Tuesday, November 5, 2013

Canada's Housing Market Bust

Why is the Canadian [Toronto] real estate Market so resilient? How is it pushing itself every month with strong numbers in detached home sales. Even with LOUD warning bells from Flaherty on increased Household debt, Condo's continue at an annual pace of approximately 25,000 units. Houses Prices Rocket as the Number of available units dwindle. Instead, Home buyers are migrating further into the 905 while others steadfastly ride the elevator higher. 

We don't have financial silliness in Canada;
No NINJA loans.   No Income No Job  No Assets   NINJA
Interest only payments with a Balloon payment at 5 years - Why?   Tax deductibility

Borrowers Need to Qualify (apply for the debt) and demonstrate the ability to repay
Canada is a Full Recourse Lender - They sue you and take ALL you stuff.

Yes, Debt levels are rising; We are using our home as security for lines of Credit [Heloc] to purchase and pay for tuitions, weddings, divorces and finally that Porsche 911 or retirement savings.

Our house is earning 8 - 10% annually while inflation has stayed at 3.5%.  My bank however pays me a paltry 1.5 - 2% annually for locking my money.

The US housing crisis that occurred a few years ago will be a data point that analysts, economists and the public will remember for decades as it serves as a reminder of how precipitous the market can get when we sign up for more than we can actually afford. Other countries experienced this same economic downfall as well, but a study published by Bank Credit Analyst (BCA) Research shows that Canada did not fall victim to the housing bust that affected the U.S. While the US debt to income ratio fell as much as 30 percent beginning around 2006 until now, Canada’s has been on the rise since 1990 and has already hit more than 160 percent.
Why the disparity in income to debt between the two countries? Canada has safeguards against some of the factors that fueled the flames of the US housing market crash, such as its government requiring mortgage insurance when home owners are being considered for a loan. There are also requirements for credit checks and a minimum down payment in order to ensure that interested home owners have a proven history of handling and paying down debt, as well as that they have enough cash flow to handle the responsibilities of paying a mortgage. The US has these forms of checks and balances as well, but in past years, mortgages were being approved at a far less stringent rate and often to people who could not reasonably take on that amount of debt. http://agbeat.com/economic-news/canadas-housing-market-didnt-crash-americas/

Toronto may be in its infancy as a City and all the squabbling about expansion, but the land is already built out.  We have a lake to the south and the periphery is the 905. Residents continue to arrive for safe haven, employment, education and most importantly medical services as we age.

I see seniors selecting the condo with a view where they want to spend their retirement years. They buy it and rent it, until they are ready to move in. This adds to their nest egg. Are you ready to join in? Call me.   There are incredible choices at Humber Bay Shore.

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