Since 2000, Canadian home prices have been on a steady rise. Over the past five years, with low interest rates, robust immigration, and an infusion of foreign money, Canada's booming housing market became a bubble.
Currently, Canada's price-to-rent ratio is one of the highest recorded by the Organisation for Economic
Co-operation and Development, and is much higher than the United States' ratio during the peak of its housing bubble. Price-to-rent ratios are a measure of housing bubbles; if a home is considered overvalued if it is worth more than what it could earn as a rental property. “We’re basically in a correction now, which most people believe will be a soft landing,” author Hilliard MacBeth says to Curbed. “I’m pretty sure it’s not going to be a soft landing. It’s going to be a crash.”
The next year will be telling because unlike in the U.S., the interest rates on most mortgages in Canada reset to the current rate every five years, and 47 percent of Canadian mortgages will “reset” within the next year. While the Bank of Canada expects the reset rates to be on par with what they were five years ago, even a slight rise could put Canadians with a high amount of debt at risk of default.
