Five Reasons Why You Don't Need To Worry About A Canadian Housing Bubble

by: Joshua Brown, The Reformed Broker 

 

 

This weekend I shared this Globe & Mail story about the hedge fund manager betting big against Canada, specifically the Canadian banking sector, housing market and the country's currency. He sees a crisis coming for the real estate market up north that will wreck the economy.

It's an interesting view, but one that I think will be wrong.

Five quick reasons why:

1. A lot of the money fueling the boom is coming from Asians (especially from China) who want to get some assets outside their country. Real estate is how they're doing it. A new boom in China fuels more of this as there is more money to be invested. A crash in China fuels it even further as the newly minted millionaires and billionaires seek to protect even more of their wealth from local conditions. It's virtually guaranteed to continue.

2. The rest of the money is coming from gold mining, oil drilling and nat gas discovery. Gold may be in or out of fashion, but its been a Canadian mainstay industry since the flag was first planted. It is endogenous to their culture and way of life. Oil and gas prices rise or fall but the underlying need and demand really don't. In short, the prices of materials fluctuate but its not likely that activity in finding and producing these materials will ever stay down for long.

3. Have you met any Canadians? Outside of hockey arenas and beaver-trapping blinds, they tend to be well-educated, clean, smart, well-mannered, fastidious and responsible. Yes, this is a stereotype, but most stereotypes contain a kernel of truth, it's how they get started to begin with. Look at the loan-to-value rates in Canadian housing, look at the percentages of equity being put down, look at the sheer amount of activity taking place with cash on the barrel head and no debt. It's hard to call this a mania or a free-for-all.

4. Canada's housing supply is mostly igloos, which will eventually melt, thus preventing massive overstock in the market place. This factor should keep pricing somewhat stable over time.

5. I don't have a fifth, it's been a long day

Comments:

No comments

Post Your Comment:

Your email will not be published
Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.