According to Dan Werner of Morningstar, the
Canadian real estate market is seriously overvalued and Canada could see a 30%
nationwide decline in the price of houses.
Canadian debt-to-equity ratios look awfully similar to
U.S. numbers at the top of its market, as 23% of Canadian homeowners have a
debt-to-value ratio of greater than 80%. The number in the U.S. at its peak was
22%. Werner also cites evidence that many Canadian borrowers can’t handle
higher interest rates. More than 2.5 million have used the RRSP to help out
with funding the down payment. This loan must be repaid over time, or else the recipient
has to pay tax on the proceeds. In recent years, a full 25% of Canadians
couldn’t afford to pay their RRSP loans back.
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