The hidden impact of the Canadian real estate bubble

The hidden impact of the Canadian real estate bubble

The real estate bubble is compounding financial difficulties for many Canadians and sometimes they are forced to choose between mortgage payments and medical treatments, says Easy Legal Finance Inc. president and CEO Larry Herscu.

“Their debt-to-income ratio is increasing and often there is no safety net in place should a person experience an accident,” he says. “They are unable to pay for treatments such as physiotherapy because they have overextended themselves in the property market.

“Lawyers are, in turn, partnering with us because their clients can no longer afford the basic rehabilitation and support they require to get better.”

Easy Legal Finance provides financial assistance to people who have been hurt in an accident so they can pay their bills while their lawyer fights for a fair settlement, Herscu explains.

“We see it with our clients in Ontario, Alberta and British Columbia,” he says. “The prices have pushed people further into debt. To keep up with their financial obligations, some people are cashing intheir RRSPs and other savings.”

Many residents in Alberta, where the recession is in its third year, are feeling the hit particularly hard.

In Calgary alone, about 90,000 people are looking for work; the unemployment rate there has been about 10 per cent in recent months, the city’s highest in 23 years, reports the .

Home prices have weakened in Calgary since the price of oil has plummeted, and many individuals who were renting apartments have left the city because they’ve lost their jobs, the article says.

“Average rents fell 7.5 per cent last year amid rising vacancy rates. Condo prices have plunged 11.5 per cent since 2014 and the local real estate board predicts they will fall another 2 per cent this year,” says the Globe.

Easy Legal is seeing a direct connection between housing prices in many markets and the economic strain on the average Canadian, Herscu says.

“Specific to Calgary, based on the hardships imposed by the real estate market, more clients are struggling to fund their recovery after an injury and are seeking assistance from us during the settlement process,” he says.

“The depressed housing and rental market has squeezed people financially. Those who own investment properties are finding they can no longer rent them out, based on required price increases, to sustain the investment.”

Individuals who would normally be able to support themselves are having challenges, Herscu says.

“For some injured people, they not only have a rental income shortfall because of the market, they mayalso have an income loss because they are unable to work,” he says. “People are coming to us for an income bridge so they can continue their treatment because they haven’t received their income-replacement benefits yet or have been cut off.”

Many people are unaware of the struggle and expense involved in recovering from an accident and how to co-ordinate the necessary benefits to fund their treatmentwhile waiting for a settlement, Herscu says.

“One of the things the insurance company is looking for is proof there is an injury, and a third-party assessment is typically completed to make that determination,” he says. “But if the individual can’t afford the treatment or the assessment, how does that person then argue their legal case?”

Sometimes, people are pressured to settle lawsuits early because they have no financial means to continue the process, Herscu says.

“Easy Legal Finance has been hearing this message from ourclients as they seek our assistance for bridge financing so they have the flexibility to settle on the right terms and not be forced into doing it earlier,” he says.

“In some cases, the mental anguish associated with their financial situation can even exacerbate the injury.”

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