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Housing Correction Could Sink Young Homeowners

November 9th, 2015  |  Home

A recent report found that young Canadian home owners are most vulnerable to a housing correction.

The report, released by the Canadian Centre for Policy Alternatives (CCPA), states that over 1 in 10 people would owe more than they owned if there was a 20 per cent pullback on housing prices.

The CCPA is urging the government to put policies into place that wouldencourage Canadians to reduce their debt load before it’s too late.

Young or new homeowners tend to carry more debt load due to higher priced homes, especially in hot real estate markets like Vancouver and Toronto.

The Organization for Economic Co-operation and Development (OECD) issued its own warning on Monday about the impact of a housing correction, especially for Toronto which has experienced a high rate of condo development.

CCPA Economist David Macdonald stated the debt-to-income ratio for people in their thirties has almost doubled since 1999, hitting an uncomfortably high 4 to 1 ratio.

"A badly managed downturn in real estate prices could wipe out the wealth of a large number of Gen-Xers and Gen-Yers," he said. "We need to recognize that young families are the most likely group to be plunged underwater by a nasty housing correction."

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