“An increase of that amount in such a short time is very rare but when it has happened in other countries, it’s always been followed by a financial crisis, as the borrowing is used to buy illiquid assets such as real estate,” he said.
MacBeth believes three quarters of Canada’s $1.8 trillion in household debt is backed by government insurance which, he says, protects the lender only and not the taxpayer or the economy.
As for which areas are most at risk, MacBeth believes Calgary will be the first to correct, with Edmonton, Vancouver and Toronto also at risk.
“The surplus of condos in Toronto that is developing is dangerous too, as an oversupply of units could mean that condos -- which are difficult to sell except when brand new -- will be dumped on to the market by investors who have borrowed most of the money,” he said. “Or by lenders who have foreclosed on the properties.”