[wyatte]

Well "only reacting now" might be a stretch. A few years back they elimintated 40 year mortgages putting them back to 25 years and adjusted the loan requirements.

Canada isn't facing a housing bubble as much as they are facing a debt bubble. Most of the recent household debt that has been record breaking year after year has been with credit cards, autos and lines of credit.

[mgbmtl]

> "Canada isn't facing a housing bubble as much as they are facing a debt bubble."

Are you sure? I've seen articles mentioning increasing debt in general, but that's mostly tied to mortgages, which isn't a big deal (unless rates rise quickly, which is unlikely).

For example: http://www.cbc.ca/news/business/canada-credit-cards-transuni...

"[credit card] delinquency rates in British Columbia and Ontario dropped by 2.1 per cent and 3.3 per cent, respectively." (by contrast to Alberta and Saskatchewan)

Car loans are ~ 2% of total debt, at least in Quebec: https://www.desjardins.com/ressources/pdf/pv170828f.pdf?resV...

[wyatte]

As I understand it, housing is out of control in Toronto and Vancouver which accounts for most of the averaged out increase in Canada's housing prices over the last 8 years. These out of control cities are experiencing the increases because of foreign purchasers pushing up the prices (they may only account for 5-10% of purchases, but that money has impacted all pricing through competition). And Canada is a great place for foreigners to have their money.

[edit: note that TO is in a short term downwards price adjustment due to the 15% foreigner tax put in recently, that will stabilize this year, but still over the last 8 years TO pricing has skyrocketted]

Even so housing across Canada has gotten more expensive. Through gentrification in these big cities, smaller cities have seen people move in causing some nominal increases too.

The result is that people all around are needing to allocate more and more money towards housing leaving them having to use credit cards and loans more. You can do a Google search on Canada household debt and there's no shortage of articles declaring record breaking household (non-mortgage) debt levels.

So yeah it's all one big problem, but it's the household debt that's going to kill them, not the mortgage debt. Foreigners will continue to invest in Canada even during a recession, because Canada will still be a good investment on a relative basis. Big cities like Vancouver and TO will hold their value as all big cities tend to even during recessions. Just look at how quickly NYC managed/recovered post 2009 compared to other US cities.

All this leads me to believe that people are in financial trouble due to household debt, though maybe it's semantics. For some when, mortgage renewals come about, does it really matter which?

[anthony_barker]

1) rates were kept low to keep the Canadian dollar exchange rate low 2) Chinese and foreign investors loaded up on real estate and locals also jumped on the band wagon 3) condos are 2x per sq ft as expensive to build as regular housing 4) building regs in Van and Toronto push everything to condos 5)low rates and mortgage insurance helped fuel the boom 6) tax policy also fueled it 7) as does immigration policy and bad transit systems 8) productivity gains in construction for the past 20 years are basically flat. Driving up relative cost of construction to other goods

Summary: govt created a housing bubble let's see what happens.

[msie]

they may only account for 5-10% of purchases, but that money has impacted all pricing through competition

I don't believe that. Somehow the other 90-95% don't have a greater impact? If the roles were reversed you wouldn't even consider that possibility.

[wyatte]

Well I'm not going to bother arguing the merits of supply demand curves altering pricing models. We can just agree to disagree.

I don't understand your comment on roles being reversed. I didn't realize I had a role in this and I don't know what possibility you're referring to or how it might relate. Maybe you can elaborate.