Image by: unsplash

An analyst, Phillip Colmar, has raised concerns about Canada's housing market, characterizing it as being on the brink of "the largest housing bubble of all time." Colmar warns that if this bubble were to burst, Canada could experience a more severe recession than currently anticipated. While he doesn't predict an imminent crash, he believes it's virtually inevitable.

One of the primary factors contributing to the housing market's fragility, according to Colmar, is the significant disparity between house prices and incomes. Decades of low interest rates in Canada have lured many homebuyers into the market, resulting in excessive leverage within the system. Colmar notes that this level of leverage exceeds what the United States had before its 2008 housing market crash.

Another key issue is the structure of mortgages in Canada. Unlike the United States, where borrowers can secure 30-year mortgages, Canadians must renew their mortgages every five years at prevailing interest rates. This situation has led to high mortgage burdens and limited affordability. With interest rates in Canada at their highest levels since 2001, homeowners are already feeling the pressure, and Colmar suggests this is just a glimpse of what may come.

While Colmar doesn't predict an imminent crash, he highlights the importance of monitoring factors such as further interest rate increases and employment levels. If rising unemployment coincides with spiking mortgage rates, Canada could face a situation similar to the 2008 housing crisis in the United States, resulting in a deep deleveraging cycle, a pronounced recession, and negative impacts on the country's currency.

Read the full article on: CTV NEWS