CMHC: Canadians’ High Net Worth “Vulnerable to External Economic Risks”

Joannah Connolly
November 4, 2014

Canadians need not fear the currently high debt-to-income ratios as their average net worth is also high – but the fact that most people’s assets are tied up in real estate creates a “vulnerability” to external and global economic forces, the CMHC’s chief economist warned November 4.

Speaking to a packed audience at the CMHC’s fall Housing Outlook Conference in Vancouver, Bob Dugan said that, in the event of a future recession and wave of job losses, Canadians lacking liquid assets such as cash and stocks to draw on would be likely to be forced to sell their homes, resulting in a flood of homes on the market that could cause a price crash.

Such a crash would damage the total net worth of even those Canadians who did not need to sell their homes in a recession, he added.

Global economic risks he identified were:

  • a possible slowdown in the Chinese market;
  • the potential for monetary deflation in the Eurozone;
  • renewed geopolitical tension in the Middle East;
  • weaker-than-forecast economic growth in the US; and
  • rising interest and mortgage rates in Canada.

Dugan said he believed that the impact of such events in Canada could be “amplified” because of the vulnerability of Canadian household wealth.

However, his forecast for the Canadian housing market was largely positive, as he predicted interest rates to remain level until late 2015, average incomes to rise modestly and net migration to remain strong.

Dugan added that although the debt-to-income ratio is growing in Canada, the rate of growth is slowing in all areas other than personal loans, which only accounts for a small proportion of household debt.

Joannah Connolly
Joannah Connolly is editorial director of Glacier Real Estate, Glacier Media's real estate division. Joannah writes and curates real estate news for Glacier Media's local newspaper websites, including the Vancouver Courier, North Shore News, Burnaby Now, Tri-City News and others. She also oversees editorial content in Real Estate Weekly Homes, West Coast Condo, Western Investor and Glacier's special real estate publications. A dual Canadian-British citizen, Joannah has 22 years of journalism and editing experience in Vancouver and London, with a background in construction, architecture, healthcare and business media. Joannah has appeared on major local TV outlets as a real estate commentator, has moderated and spoken on various industry panels, and spent two years hosting the Real Estate Therapist radio show on Roundhouse Radio.