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April 5, 2017 | Canadian Realty Prices: Payback Period Set Up To Be Long and Hard

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

The longer/further price gains go above the long term average (5% a year line below) the longer/further they will spend laboring beneath it.  Moonshots like the past year over year move in Toronto prices, is a 4 standard deviation event above the long term mean, and that’s a bad sign.  This chart since 1990, offers some insight on scope and scale.  The payback period after this one, is set up to be long and hard, potentially unprecedented.

Unfortunately madness and mayhem is not “contained” to Toronto. The ‘average’ Canadian home price nationally is now about $613k or nearly 8 x the average national household income–the long term multiple generally considered healthy/affordable/sane is 3x household income.  Froot Loops anyone?

For many, the dream of home ownership has become a nightmare of extreme indebtedness and insufficient cash flow to cover living expenses never mind savings for the future. The resulting deficits will be a problem for families, businesses, social programs and taxpayers across the country.  Read the below table of gains over just the past year, and weep.  Much pain and suffering lies ahead when our debt-addicted nation goes into rehab once more.  See:  Home price surges across the GTA in March.

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April 5th, 2017

Posted In: Juggling Dynamite

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