Like other places, the living costs in Canada are increasing with a high rate in the current times. If we have a look at facts and figures, we will find that the people in Canada are finding themselves in difficulties to meet the expenses like rents, taxes, mortgages etc. Due to all this, the net extra income of people is reducing continuously.
One of the major factors that are contributing to the increase in property prices is the low interest rate offered by Bank of Canada. These interest rates have made more and more people to invest in the real estate industry. Moreover, this has attracted the investors from China, Russia and other countries to invest in the real estate industry in Canada, which is one of the resistant economies over the recent past years. According to the professionals, the Canadian real estate sector is passing through a bubble, which is expected to end in the near future. They are hoping that the prices of real estate in Canada will fall down with 25% in two to three years. The economists also say that the Canadian real estate sector will not face the negative impacts of the bubble burst that were actually faced by US in the past.
Currently, the Bank of Canada has set the interest rate of 1% which is adopted all across Canada. If they want to avoid the great bubble burst, then they have to increase the interest rate. But if this happens now, it will really have an adverse effect on the people who are paying mortgages. Concurrent to the recent survey, if the Bank of Canada increases the interest rate only by 1%, then it is expected that half of the Canadians paying their mortgages will not be able to pay their complete mortgage installments. So, it is not easy to increase the rate as it looks so. Economists, bankers, politicians etc are all trying to find a solution to this problem that Canada is facing.
According to current opinion by IMF, it is expected that the debt burden of Canada is going to enlarge in the coming years and the major reason behind this will be customer and accommodation debts. According to this explanation, it is also expected that Canada will be experiencing 2.8% rise in financial advancements this year; however, the inflation will also increase unpleasantly. Due to all this, IMF has now suggested the Canadian policy makers to find some way in order to increase the interest rates sooner or later.
The question arises here is that what is the real solution for all this? Whether the Canadian people should reduce their expenditure in the real estate sector or the government should have a look at their policy and make the necessary changes. Whatever the choice is, it should be done quickly and in the very near future to avoid the consequences as USA faced in the past with bubble burst causing many of USA citizens unable to pay their mortgages and many of the debts are still pending today
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