In Canada’s real-estate and mortgage markets, there continues to be a lot of talk about a “bubble” that’s ready to burst at any moment now. The problem, however, is that this speculation about a bubble has been around for the better part of a decade now, and these warnings have never materialized. There are a few reasons why Canada’s mortgages market continues to outperform the naysayers.
First, the one thing about global crises is that they often force people into reactionary views of the world that aren’t necessarily based on the facts. So, with respect to the global financial crisis that was in part initiated by the U.S. housing bubble of 2008, many people overreact afterwards in an attempt to not have it happen again. It’s understandable, but not necessarily right.
Learning the right lessons from history
The fact is that Canada never initiated a housing bubble that precipitated the financial crisis almost a decade ago, and the effects that Canada felt as a result of the real housing bubble collapse in the States was relatively minimal.
In Canada, we had a mild recession, a mild housing downturn, and then things picked up incredibly well soon afterwards. In fact, Canada’s housing and construction sectors reached pre-recession levels rather quickly, and have never looked back. In fact, this sector has really never been better.
And that’s why people keep predicting another housing “bubble” even though we really never had one in the first place. In some ways, when things keep doing well, the naysayers have to chime in. It seems to be a part of human nature.
Nevertheless, there are many reasons why Canada’s mortgages market has been strong, and will continue to be strong. For one thing, our financial sector is generally better regulated than in the States. In fact, it might well be overly regulated, but we can get into that another time.
Sustaining the boom
However, another factor in Canada’s mortgages strength is its demographics. In particular, young and well-educated immigrants are moving to Toronto and Vancouver, and they’ll be doing so within the foreseeable future. This means that not only will there be a demand for condos and high-end housing in those cities and surrounding areas, but the families will grow, which bodes well for the future of the housing/mortgage market, too.
So, next time someone tells you that the bursting of Canada’s housing/mortgages market is imminent, don’t be so quick to accept it. It hasn’t been the reality yet, and evidence suggests the market is still stable and healthy.