Canada’s Real Estate Market Health

Canada Housing Market

First Published Date: March 30, 2010

While many other western countries, most notable the United States, are still experiencing the aftershocks of a housing bubble crash, the Canadian real estate market is still doing quite well. Since the start of 2009, the average home price in Canada has risen nearly twenty five percent, with the volume of home sales at nearly seventy five percent. What does this mean? Simply put, it means that Canada has a very healthy, vibrant real estate market. And this signifies that it is currently a good time to purchase real estate in Canada.

But why has Canada’s real estate market been so healthy? Why has it outperformed its southern neighbour? There are four basic reasons why. The first reason is that Canada has maintained a set of high quality lending standards. The lack of this high quality lending was a great problem in the United States’ recent real estate crash. Related to the first reason, the second reason is the single regular “lack of regulatory capture.” In Canada, regulation is much more consistent and uniform than in the United States, and the regulating body tends to be much more in lockstep than the US’s regulating bodies. This has a direct effect on not just clarity of information, but also on issues such as corruption and trust.

The next reason is relatable to the first: high risk mortgages in Canada require the purchase of mortgage insurance. The final reason is what is termed “full recourse mortgages.” In the Canadian real estate market, a person may walk away from his or her home, but not the debt. This has a direct affect on consumer behavior – it limits risk on the consumer end, essentially. Each and every one of these traits of Canada’s real estate market plays a role in why it has remained healthy. And it is exactly this stability and market health that makes real estate such a great investment in Canada, even while so many other countries are struggling with real estate problems.

If you’re already set on purchasing some form of real estate in Canada, the question then becomes what? Are you looking for a short-term solution, or a lifetime investment? How much space do you need? How many rooms? And then, just as importantly, you need to know how much you’re able to afford, and how much a home mortgage will cost per month and overall. Now this is one area in which real estate operates in Canada much like it does in the United States, and most everywhere else.

See, regardless of the regulations involved, all financial transactions from direct exchanges of goods and services for money all the way to borrowing and lending are governed by universal economic laws. How much you’re able to afford in monthly payments is necessarily a function of how much income and savings you have. These also have a bearing on what size of a mortgage loan you’ll be approved for. As a general rule, you’ll be approved for a larger loan if you have a higher income and increased savings. Of course there are other factors involved, such as other debts or financial obligations, as well as the current health of the market.

The simple facts are these: when purchasing a home, you’ll want to be approved of a mortgage large enough to complete the transaction of the home; you’ll want your mortgage rate to be as low and as beneficial to you as possible; and finally, you want to purchase the home in a stable market environment. These three facts all still come together very well in Canada, and they make purchasing real estate there a generally wise investment