snapped up by foreign investors, with much of the properties bought at the high end of the market. The situation has prompted some local politicians to push for restrictions on foreign ownership of residential property.
Some housing market experts have expressed concerns that Canada’s real estate market could suffer price declines if foreign investors were to withdraw.
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