A reader writes:
I wanted to ask you what your thoughts were on the Canadian housing market. I know you wrote a piece on our housing market in your blog a while ago but have you been following it lately? I really want to sell my house and go rent. It is cheaper to rent than buy in pretty much any area of greater Toronto. Any condo development today is negative cashflow and people are snapping them up like crazy. Prices make no sense. You can rent a $700K townhouse in my area for $1600/month. People tell me that prices never go down and I tell them have you looked at the US market, Ireland, China, Spain, or Dubai? And they reply, it's different here. Oil prices have dropped and that will hurt certain markets such as, Alberta but it won't bring down prices here in Ontario. Anyway, what do you think could be a catalyst for falling prices or do you think high prices are here to stay?
Rather than lowering the millage rates to account for the rapid rise in property values, the local governments just raked it in and spent it. As a result, property taxes went up dramatically, within about a year of ownership, and many folks just failed to account for this.
And the granddaddy of them all: "You'd better buy now before you are priced out of the market forever!" - once again, using fear to sell us a bad deal. When you hear that, it is bubble-time.
UPDATE: some interesting links and comments from my reader. Looks like another "perfect storm" to me. Oh, but wait, since they don't have the Community Reinvestment Act, they are safe!
Debt to disposable income is 165% in Canada and has been rising for years.