Around the globe, countries are bracing for and trying to prevent a housing bubble. There is one country that is bucking that trend, Canada.

While banks around the world are flooding their economies with cheap credit to prevent bubble Canada has decided that our home price inflations are just an uncontrollable consequence of the environment. The Bank Of Canada appears to be welcoming rapid home price growth and calling it, “needed”.The Bank of Canada (BoC) governor, when asked about taming home prices, said “we need the growth.”

It’s interesting to note that the Government of Canada hasn’t mentioned home prices since the pandemic started.

Other countries and economies that are facing rapid home price growth are attempting to stop it. There are even countries trying to pop their own current housing bubbles.

While the housing bubble might not seem like a big deal there are consequences and sacrifices that come with skyrocketing home prices and the effects are usually felt by the younger generations.

The Low-Interest Rate Problem

Most countries are embracing accommodative monetary policy these days. This is when central banks try to grow the money supply in a downturn, to stimulate the economy. They lower interest rates, and hope businesses and households use cheap credit. Businesses ideally use the cheap capital to expand operations and buy inventory.

Households ideally use the cheap cash to consume or finance large purchases. Consumption of goods and services is how economies work.

Our problem is this:

• Almost 10% of our population is unemployed.
• More than 200,000 Canadian businesses could close permanently due to COVID. If that happens, the unemployment number will rise.
• There were over $500M of double CERB payments made and Canadian’s are now receiving letters to repay those funds.
• (53%) of Canadians are living paycheque to paycheque.
• One in four (25%) say their debt load is overwhelming.
• More than one-quarter of Canadian’s (27%) don’t have enough for their daily needs.

We want to leave you with one final thought – it took a global pandemic and government intervention money for home prices to soar and this frenzy to begin. What happens when the money stops?

As always, if you need help buying or selling your home please contact us. Gregg Bamford and Ryan Bamford.