The meltdown of the U.S. real estate market has many homebuyers wondering if and how it will affect the housing market in Canada, but market analysts feel the problems the U.S. is experiencing should have little impact on real estate in this country.
In fact Statistics Canada recently reported that the home ownership rate stands at its highest on record. Given the combination of consistent and relatively low interest rates, the availability of longer mortgage amortizations periods, and the fact that Canada's population continues to grow, it's not surprising that more and more people continue to enter the real estate market here.
In The Emerging Trends in Real Estate Report 2008, released by U.S.-based Urban Land Institute and PricewaterhouseCoopers, it sheds light on some of the fundamental differences on why Canada isn't expected to experience the same downturn as the U.S. market. Interviews with real estate executives in both Canada and the U.S. help explain a few of the reasons.
Canada benefits from a simpler economy and a more conservative investment environment than the United States, avoiding the consequences of lax underwriting and speculative building. Secondly, Canadian federal surpluses have given consumers more confidence which has led to increased spending on homes, retail goods and business expansion.
Another big difference has to do with mortgage loans. Unlike the U.S., the Canadian housing market has not been artificially driven by bad lending practices. As well, all mortgages in Canada are insured which is not the case in the U.S.
This may explain why according to the Canadian Real Estate Association, MLS resale housing activity in Canada's major markets broke all previous annual records by the end of 2007. In many areas it was a sellers market with the residential average price rising 11.6 per cent.
