Canada Housing Bubble?
Is Canada in for a housing crisis similar to the one that
plagued the United States?
The short answer is no.
The Hamre Real Estate Team at RE/MAX in Ottawa focuses on the main points and show you why they may not be as they seem.
Canadian’s household debt – to – income levels are at a record high!
Yes... technically. Statistics Canada recently changed the way they calculate this number to align with international standards. This bumped the average ratio up a dramatic 11%. The standard method of calculating this number uses after-tax income, which isn’t fair because Canadians after-tax income includes health care. In research done by David Larock he estimates that Americans spend anywhere from 10—20% of their after tax income on health-care related costs.
A report by BMO economists earlier this year stated that it would be more accurate to use Canadian debt-to-gross income to compare ‘apples to apples’. BMO economist Sal Guatieri reported recently that Canada’s debt-to-gross income ratio (121 per cent) is still well below both the current (146 per cent) and peak (166 per cent) U.S. levels.
Well known economist, David Rosenberg , stated that Canadian policy makers have been pro-active in responding to rising household debt, whereas US policy makers seemed to be ‘asleep at the switch.
Of course, the United States sub-prime lending policy played a big part in the crash. Without it, we probably would have seen the US market have a soft landing instead of hard crash. While Canada does have sub-prime lending, it represents about 7% of the mortgage market in comparison to almost 25% in the United States.
Peter Bastedo from the HAMRE Ottawa Real Estate Team states that “household debt is something that everyone should think about when purchasing a home. The last thing you want to do is over-extend yourself financially and not be able to enjoy your new space. Be smart, have knowledgeable, experienced and professional Realtors® behind you to give insight on these important decisions.”
For more information on buying a home in the Ottawa Real Estate Market, visit our website at www.weknowottwa.com
Written by Peter Bastedo