{"id":8913,"date":"2016-12-21T11:51:26","date_gmt":"2016-12-21T16:51:26","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=8913"},"modified":"2016-12-21T11:51:26","modified_gmt":"2016-12-21T16:51:26","slug":"rising-home-prices-pose-biggest-economic-threat-reports","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/rising-home-prices-pose-biggest-economic-threat-reports\/","title":{"rendered":"Rising Home Prices Pose Biggest Economic Threat: Reports"},"content":{"rendered":"

Rapidly rising home\u00a0prices have been a volatile issue in Canada for years, as shelter costs far outpace average incomes in some the nation\u2019s largest cities. And the risks posed by the accompanying mortgage debt\u00a0grew even more pressing in 2016, according to two reports out this week from the Bank of Canada and ratings agency DBRS<\/a>.<\/p>\n

According to data revealed by both institutions, Canadians are grappling with more high-risk debt than ever as a direct result of the housing market; the cost to buy a home is now six times that of the average household income in Canada \u2013 the highest ever, reports the BoC\u2019s Financial Systems Review<\/a>.<\/p>\n

As of Q3 this year, there were 18% more households with very large debt loads (a mortgage-to-income ratio above 450%) \u2013 up 13% from two years ago. And it should come as no surprise that the largest proportions of this debt are carried by buyers in Canada\u2019s most competitive housing markets \u2013 39% in Vancouver and 49.7% in Toronto.<\/p>\n

Meanwhile, the report from DBSR finds a drastically larger portion of household incomes are needed to pay down mortgages in these cities: 95% in the Greater Vancouver Area and 66% in the GTA, respectively. That\u2019s far higher than the amount of 39% recommended by the Canada Mortgage and Housing Corporation. To put it into perspective, excluding those two cities, the national Gross Debt Service Ratio for the rest of the country is within the safe range, at 38%.<\/p>\n

Related Read: Townhouses \u2013 The New Real Estate Reality in Toronto<\/a><\/strong><\/p>\n

New Mortgage Rules Expected to Help<\/h2>\n

While the debt numbers look daunting, both institutions are optimistic that measures put in place by both municipal and the federal government will help reign in risk. \u201cSeveral macro-prudential policies have been implemented this year, addressing high real estate prices and taxpayer exposure to the housing market,\u201d states the DBSR. The BoC concurs, finding new mortgage rules introduced this year should help counter run-away\u00a0household debt levels.<\/p>\n

Buyers and borrowers endured a number of changes introduced this year, designed to toughen mortgage qualification standards, reduce risky borrowing, as well as discourage foreign real estate speculation:<\/p>\n