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Deflating the Canadian Real Estate Market Bubble Before It Bursts Deflating the Canadian Real Estate Market Bubble Before It Bursts
by Mirella Ionta
2017-11-23 11:10:43
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Dedicated to Vancouver, British Columbia and Toronto, Ontario

Deflating the Canadian Real Estate Market Bubble Before It Bursts


Inflation in this particular asset market or its “appreciation value” is rising too quickly. What policies can be passed so that Canadian property is not bought out by the well-to-do, who invest in real estate to protect their wealth from becoming devalued over time by inflation? In avoiding inflation, these well-to-do cause it in real estate. How do we slow down the rate of inflation in this market?

From my understanding of this bubble, it seems that there’s too much cash flow in the real estate market and, for the time being, we have to oblige the house buyer to commit to a mortgage payment with higher interest rates, stretched over an extended period of time. To see decreased prices, we have to discourage a demand for property and increase the supply of property, but not allow supply to exceed demand by too much.

The Financial Post has recently reported that Canada’s provincial governments have taken the required measures to ensure that the Canadian housing bubble deflates gradually before it culminates in a destructive burst. The Bank of Canada has already raised mortgage rates and this increase will spark a decreased demand for property. Home prices are expected to fall about six per cent per year beginning in 2018.

But many sceptics are not convinced Canada’s financial institutions and governments are passing effective policies that would ensure this market does not suffer a future crash. Torontonians and Vancouverites have been complaining for well over a decade about the fact that home price increases have grown at a faster pace than salaries. They lament on the government’s lack of intervention in slowing down inflation in this market.

Frustrated Canadians eager to buy their first homes or condominiums link the housing affordability crisis to the pouring in of super-wealthy immigrants. About 8,000 millionaires moved to Canada last year, many of whom Canadians believe are not even interested in becoming Canadian citizens or living in the nation.

These millionaires are investing in Vancouver and Toronto real estate to protect their wealth from becoming devalued by inflation and end up abandoning their homes for extensive periods of time so that they can tend to their offshore businesses or properties.

On the surface, their globe-trotting does not seem like it would damage the economy. We all tip our hats and raise our glasses to salute people who are able to make money and know how to protect it. With time though, one starts to think about the losses that local businesses will suffer in the neighbourhood where homes are abandoned.

Grocery stores, convenience stores, pharmacies, dry cleaners, barber shops-whose survival and profit margins depend on local residents-as well as local job-seekers, will feel the effects of the takeover by the rich-on-their-all-year-round-tours the most.

When I was living in Vancouver, I remember seeing rare sports car after sports car roar by on Cornwall Avenue. I thought that the lux cars did not suit the Vancouver streets as they were not an honest reflection of money earned in the local or national markets.

Sympathy for the Underground World

With all of the evidence of the flashy wealth stored in Vancouver, I began to see why the city had a big underground drug-trafficking world. It is impossible for an average working person to earn decent wages to make ends meet. I think some boys and girls from working or middle class parents become attracted to the underground lifestyle after feeling demoralized from an early adult age realizing how tough it would be to make it “legitimately” in the city.  


The house on the left is priced at 2.4 Million $ in the Point Grey area and this price is considered a bargain and the house on the right is valued at over 4 Million $. Are you serious Vancouver? I would not buy these run-down houses for even $300,000.

Forced into Hippie Communism

Many working class Vancouverites are forced to share their houses and apartments with many roommates just to pay the full rent. It looks like they are trying to build a commune but then one realizes that there is no alternative for survival.

Still today, it is common to see Vancouverites well into their thirties with no penny to their names under tents made of flowered bed sheets on the beaches reading one another’s palms.

In addition to interest rate hikes, Vancouver’s municipal government, in 2016, took steps to deter rich foreigners seeking a home in Vancouver by adding a tax of 15% to purchases.

But is this enough to cool down the market? What other policies can be passed to discourage the rich from using real estate as an inflation hedge?  Here are two more suggestions to consider:

1. A home buyer must mortgage at least 75% of a house payment and can only pay maximum 25% in cash even if it is the home buyer’s second home purchase.

2.Increasing the external value of the nation’s currency

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