The Sky Is Not Falling; Why You Won’t See an American Style Housing Crash in Canada

If you take a look at the last 3 years to see that there been many doom and gloom predictions that the Canadian housing market is going to crash, but it still hasn’t.

Bubble or not, the demand for new homes is beginning to cool. Baby Boomers that were expected to sell their homes and and buy new ones are staying put. More and more borrowers that did want to buy couldn’t qualify because of the new mortgage rules, and people trapped in the middle can’t find a home to buy.

Appreciation Rates Coming Back down to Earth

It’s expected that home appreciation levels will go back down to 2% per annum; over the last four years many Canadian markets have seen a jump of 10% a year. More and more Canadians are going to have to get acquainted with realistic appreciation levels - which may curb speculation, but that could hurt the housing market in the long run. Mortgage changes earlier last year have made it harder for some people to buy homes, but they are doing their job. Even if 9% of Canadians have to wait to buy a home, this is entirely a not bad thing. The last thing you want is for Canadians to tap out all of their equity.

Low Interest Rates Can’t Last Forever

Let’s face it, low interest rates just can’t last forever. Inflation is eventually going to hit Canada, and when it does, we want the landing to be soft as possible. In 2014 interest rates are expected to spike 1 to 2% in tandem with US interest rates. Canadian interest rates and American interest rates have long been tied in tandem.

The economy can’t grow with really low interest rates; eventually everything has go back up at some point. It’s important for growth to happen, and while Canadian interest rates have remained low and the sales of real estate, especially luxury real estate have fared fairly well, eventually everything is going to go up. But this isn’t bad, we’ve recognize the problem before it’s too late. The Americans didn’t have this, and that’s why they had such a bad crash. More Canadians own more of their homes; many pay down thirty-year mortgages within 12 years and haven’t borrowed much against their equity.

A Soft Landing for Canada?

Only time will tell. While Canadian consumer debt levels remain high, more and more Canadians are paying off their debts. You won’t find many Canadians completely tapped out – a problem the Americans had. Canadians are not spendthrifts, something that hasn’t changed in the last 60 years.

When it comes to real estate, even luxury homes for sale, the market isn’t going to bottom out anytime soon. There will be some growing pains, this is to be expected in a growing economy. We won’t see an American style housing crash here.

The Goodale Miller Team is based in Oakville, Ontario, specializing in luxury homes for sale, is Canada’s #1 Century 21 team for 8 years running. Visit us today at http://www.goodalemillerteam.com/

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