Cross Country Checkup

Are Canadians dangerously in debt thanks to expensive housing and cheap credit?

Experts and the IMF have sounded an alarm about Canada's overheated housing market and high levels of personal debt. Are Canadians dangerously overextending themselves?
(Julie Gordon/Reuters)

Experts and the International Monetary Fund have sounded an alarm about Canada's overheated housing market and high levels of personal debt. Are high house prices and cheap, easy credit encouraging reckless behaviour? Are Canadians dangerously overextending themselves? With guest host Suhana Meharchand.


GUESTS & LINKS
TWITTER & EMAIL
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INTRODUCTION

Two reports released this week told Canadians something they've known for years, that house prices are high and so are the levels of debt being carried by most households. The reports, one by the International Monetary Fund and the other by Statistics Canada raised the alarm that this country could be headed down a path towards a day of  economic reckoning.  If house prices tank and most household debt is secured by those prices then many families would suddenly find themselves in difficulty.

But the alarm is not universal.  Experts from bank economists to political leaders say, 'yes the figures are a cause for concern but they are not beyond repair by careful and prudent correction.'  

It's a view that is shared obviously by many Canadians because the alarm has been sounded before, and not much as changed other than a continuing rise in house prices and in levels of household debt.  Low interest rates means those high-priced houses don't seem so out of reach, and financing them is relatively painless. So, why worry?  The real test comes when interest rates go back up. 

Not everyone who wants to become a homeowner takes the plunge.  In several cities, particularly Vancouver and Toronto, house prices are so high that many simply cannot afford to buy a house.  What does it mean if a sizable number of Canadians are shutout of owning a home? Is there more of an affordability crisis than debt crisis?

With house prices so high, people really have only four choices: 
1. going deeper into debt
2. deciding to rent instead
3. moving further afield for cheaper houses and commuting to work   
4. opting for shared arrangements 

What choices are you making?  

House prices are high but are expectations too high too?  People used to wait and save for a house and now because credit is so cheap and easy, why wait and why go for a fixer-upper when a little more credit will get you your dream home now?

On the debt side ...are people less worried about carrying debt?  If you have debt, do you have a structured plan to pay it off, or is that something better put off until later?  We want to hear about your thoughts on the challenge of managing debt too? Should regulations be tightened to protect people from themselves?

Our question today:  "Is expensive housing and cheap credit driving Canadians dangerously into debt?"

I'm Suhana Meharchand  ...on CBC Radio One ...and on Sirius XM, satellite radio channel 169 ...this is Cross Country Checkup.


GUESTS

Tamsin McMahon
Globe and Mail Real Estate reporter
Twitter: @tamsinrm

Hilliard MacBeth
Investment Manager at  Richardson GMP in Edmonton, and author of "When the Bubble Bursts: Surviving the Canadian Real Estate Crash."
Twitter: @hmacbe

Al Antle
Executive Director of Credit Counselling Services of Newfoundland and Laborador, a personal credit counselling group in St. John's

Benjamin Tal
Deputy Chief Economist of CIBC World Markets Inc.


LINKS

CBC.ca

National Post

Globe and Mail

International Monetary Fund

Statistics Canada


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