Wednesday, 14 March 2012

Is there a Canadian Real Estate Bubble

Is There a
Real Estate
CanadianBubble?
As the Canadian housing market continues to thrive, naysayers are predicting its demise. High household debt
in relation to income has sounded alarm bells for some, who warn of an American-style housing bubble and
subsequent burst. Additionally,
as much as
It’s true that consumers are borrowing at higher levels; the ratio of household debt rose to
The Economist estimated that Canadian home prices are overvalued by25 per cent.1 Is there any truth to all of this fear mongering?
149.47 per cent
remain stable and avoid the devastation felt in the United States, even if prices fall, for several reasons.
in 2011.2 However, most experts predict that the housing market will
1. We have stricter lending standards than the United States.
major banks, who are required to follow specific regulations. Additionally, sub-prime mortgages are rare,
comprising only
they never gained traction here.
Most mortgages are written by one of our six5 per cent of mortgages.3 While these loans were all-too-common in the United States,
2. Mortgages are full recourse loans,
of circumstances. Lenders are able to use a homeowner’s assets and income as collateral, thereby reducing the
risk of the borrower walking away from a mortgage. As a result, delinquencies are
of the United States.
meaning the borrower is responsible for paying back the loan regardlessone-tenth of the level
3. We tend to seek conservative mortgage options.
heads; in fact, most of us add an average of
We don’t like having a large mortgage looming over our$400 per month to our regular mortgage payment.4
Rising interest rates may trigger a
with a variable rate mortgage; however, rates aren’t set to increase until 2013 and a “slowdown” doesn’t mean a
crash is likely.
that raised their payments by $200 a month, and
are in a good position to survive a housing drop.
slowdown in the housing market, impacting the 31 per cent of Canadians5 Additionally, 84 per cent of Canadians report that they could handle a mortgage rate increase73 per cent feel that they5,6
Sources: 1. The Economist, November 26, 2011
2. CTV, June 26, 2011
3. Joint Center for Housing Studies, Harvard University, August 2010
4. CAAMP/ACCHA, Stability in the Canadian Mortgage Market
5. Montreal Gazette, November 10, 2011
6. Royal Bank of Canada, March 2011
In sum, the Canadian housing market is healthy and
flourishing. Contact your trusted real estate professional
to learn more about your local market.


Kevin & Faye Kitzman
Sales Representatives
Remax Real Estate Centre
Direct : 519-577-0603


Faye Kitzman
Mortgage Agent
Mortgage Intelligence
519-588-0141
M08003930

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