Leo's Notes:Random

Canadian Real Estate Market

In summary, prices in the Canadian real estate market has risen too much too fast and the market will correct itself by having the prices go back down. Government and the bank of Canada will try to keep the real estate prices... (how?)

The housing market, like any other market (such as the stock market), runs on debt with only a small percentage of real wealth; the rest is fictional. Stocks runs on margins while real estate runs on banks lending lots of easy money to people.

Real estate prices have gone up because of artificially and historically low interest rates (citation) resulting in more money being pumped into the market. With low interest rates, people have less incentive to save and more incentive to borrow more and more with the mentality that with a small percentage now, they think they own it, when in actuality the bank/lender actually owns it.

housing prices going down 25% will result in many people being wiped out - government and bank of Canada will prevent a crash like this - unfortunately the price has gone too high and the market will balance itself, prices will have to come down

The real driver in real estate prices boils down to the interest rate.

The primary indicator of the real estate market is the interest rate

BC has a 15% foreign buyer's tax to reduce the incentive for foreign buyers (chinese) from buying in the hopes to reduce the heated prices in Vancouver. Ontario also implemented a similar tax. This tax has so far not helped the prices since builders/real estate companies now has an incentive to pay the fees. This only results in a higher overall price of all the real estate.