According to Robert Hogue, a senior economist at Royal Bank of Canada in Toronto, “We don’t expect the base Canadian housing market to experience the trauma of the U.S. market.” I think most of us can breathe a sigh of relief at that.
So we’re not really living in a real estate bubble, as has been repeated ad nauseum for the last couple of years, but rather, we are more like that wonderful froth at the top of a creamy cappuccino.
Those keeping a wary eye on the real estate market have noticed that the action that the Canadian government took beginning in 2008 by limiting access to credit at the time of the financial crisis, has had the desired effect of cooling down the incredibly heated Canadian real estate market.
First, the Canadian government made it so that buyers had to have at least a 5% minimum down payment for government-backed mortgages. Next, they began to limit the amount of time in which borrowers could take to pay back their mortgage loans to 25 years instead of 35.
Considering that home prices have almost doubled over the past decade, the measures taken to insure that our housing market doesn’t crash were necessary. According to Sheryl Kennedy, CEO of Promontory Canada and deputy governor at the Bank of Canada from 1994 to 2008, that the actions that the Bank of Canada and Ministry of Finance took have steadily contributed to the cooling effect on the Canadian housing market.
Thus far, statistics show that Canada’s housing market is on a consistent cooling, as the number of newly-listed homes for sale dropped by 3.3% in July, from June 2012, according to an RBC report released in early August.
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