Canada’s dependence on housing appears to be as stretched as it was in the U.S back in 2005, and the degree to which new mortgages rely on risky borrowers is equally as troubling, a new report warns.
David, Doyle, Canadian economist and strategist at Macquarie Capital Markets, tracked residential investments as a share of GDP in both countries. He found that the standard deviation from the long- term average in Canada from 2001 to 2006, is similar to what took place in the U.S between 1991 and 2006.
Based on this analysis, Canada is poised for a sharp downturn if it continues to track the U.S.
Doyle noted that the surge in Canadian residential investment has been driven by broker commissions and transfer costs, much like the U.S. market as it approached a late-2005 peak.
He also highlighted the rising share of mortgages with loan-to-income ratios above 450 per cent, particularly in Toronto and Vancouver