Will there be a housing bubble in Canada? Not likely.Guy Ward
On the job front, Statistics Canada found that in May, the country had its best month for job creation in more than a decade, and remained steady in June.
Also last week, the Conference Board of Canada and the Canadian Federation of Independent Business reported a surge in business confidence and that companies were preparing to boost investment and increase hirings.
The news is equally as good for the housing sector, one area analysts look at to gauge the health of the economy. Who can forget what happened to the U.S. and global economies when their housing sectors got into trouble. It didn’t happen in Canada, which is one reason the country got through the recent global recession in good financial shape.
The Canadian Real Estate Association reported that home sales increased in June for the third straight month and prices also rose. This combination is cause for concern among some economists and the reason why there’s new talk of a housing bubble. However, a report by TD Economics debunks that idea with some solid observations.
Finally, Statistics Canada, in its first quarter of 2013 economic report, found that high household debt and the housing market is starting to balance, which means the new mortgage rules implemented by the federal government and the Office of the Superintendent of Financial Institutions has worked. Those changes helped to slow the growth of household debt. The result is that debt growth is at its slowest pace since 2003.
It’s true that household debt is still high and condo markets in Canada are still uncertain, yet there’s no real chance that interest rates will increase suddenly or that there will be a quick uptick in unemployment, which was the condition in the U.S.
The new Governor of the Bank of Canada Stephen Poloz said the prime rate will remain where it is at least until the end of 2013 and into mid-2014. This will help keep all household costs down. A confident business sector means more jobs, and could mean pay raises as well, which means households will be able manage their debt.
So read the news reports about housing bubbles with some healthy scepticism – Canada and Canadians are in good financial shape for the future.
Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta).