In this edition of 5 Minutes for Business, Hendrik Brakel (Senior Director of Economic, Financial and Tax Policy at the Canadian Chamber of Commerce) looks at the reasons and effects of soaring housing prices, as well as the very real possibility that the bubble will burst in our faces.
In 1997, there was a famous cover story in the Economist about American stockmarkets entitled “Crash Dammit!”. Frustrated analysts just couldn’t understand why massively overpriced shares kept on rising year after year. Surely, a crash was coming…three years later.
Now that there are warning signs that Canadian real estate is overvalued and cruising for a bruising, it must be time to write our own “Crash Dammit!” But how did we get here? And what effect would a rapid decrease in housing prices have on the economy?