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Montreal housing market exceeded 2015 forecasts


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Housing is doing well only because interest rates are on the floor. Nothing else. Canadians are overstretched in debt, wages are not increasing, the canadian stock market is crashing (-25% in the past two year), dollar is in the toilet, oil racing to 0$... An increase in interest rates over the next fee years will crash the housing market like crazy. Let's see if that increase in interest rates materializes. It will eventually have to.

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. An increase in interest rates over the next fee years will crash the housing market like crazy.


1) Crash in CAD terms: no; 2) affect negatively: certainly; 3) to what extent then?: to be discussed.


When this happens, other cities/regions in Canada where the median house price/median disposable income ratio is much higher (ie. worse) than in Montreal are likely to suffer more. A Schadenfreude affair? Not quite. Rather a reminder that comparative outcomes are useful (albeit not absolute) guides to investment decisions. Because in the end, the question is: what to do with your money? No alternatives are 100% safe. Of course, if you have no money, you do not have this problem; but in this case, I would advise not to take a mortgage to buy a house at the present time in Canada.


Dollar in the toilet? --This implies that the average and median «value» of a house in Canada has already dropped in the year 2015, when measured in USD. Same with other investments like stocks and bonds: my banker told me I gained (let us say) 5% in 2015, to which I replied: well, in USD terms, I am poorer than last year, yet I must pay income tax on these «gains» (measured in CAD).:mad: Now, to be fair, if I have debt denominated in CAD, the burden has likewise diminished. Many people will object, saying in the real world we get paid in CAD and we pay our bills in CAD; I will argue: not so simple. Devaluation will bring in price inflation (but not equally among items: depending on their import content). One apple will cost 1,25CAD instead of 1,00. My mortgage of 400,000 was equivalent to 400,000 apples at a dollar each, now I will only need 320,000 to pay it back (if I can grow them in the middle of winter). By the same token, the value of my house, previously set at 500,000 apples, will have gone down to «just» 400,000 apples. In other words, it will have «crashed» by 20%, except that all those who only view things in CAD will say no crash, price is stable at 500,000 CAD.


In a nutshell: currency fluctuations would continue do the «job» that the domestic market was «unwilling» to accomplish.

:relieved:Have no fear! Unfortunately, it is much more complicated than that. With so many diverging factors at play, wordwide, there is no simple answer (except of course if you have nothing...). So I have only one advice: be prepared to withstand adverse winds, from any directions; do not put yourself in a vulnerable position, because then you would bound to suffer, if...

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