Wage Increases Can’t Keep Up With House Prices

The steadily increasing price of homes in cities across Canada is on the rise faster than recent wage increases can keep up with it. According to the Canadian Real Estate Association, the home index price rose 5.2 percent just this past May. CBC news reports weekly income increasing by only eight tenths of a percentage point. Many economists are citing this disproportional increase as reason for the government to €tighten up€ mortgage rules even more than what has already been done. BMO Capital Markets Economist Sal Guatieri says, “€œBy our estimate, to neutralize the impact on mortgage payments of the amortization rule change, average home prices would need to fall by about four per cent.€” In response, Ottawa has begun limiting the availability of government-insured mortgages, limiting them to home worth less than one million dollars with amortizations of 25 years or less. These cutbacks are reportedly an effort to curb the overheated real estate markets we’ve been seeing pop up in Toronto and Vancouver. Economists carry a generally positive outlook, mostly agreeing that the preventative measures now being taken should be sufficient to bring the market into a soft landing, as opposed to crashing and burning.

Posted in: Real Estate

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