Canadian Housing / Condo Bubble – It’s Getting Frothy

I’ve been watching the Canadian housing market for over the last decade now, and let me tell you have things been getting really frothy. In downtown Toronto, you can now get a one bedroom 700 square foot condo unit for $280,000 to $320,000. My wife and I decide earlier last month to walk our weekends in downtown Toronto to enjoy the scenery and restaurants and during those excursions I kept a mindful eye on all the condo construction and cranes that were all over.

I’ve always had an inkling that what happened in the United States with the biggest real estate bubble starting in 2007 will happen in Canada…we are just about 6-10 years behind the American bubble. So within a few years there is going to some major issues in the Canadian housing market.

About 10 years ago, the same spec unit would be selling for $170,000. The condominiums downtown right now are selling more than my 1200 square foot townhouse with a large backyard, north of Toronto… heck my back yard is bigger than the condos that they are asking for that price. I will say again insane.

For people living in the province of Ontario, everyone has noticed that to get into a home or condo is really unaffordable and expensive now. Most people out of college cannot afford a condo or a home in Toronto and the greater Toronto area.

A young family are really struggling to come up with a decent down payment.

A lot of people are deciding to pay only 5-10% down payment and then carry an extremely large mortgage in excess of $250,000 to $300,000. That is a huge mortgage and their payments are over $2500/month. Add to that , if you have less than 20% down payment you will need to pay mortgage insurance too.

Roughly, ten years ago my mortgage was less than $175,000 and my payments are like $1100. To be honest, I wouldn’t even be able to buy a house or condo with today’s price if I needed a place to live…I don’t know how the younger generation is doing it. One other thing is that interest rates have no where to go but up within the next decade, so there are lots of headwinds coming for the Canadian housing market and economy.

Anyway, have a read of a Reggie Middleton article below, I think he is dead on and when the Canadian real estate bubble blows it’s not going to be pretty:

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