Nov 7

By Stefan Hyross

The forecasts for a nationwide Canadian housing bubble have so far not become reality, and the real estate market has remained robust throughout the mortgage crisis that rocked the U. S. economy the past few years. Analysts were concerned that the Canada Mortgage and Housing Corporation’s (CMHC) plan to keep the credit circulating by approving high-risk loans had created an alarming 7.4:1 ratio of income to housing values — almost 50 percent more than the American ratio before the U.S. housing bubble burst. As a consequence of the CMHC’s policy shift, the average Canadian household debt underwent a 9.3 percent raise in only one year.

In the earlier part of this year, Stephen Jarislowsky — the 84-year-old investment advisor presumably worth $1.85 billion — said to reporters that the CMHC’s plan had failed. Jarislowsky flatly negated the comments made by Finance Minister Jim Flaherty claiming that the indications did not forecast to a future housing bubble. Jarislowsky was persuaded that the government’s plans had not strengthened the economy. ” They have basically encouraged renters to purchase homes based on inexpensive mortgages. The City of Toronto is an example of this as purchasers have pushed up prices for Toronto properties simply because of affordable mortgages.

In February, the Wall Street Journal investigated the possibility of a Canadian housing bubble and pointed out that bold lending practices adopted after the 2008 crash of the U.S. based Lehman Brothers could have backfired unless the government balanced the lending practices. In January of 2010, the Bank of Canada representative expressed the hesitation of the banks to take measures, saying that “if the Bank were to increase interest rates to slow down the property market now “we would, in essence, be dousing the entire country’s economy with cold water, just as it crawls out from recession”. Condo owners in Toronto are following this extremely closely since a rise in lending rates would have a large impact on condos for sale in downtown Toronto which would affect sales.

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The Canadian Real Estate Association figures that were published for the first half of 2010 does show that the start of the slowdown in 2008 created a steep drop in residential real estate transactions. But this was short-lived, and the rebound has not been as dramatic as expected. Even though the May 2010 sales numbers indicated a 9.5% drop, the year-over-year price gains actually moderated it to 8.4 percent. Currently the market is stabilizing, and the offering of homes is increasing as the prices go up and buyers are not as anxious to invest. If you own a home in Toronto you may be able to withstand a fall in the value of your property however smaller regions like the Hamilton real estate market could see a substantial decline in housing values.

“The bubble threat made a lot of people nervous,” explained Pascal Gauthier of the Toronto-Dominion Bank, who saw clients fearing a crash similar to the 30 percent drop in U.S. housing values. But he mentions this summer he is experiencing a “180-degree turn from six months ago,” and that the interim factors that boosted values have only resulted in a modest fall in a sector that was clearly overpriced. Gauthier estimates that the national average may experience a 7% decline, but that the markets in Toronto and Vancouver will bear the brunt of that decrease, and a few sectors such as The Prairies and Maritimes could even start to realize increases by the end of the year.

About the Author: Stefan Hyross is a housing writer that studies the housing sector. For news about

Toronto properties

or to look for

condos for sale in downtown Toronto

please visit the sites. You may also search for

Hamilton real estate

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