Analyst: Canada’s housing market is ‘Loonie Tunes’

Another analyst has added his voice to the conversation about the Canadian housing bubble, saying that the country is in the midst of an unprecedented housing boom that is likely to bust – and when it comes, it will be felt right across the country.

“It’s not unreasonable that we could see house prices fall by 30 to 50 per cent,” Vikram Mansharamani, a global equity investor and lecturer at Yale University, told CREW.

“It will pinch the entire economy and have an impact on consumers. There is a material risk that it will spread across the country.”

Naysayers who have refuted other calls of overvaluation – most notably by the Bank of Canada and the International Monetary Fund – say that Canada’s economy is regional, and that problems felt in Alberta, for instance, won’t reverberate to hot markets like Toronto and Vancouver.

But Mansharamani wrote on his website that, during a recent visit to Canada, he “noticed a schizophrenic oscillation between housing exuberance and oil-price despair” and concluded that “Canada is now among the most vulnerable large economies in the world.”

Contributing to the impending burst bubble, according to Mansharamani, is rapidly rising household debt that far exceeds GDP, house prices that have continued their upward march, and the falling price of crude oil – all of which will be felt across the country.

The naysayers point out that the impact of oil prices is a regional phenomenon, and that Alberta is not Toronto. But consider that, over the last four years, Alberta was responsible for between 50 and 85 per cent of new jobs created in Canada.

“Without the Alberta employment gains, Canada would have a nine per cent unemployment rate,” said Mansharamani. “It is oil that has helped create that strong economy.”

And many of those workers were “fly-boys,” flown from across the country to work in Alberta. “If there isn’t the work, they’re not going to fly to Alberta,” he added. “If they’re at home, what does that do to the labour markets in each of those local regions?

"It puts downward pressure on wages, it puts upward pressure on unemployment and it creates a slower consumer spending rate.”

The housing bubble burst is just around the corner, Mansharamani added on his website. “In this Loonie tune, it seems our Crazy Canadian Coyote has run off the cliff, his feet are still moving, but he has yet to look down. He’s suspended in air, and it’s only a matter of time until gravity exerts its force.”
 
 
 

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COMMENTS

  • by Byron Depass 2015-03-27 4:37:56 PM

    Vikram Mansharamani like all the rest who have been making predictions about the Canadian House Prices over the past 10-12 years are all guessing. Yes, there will eventually be a correction and he who makes the last prediction will look really smart. The GTA market is being driven by the Chinese Buyers and Low Interest Rates. That's it. The correction will come if The Chinese Government cut off the supply of Chinese buyers and money or interest rates increase by about 5%. Until that happens Sell Sell Sell! Unfortunately it's no fun for buyers especially first time buyers.

  • by EddieN 2015-03-27 5:01:06 PM

    During his last visit..... I suggest that he stays home and minds his own business. He has absolutely no clue and the various markets in Canada and what influences them. He is just jealous that he hadn't invested in Canada. That's all. I live and work in Ontario and I can say with a certain amount of confidence that most people here WELCOME lower oil prices. Since we don't spend the money on gas, we can now afford other pleasure and necessities. Furthermore, with oil prices down, the dollar has gone down. That means that Canada can export more, thus producing higher employment and increased spending. Mr American Expert also doesn't take into account for immigration and investment in flow. Don't forget, Chinese are not the only ones buying up real estate. There is also the eastern Europe and the Middle East.

    I just want to know why the media is quoting this guy? Who is he that he deserves our attention? Is he smart but BoC is dumb along with thousands of investors putting up billions of dollars? He doesn't make policies or enact laws. He is a nobody. I think he needs to go back to watching cartoons because that is what he seems to be good at, and Crew needs to stop quoting anyone that's shows signs of a pulse.

  • by jeff 2015-03-27 6:37:57 PM

    wiley coyote, or maybe its a page out of Chicken Little.

    you ever heard about pounding a square peg into round hole, if you work hard enough at it, someday it just might fit.

    if you keep predicting doom and gloom, eventually, normally sane people will start to believe you and figure well I read it in CREW so it must be true.

    Has CREW fallen to the level of the Tabloids that grind out the rumour and sensational articles?

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