Housing in Canada is now too important an asset class: Rosenberg


People who buy a home in Canada don’t just own a home, but rather control a seemingly ever-growing asset class, as the cost of housing in many Canadian cities continues to soar, according to the Bay Street economist David Rosenberg.

“Housing has not only become a place to live in Canada, it has become like an asset class, and probably too much an asset class,” said Rosenberg, chief economist and strategist at Rosenberg Research and Associates Inc., in an interview Friday. . “We have strayed far too far in terms of pricing and nominal growth in the economy.”

Rosenberg’s comments come as price of a house in Toronto climbed to a record $ 1,163,323 in November, up nearly 22% from the previous year, according to data from the Toronto Regional Real Estate Board released on Friday. Toronto was not the only city in Canada to report sharp increases in house prices in November, with the average price of a home rising. Vancouver climbing 16 percent to $ 1,111,200, while Calgary Price rose nine percent to $ 461,000, according to the respective real estate boards in those cities.

The cooling of housing markets in Canada has been an ongoing debate for years, with some analysts indicating that the Bank of Canada is raising interest rates as a way to make homes more affordable for the average Canadian. Based on overnight index forward swap rates, investors expect the Bank of Canada to hike rates five times during 2022, Bloomberg data shows.

However, Rosenberg cautions that rate hikes are unlikely to move at this rate, given the amount of outstanding debt Canadians have incurred. Statistics Canada said in August that Canadian households had about $ 2.5 trillion in debt a year after the COVID-19 pandemic, about two-thirds of which was linked to mortgages.

“We had a mountain of debt before the [COVID-19 pandemic] which has prevented a normal political development during the last cycle. Now we are smothering even more debt, ”said Rosenberg. “Central banks might want to raise rates (but) they won’t raise them as much as the markets have predicted. “

Rosenberg – who rose to prominence thanks to a series of bear market calls during his tenure as an economist at Merrill Lynch in 2007-08 – expects the Canadian economy to underperform next year . He predicts that stock valuations will be “quite low” and that the housing market landscape will be very different from what homeowners are currently seeing.

“When I tell this story, people say, ‘Well, you’re like the boy who cried wolf.’ To which I say, ‘Just remember the wolf appears at the end of the story,’ “he said.

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