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Are physician salaries in Canada a bubble that is waiting to pop?


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I can't help but think that one day it won't be as good for physicians in Canada as it is now. The only reason med school seats are so restricted is because they need to keep the supply of docs low so salaries can stay high. But, it is pretty clear that our society NEEDS more doctors. We simply don't have enough to go around and with Canada's aging population on the rise, this will only increase the demand.

So as the boomers get old, we will have more old people than tax payers. Our government will be scrapped for money and the deficit that covid created, we will have to pay for this also. I think inevitably they will have to loosen medical school restrictions and allow more people to matriculate. With less taxpayers and more doctors, I think the physician salary will drastically decrease. 

We already can't create jobs for specialists as it is now, and I think the medical profession may be headed towards doomsday. Any thoughts? I really wish the future didn't look so bleak :(

 

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I wish more folks realized this. The Canadian government doesn't accept more immigrants out of the goodness of its heart. It's mainly to support the government's tax base and to keep the public sector

It takes lots of government $$$ and resources to train a medical doctor. I don’t think the government is going to spend more money expanding spots for med schools.

The reason why med school seats are restricted is because we lack government funding in the first place.

Also, most docs aren’t salaried. It’s mainly fee for service.

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8 hours ago, Butterfly_ said:

It takes lots of government $$$ and resources to train a medical doctor. I don’t think the government is going to spend more money expanding spots for med schools.

The reason why med school seats are restricted is because we lack government funding in the first place.

Also, most docs aren’t salaried. It’s mainly fee for service.

Apparently Ryerson was given permission for a new medical school though in Brampton :blink:

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10 hours ago, Butterfly_ said:

It takes lots of government $$$ and resources to train a medical doctor. I don’t think the government is going to spend more money expanding spots for med schools.

The reason why med school seats are restricted is because we lack government funding in the first place.

Also, most docs aren’t salaried. It’s mainly fee for service.

Right, we lack government funding which is why there are no med school seats and no jobs for specialists/surgeon. But, as our population ages the government will be forced to open up new seats because we will absolutely need MORE doctors. But, with less taxpayers (as boomers get old, we will have less working people and more old people to support) they will have to cut corners somewhere and that might mean lower compensation for physicians.

1 hour ago, Edict said:

Apparently Ryerson was given permission for a new medical school though in Brampton :blink:

Looks like they are only proposals. But I am doubtful whether it will turn into anything meaningful. Apparently the same thing happened in 2008 with York, but it was only a political stunt pulled by the premier at the time. 

 

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56 minutes ago, MasterDoc said:

Right, we lack government funding which is why there are no med school seats and no jobs for specialists/surgeon. But, as our population ages the government will be forced to open up new seats because we will absolutely need MORE doctors. But, with less taxpayers (as boomers get old, we will have less working people and more old people to support) they will have to cut corners somewhere and that might mean lower compensation for physicians.

 

That is why we have an aggressive immigration policy (temporarily derailed by Covid), to replace the retirees - so there will be more taxpayers. I do not see lower compensation for physicians.

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The major reason there is high compensation for physicians in Canada has less to do with intrinsic factors (whatever the actual value of physician work in specialty x is) and more to do with living beside the US where doctors generally earn more, are in demand, along with a degree of Canadian-US training equivalency permitting some labour-market mobility.    

Even though an exodus of physicians is unlikely to ever repeat like it did in the 1990s, if income differentials get high enough then Canadian physicians will be incentivized to try to go to the US.  I think it is maybe harder to go now than it was then, but regardless it's generally possible in most specialties.

Regardless of mid-levels, US demand for physicians and income is generally still high - if that were ever to change drastically, then Canadian physician income would probably go down.  

Of course tightly regulated training positions ensure that supply can't overwhelm demand either which helps keeps income high (vs say law).

The Royal College system virtually ensures that no "outside" trainee could pass Canadian equivalency in a given specialty which protects whatever the labour market in Canada within the specialty.  Of course it's not presented as such, but I think that is a major de facto "raison d'être".

On the other hand, the accessibility of US board exams helps Canadian specialists gain leverage over provincial governments - with the exodus threat.

One can see labour market dynamics with the rise of physician income in QC through exodus (both real and threatened) over the past couple of decades which has historically been more "European".   The QC doctors played by North American rules and won big - their income is now higher on average than other Canadian doctors, despite the much lower cost of living etc..     

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On 4/5/2021 at 2:46 PM, indefatigable said:

The major reason there is high compensation for physicians in Canada has less to do with intrinsic factors (whatever the actual value of physician work in specialty x is) and more to do with living beside the US where doctors generally earn more, are in demand, along with a degree of Canadian-US training equivalency permitting some labour-market mobility.    

Even though an exodus of physicians is unlikely to ever repeat like it did in the 1990s, if income differentials get high enough then Canadian physicians will be incentivized to try to go to the US.  I think it is maybe harder to go now than it was then, but regardless it's generally possible in most specialties.

Regardless of mid-levels, US demand for physicians and income is generally still high - if that were ever to change drastically, then Canadian physician income would probably go down.  

Of course tightly regulated training positions ensure that supply can't overwhelm demand either which helps keeps income high (vs say law).

The Royal College system virtually ensures that no "outside" trainee could pass Canadian equivalency in a given specialty which protects whatever the labour market in Canada within the specialty.  Of course it's not presented as such, but I think that is a major de facto "raison d'être".

On the other hand, the accessibility of US board exams helps Canadian specialists gain leverage over provincial governments - with the exodus threat.  

I 100 percent agree(also love the raison d'être bit, reminds me of my Focault) . I think that most people are unaware of how bad the brain drain in the 90's was. The number of doctors leaving each year was approximately 30 percent of new graduates. The brain drain was especially acute in surgical specialties and in English Canada. For example, when Canadian Neurosurgeons were board certifiable in the US, only one or two of the six graduating neurosurgeons in Ontario would stay here, the rest would immediately move down there. So as long as Canadian specialties can get board certified in the US (which is everything other than NSx and CVSx), the government can't underpay physicians too much relative to the US. So it's imperative for most specialties to maintain board eligibility in the US. The current NSx and CVSx job market points to what would happen if a specialty loses board eligibility in the US.

Also the Royal College runs a very tightly controlled cartel. I don't think provincial governments could pull anything like what Tommy Douglas pulled in Saskatchewan when first implementing Medicare and was confronted with the uproar of local physicians. He literally flew in British doctors to break the Sask Doctor's strike.

But that still doesn't address what's going to happen with the increasing strain on provincial budgets. I'd wager that what's going to happen is a continuation of today's system. Canada will continue having less doctors per capita than other countries(2.8 in Canada vs 3.4 in France, 4.3 in Germany, and 4.9 in Norway), but those doctors will be better paid than the OECD average. The government will then cut from places that are invisible to taxpayers. Namely imaging services, number of hospital beds, number of ICU beds, OR time, nurse staffing levels, etc.

Also while the public thinks that the country needs more doctors, the provincial governments want less doctors so that they spend less money. The public may want better healthcare, but they are not willing to pay the taxes that would pay for this better healthcare. I bet that when COVID is over, all this talk of opening new medical schools will fall by the wayside when the brutal austerity of the 90's returns to pay for the past year. Especially if interest rates rise to fight the ballooning real estate market. Japanese asset bubble anyone?

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2 hours ago, Bambi said:

That is why we have an aggressive immigration policy (temporarily derailed by Covid), to replace the retirees - so there will be more taxpayers. I do not see lower compensation for physicians.

I wish more folks realized this. The Canadian government doesn't accept more immigrants out of the goodness of its heart. It's mainly to support the government's tax base and to keep the public sector gravy train on its tracks. It's the main reason why there are such strict criteria for immigration. And I say all this as an immigrant myself.

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14 hours ago, MasterDoc said:

I can't help but think that one day it won't be as good for physicians in Canada as it is now. The only reason med school seats are so restricted is because they need to keep the supply of docs low so salaries can stay high. But, it is pretty clear that our society NEEDS more doctors. We simply don't have enough to go around and with Canada's aging population on the rise, this will only increase the demand.

So as the boomers get old, we will have more old people than tax payers. Our government will be scrapped for money and the deficit that covid created, we will have to pay for this also. I think inevitably they will have to loosen medical school restrictions and allow more people to matriculate. With less taxpayers and more doctors, I think the physician salary will drastically decrease. 

We already can't create jobs for specialists as it is now, and I think the medical profession may be headed towards doomsday. Any thoughts? I really wish the future didn't look so bleak :(

 

Well, in general it is true with any sort of job. Even if with software engineering jobs, which is considered a sort of craft, the salary bubble can burst if the government allow more skilled workers from other countries such as India. The good thing with medicine is that the training path is tedious and long and there is a prestige element assigned to it as well. With software, companies do not care if you have your degree from UBC or some obscure university in some foreign country as long as you do the job. With medicine, it is hard to quantify who is "doing the job" because the output is complex and could be related to short/long term satisfactions of patients so the university you graduate form plays a role in maintaining your prestige. For this reason, I think Canadian-educated doctors would be always at an advantage if we ever allow mass immigration of foreign doctors.

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2 minutes ago, Bambi said:

Correct ^. The Canadian government accepts refugees out of the goodness of its heart, accepting immigrants is a necessity to keep the economy going.

Exactly, and refugees are under 10 percent of annual immigration.

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Immigration and immigrants serve to stabilize non-growing populations like in Canada.  But, recent immigrants have had difficulty integrating into labour markets, with below average wage, making them more warm bodies at the bottom of the food chain.  Without the US as a neighbour, without labour market mobility, and everything else I mentioned in the post above physician income would be much lower - immigration is a red herring.  Quebec started paying its doctors twice as much over a one decade period due to labour market dynamics - nothing to do with immigration.

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2 hours ago, indefatigable said:

Immigration and immigrants serve to stabilize non-growing populations, like in Canada.  But, recent immigrants have had difficulty integrating into labour markets, with below average wage making them more warm bodies at the bottom of the food chain.  Without the US as a neighbour, without labour market mobility, and everything else I mentioned in the post above physician income would be much lower - immigration is a red herring.  

Yep, studies show that immigrants in the US do better integrating in the labor market than immigrants in Canada do. This is especially true for higher skilled workers.

GDP per capita and productivity growth in Canada has been stagnant for a while. Any GDP growth is purely due to a growing population rather than innovation or productivity growth. Canada remains at its core a commodity exporter, a Franco-Anglo Venezuela or Saudi Arabia if you will. Plus, a huge amount of investment is being poorly spent in real estate rather than the private sector capital investment that is necessary for productivity growth. Bad government policies and protectionism  disincentivize good investment and I don't see this changing in the future.

But still, Canadian doctors are lucky that there is an almost infinite demand for their labor in the US. And the imported warm bodies(like me) will keep on paying their taxes.

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You guys are missing the point, high compensation for any government job can be negated by inflation. Yeah you might make 300K today, but if I keep you at that level for 3-5 years (aka what ON and AB tried to do), with Bank of Canada given the green light to let inflation run above 2% (well, actually M2 is increasing at 18% in 2020 if I remember correctly). Then in real terms your compensation is decreasing yearly, perhaps to the tune of 10-15% compounded.

Same thing with government debt, every government in the world is hoping that inflation will slowly chip away at their debt without increasing taxes or cutting programs.

That's why real estate, BTC, and gold price all go up like 10% a year. Sharp money is sharp, they aren't gonna keep them in a savings account. Money is just a number on a computer screen.

If you are interested in how government find "clever" ways to reduce debt, read up on the Mississippi Company bubble of 1721.

Also USA does not experience inflation to the same degree as other countries, because USD is the world's currency, hence it is able to "export" some inflation to other countries. For example in Canada we have tonnes of natural resources yet we have to sell, then buy them on international market in USD. Unfortunately CDN has a free floating exchange rate therefore expect inflation in Canada to be more severe than in US. That's why US is able to issue debt with impunity. So if you live and work in US, for now, as long as USD is the world's currency, you will live a very high standard of life (partially paid by every other country in the world that transacts in USD).

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On 4/5/2021 at 8:34 PM, shikimate said:

You guys are missing the point, high compensation for any government job can be negated by inflation. Yeah you might make 300K today, but if I keep you at that level for 3-5 years (aka what ON and AB tried to do), with Bank of Canada given the green light to let inflation run above 2% (well, actually M2 is increasing at 18% in 2020 if I remember correctly). Then in real terms your compensation is decreasing yearly, perhaps to the tune of 10-15% compounded.

Same thing with government debt, every government in the world is hoping that inflation will slowly chip away at their debt without increasing taxes or cutting programs.

That's why real estate, BTC, and gold price all go up like 10% a year. Sharp money is sharp, they aren't gonna keep them in a savings account. Money is just a number on a computer screen.

If you are interested in how government find "clever" ways to reduce debt, read up on the Mississippi Company bubble of 1721.

You may be right. After all, I'm no macroeconomist.

But I think the main point that you're missing is that if there's inflation, American doctors and big hospital systems like UPMC aren't going to sit by and watch their income turn into peanuts. And when they fight and get fee increases, it will inevitably lift the boat of Canadian doctors. And if it doesn't lift the Canadian boat, there's nothing stopping those committed to their bottom line from moving south of the border.

The bottom line is that as long as Canadian physicians are able to move to the US, it's very unlikely that the pay gap between Canadian and American doctors will get too big.

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You have a good point, the free flow of human capital between US and CAN will certainly help. 

Another area that I always wanted to talk to someone in depth, but haven't found a chance, is UK's NHS. It's well known that doctors in NHS are often underpaid and the system is under tremendous stress. Now I've read rumor there is an exodus of UK physicians post Brexit but I don't know first hand if this is true. In any case I do know the salary NHS pays its consultants is peanuts compared to North America.

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On 4/5/2021 at 9:15 PM, shikimate said:

You have a good point, the free flow of human capital between US and CAN will certainly help. 

Another area that I always wanted to talk to someone in depth, but haven't found a chance, is UK's NHS. It's well known that doctors in NHS are often underpaid and the system is under tremendous stress. Now I've read rumor there is an exodus of UK physicians post Brexit but I don't know first hand if this is true. In any case I do know the salary NHS pays its consultants is peanuts compared to North America.

There is a large exodus from the UK and it's been there far before Brexit. It's mainly towards Australia and New Zealand, as those two countries accept British training to be equivalent to their own and the pay, lifestyle, and weather is much better. I don't have the data off the top of my head but it is accelerating.

The UK just replaces those that leave with physicians from Eastern Europe, the Middle East, etc.

An interesting fact about the NHS is that there isn't much variation in pay between different specialties. Accordingly, foreign graduates are the only ones willing to do surgical specialties with horrible lifestyles. I was reading a study about how in the UK "59% of congenital heart surgeons, 46% of thoracic surgeons and 36% of adult cardiac surgeons are overseas graduates". Furthermore currently "only 32% of trainee surgeons are UK graduates. Of those receiving UK Certificate of Completion of Training in 2013, only 18% were UK graduates compared with 68% in 2000."

Again, as indefatigable said , the Royal College makes it impossible for the same thing to happen in Canada by heavily restricting who gets Royal College certification and protects the Canadian physician labor market from foreign physicians.  

https://academic.oup.com/ejcts/article/47/4/679/497990

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On 4/5/2021 at 8:34 PM, shikimate said:

So if you live and work in US, for now, as long as USD is the world's currency, you will live a very high standard of life (partially paid by every other country in the world that transacts in USD).

Not really sure what you mean about this. Having an income in USD does not automatically give you high quality of life, and being in other countries and paid in other currencies including CAD also does not preclude that

In my my internal medicine subspecialty Canadian's are on average paid better, even after converting CAD to USD...

 

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1 hour ago, Jarisch said:

Not really sure what you mean about this. Having an income in USD does not automatically give you high quality of life, and being in other countries and paid in other currencies including CAD also does not preclude that

In my my internal medicine subspecialty Canadian's are on average paid better, even after converting CAD to USD...

 

I think @shikimate was pointing to the so called "exorbitant privilege" that the United States has by virtue of the USD being the world's reserve and trade currency. It's supposedly what allows them to run deficits and issue bonds with impunity from inflation, a luxury that Canada and other countries do not have. Some economists actually argue that the privilege has long eroded and it wasn't that big to begin with. I'm not a macro economist so I have no idea who's right in this debate.

Barry Eichengreen, an economist at Cal Berkeley and a Guggenheim fellow, has written a book on this topic. I've heard him give a talk and he's quite charismatic in person.

There's a small summary here about the benefits of this for the US and possible cons:

https://www.cfr.org/backgrounder/dollar-worlds-currency

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I meant to write it up but zoxy got ahead of me haha

Let's use an example, all major commodities on the international market (corn, oil, iron, wood etc) are denominated in USD.  So even when other powerful countries like EU, China or Russia want to buy stuff they gotta transact in USD. So if Fed print more money, or print less money, they can easily manipulate supply of USD, which will manipulate foreign exchange rate, which will affect how much of those goodies other countries can afford. Aka USA is the house, they set the odds, and other countries play the odds.

Once upon a time some middle eastern countries tried to trade oil in EUR instead of USD. Look at what happened, they got "liberated" by American troops lol.

That's why even the bottom dwellers in USD have better standard of living than many middle class citizen in other countries. Like the stuff you buy with foodstamps isn't organic and gluten free? first world problem eh.

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On 4/5/2021 at 2:52 AM, MasterDoc said:

I can't help but think that one day it won't be as good for physicians in Canada as it is now. The only reason med school seats are so restricted is because they need to keep the supply of docs low so salaries can stay high. But, it is pretty clear that our society NEEDS more doctors. We simply don't have enough to go around and with Canada's aging population on the rise, this will only increase the demand.

So as the boomers get old, we will have more old people than tax payers. Our government will be scrapped for money and the deficit that covid created, we will have to pay for this also. I think inevitably they will have to loosen medical school restrictions and allow more people to matriculate. With less taxpayers and more doctors, I think the physician salary will drastically decrease. 

We already can't create jobs for specialists as it is now, and I think the medical profession may be headed towards doomsday. Any thoughts? I really wish the future didn't look so bleak :(

 

Jobs for non-surgical specialists in urban centres may be scarce, but they are high in demand outside of urban centres or rural centres.

Surgeons have more challenges finding jobs, but many of them end up in the US and I think they tend to do very well. Two residents that I had rotated with in medical school are both in the US now and doing very well.

The only bubble is the Canadian Real Estate Bubble (Ontario & BC). As someone graduating next year, I know I will not be able to afford a home for the a few years despite making an income in the top 1% of Canada. Let that sink in.

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54 minutes ago, ArchEnemy said:

Jobs for non-surgical specialists in urban centres may be scarce, but they are high in demand outside of urban centres or rural centres.

Surgeons have more challenges finding jobs, but many of them end up in the US and I think they tend to do very well. Two residents that I had rotated with in medical school are both in the US now and doing very well.

The only bubble is the Canadian Real Estate Bubble (Ontario & BC). As someone graduating next year, I know I will not be able to afford a home for the a few years despite making an income in the top 1% of Canada. Let that sink in.

this is what my mind cannot comprehend. Even though I'm not in TO/VA I often think physicians who literally earn in the top 1% of income in Canada (or even better in some cases) worry about affording a detached home in TO/VA (avg cost is 1.8 million now)...what about the 99% of other Canadians?? If the average Canadian income is like 50K and household income 80K how can the "average" Canadian even dream of getting close to buying a house in these areas? Can someone who lives in TO/VA or has knowledge on these areas enlighten me on how "average" earners even live there?? is everyone renting?? is everyone using a majority of their income just to pay rent?? there can't be just millionaires that live there..

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54 minutes ago, ArchEnemy said:

The only bubble is the Canadian Real Estate Bubble (Ontario & BC). As someone graduating next year, I know I will not be able to afford a home for the a few years despite making an income in the top 1% of Canada. Let that sink in.

Yeah I'm not sure I'll ever be able to afford a home in Toronto, like in my life.  It's actually horrifying.

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On 4/13/2021 at 8:33 PM, ArchEnemy said:

The only bubble is the Canadian Real Estate Bubble (Ontario & BC). As someone graduating next year, I know I will not be able to afford a home for the a few years despite making an income in the top 1% of Canada. Let that sink in.

In my admittedly uninformed opinion, it's less a bubble than people realize. There are five main factors make housing in Canada very expensive and I don't see them changing.

1) The exemption of principal residence from capital gains tax turning housing into a better investment than stocks/bonds.  The vast majority of Canadians, and particularly older Canadians who are more likely to vote, own their homes and like this law. They like the fact that they're able to sit on their homes and feel rich, and sell it later and benefit 100 percent from its appreciation. The politicians are unlikely to change this law and anger an important constituent

2) Zoning laws from after the second world war make building new and denser types of property impossible. Over 80 percent of Vancouver and 65 percent of Toronto are zoned for single family homes. For comparison, only 45 percent of Montreal is zoned for single family homes. The GTA and MetroVan suburbs are even more strictly zoned for single family homes. There are no medium density in those two cities and their suburbs. Unlike Montreal, NYC, Chicago there are very few duplexes, rowhouses, semi-detached houses, or other buildings with fewer than five stories. In the GTA and Metro Vancouver there are only high rises in the downtown core and single family homes everywhere else, there is no other form of hosuing in between. I think the NIMBYs are too strong and the zoning laws won't change.

3)Interest rates are at historically low levels. The price that people are sensitive to are their mortgage payments, not the overall price of the home they buy. With interest rates so low, buyers can finance incredibly expensive homes as long as they have some equity for the down payments. The CMHC mortgage insurance makes mortgages essentially risk free for banks. Most economists don't see interest rates rising substantially in the coming years so I don't see this issue also changing either.

4) The rapid pace of population growth due to immigration(400,000-450,000 annually) and that growth being concentrated in a few major metro areas. The three main parties at the federal level all agree on immigration rates and it's very unlikely that they would change things.

5) Property taxes in Canada are relatively low when compared to the US. This makes the holding cost of a multi million asset negligible. A million dollar house in Dallas will have around a 16,000 USD in annual property taxes, in Toronto and Vancouver it's around 5,000-6,000 CAD. In Canada assets such as houses are very lightly taxed, but working people's income is taxed to the last drop. It's an incredibly unfair system. This won't change either because there are fundamental differences between the uses for property tax in Canada vs the USA. You can't suddenly jack up property taxes and decrease income taxes.

 

In summary, the so called housing bubble in Canada is a direct result of government policies. People like to blame imaginary foreign investors but the reality is that Ottawa and City Hall are the ones that are culpable. There's not enough supply and a lot of new demand. Bad government policy turns housing into an investment. As long as those policies don't change, the bubble won't pop. Canada's issue bears no resemblance to the subprime mortgage crisis in the United States in 08-09. Canadian home buyers can afford their mortgages.

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