A housing market crash in Canada will most likely affect a big number of young homeowners.
The Canadian Centre for Policy Alternatives (CCPA) reported on Monday that a drop by 20 percent in the prices of real estate in Canada will put many young families in the red as their debt will become higher than the value of their homes.
According to CTV News, this report comes in the midst of a real estate boom the country has been enjoying the last few months which has seen many young would-be home owners taking on huge debts just to buy their dream houses. This trend, according to the report, puts them in great risk should there be a sudden change in market prices.
David Macdonald, senior economist of CCPA, said in a statement that house owners who belong to the 40 and below age bracket are the ones who will feel the brunt when real estate prices begin to drop. The report also suggests that the affected demographic will most likely experience a decline in their net worth by up to 40 percent or about $60,000. There is also one family in 10 that will see their net worth decline well below the negative threshold if they get hit by a sudden drop of market prices.
In a report by CBC News, it says that the government did not lack in effort to remind the real estate sector about the risks of inflated housing rates. The primary concern, they say, is that setting the prices too high often forces homeowners to take on debts they are not fully prepared to face should the market suddenly correct itself. And the report by the CCPA is one of the first studies made that focused on the young demographic of homeowners whose usual valuable assets are the homes they borrowed money for.