An Edmonton investment manager has a dire warning about the Canadian real estate market: a major correction is coming.
"The more that I researched it and the more I asked questions about it, the more convinced I became that we are in a significant bubble in Canada," said Hilliard MacBeth, director of wealth management at Richardson GMP.
MacBeth makes that argument in his coming book, When the Bubble Bursts: Surviving the Canadian Real Estate Crash.
He says the Canadian real estate market shows all the classic signs of an asset bubble: a rapid rise in prices, feelings of regret expressed by those who feel they missed out on a buying opportunity, intense media coverage, and a broad fixation on the asset in question.
If the real estate market does decline, politicians and policymakers are hoping for a “soft landing,” in which prices level off gradually. MacBeth doesn’t think Canada will be so lucky.
'If we are in a bubble, as I’m convinced we are, then we can’t get out with a soft landing," MacBeth said. "We have to have a hard landing, and a hard landing means that we have to go back to the trendline that was in place before the bubble started to appear."
In this case, MacBeth says, a hard landing means prices could decline by between 40% and 50%, causing an economic recession.
A market crash could be triggered by anything that affects the ability of first-time or investment buyers to afford a home, he said. That could include external economic factors, stricter lending rules imposed by Canada Mortgage and Housing Corp. or an interest rate hike that makes mortgages less affordable.
