Canada’s housing market is “relatively insulated” from a US-style crash and Canadians might simply need to get used to high home prices, according to the chief economist at Chartered Professional Accountants.
In his report on housing and household debt in Canada and whether a crisis is looming, economist Francis Fong examined the risks and vulnerabilities of the Canadian housing market and whether the widespread rise in household debt combined with unprecedented home prices meant that the often-predicted price crash was imminent.
Mr Fong compared the characteristics of the Canadian housing market with those that caused the US subprime crisis of 2008. He said: “Canada does not share the credit quality issues that plagued the US housing boom-bust cycle, such as the prevalence of subprime mortgages. Most critically, Canada’s housing market has not been driven by growth in low credit quality mortgages, despite the impression given by rapid price gain. In contrast, [Canadian] credit quality has actually improved alongside the growth in home prices.”
Mr Fong cited Equifax data that found the proportion of homebuyers with “very good” or “excellent” credit scored increased from 81.5 percent in 2013 to 84 percent in 2017. Among first-time homebuyers, the improvement was between from 79.4 percent to 82.4 percent. Mr Fong said: “This suggests that home price gains are being driven by those who can actually afford such prices.” He also pointed out that 82 percent of Canadian mortgages are uninsured, which means that the buyer had at least a 20 percent down payment.