May 14, 2016
Is Canadian real estate due for a crash? On today's show, I speak with Hilliard MacBeth, a portfolio manager and author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash, who thinks the Canadian housing bubble is about to burst.
Hilliard notes that there are four symptoms of a bubble:
- A period of rapidly rising prices
- People telling each other stories about why the price increase makes sense
- People experiencing regret that they didn’t get into the market earlier, or the fear of missing out – i.e. if they don’t get into the market now, they never will
- The media starts to talk about the bubble
He mentions that there is a prevailing myth that only Vancouver and Toronto are in a real estate bubble, when in fact the bubble exists across Canada. While incomes have only risen by 15% in the last 15 years and inflation has been under 2% for a long time, house prices have tripled. Considering that houses are paid for with income, the ratio of house-price-to-income has become so stretched that the bubble is no longer sustainable.