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Vancouver Real Estate Market Conditions


Blog by Claire LeLacheur | October 10th, 2008


I have been reading through some recent Vancouver Sun and Financial Post articles posted by the all knowing Merrill Lynch economist David Wolf. I still find it amazing to this day that one person states something once, and if it bad news it can be picked up by thousands of online readers, papers and news stations and the only reason for this that it is fear based and fear based advertising sells paper!

 

What Mr. Wolf is emasculating is that Canada’s housing market bubble is set to burst with a huge resounding pop because Canadian house holds are over extended, even more so then those of Britain and almost as much as the U.S.

 

While I won’t disagree that there are a large portion of Canadians who are over extended on their credit cards, and other untimely debt to un named furniture stores that advertise furniture for free until 2012, I do disagree with the statement that our housing bubble may burst.

 

There are several huge differences between the Canadian housing market and the US housing market. They were most appropriately made fun of in a Saturday Night Live Skit.

 

You have to be gainfully employed. A large portion of sub prime mortgages in the United States were handed out to people who had no income, did not have to prove that they ever had any income, and were given a substantially large mortgage based on what? Absolutely nothing.

 

 

You must have a down payment of 5% - 25%. This almost leads back to the first point of being gainfully employed. Somewhere along the line large amounts of Americans where aloud by the banks to do Zero down mortgages. What’s worse, they were only paying down the interest and not the principle.

 

You must be a person of character. Here some might argue that this may be against the Charter of Human Rights. However, those who have some sort or drug or alcohol addiction and have not sorted their lives out, and have no job shouldn’t be allowed to have an interest only zero down mortgage for a house that is worth a half million. Period.

 

You must show that you have paid your taxes. These days mortgage brokers and banks alike ask for proof that you have paid your taxes and you don’t owe the government outstanding money.

 

Canada’s sub prime mortgage market made up only about 5%-7% of the overall mortgage market which is not much considering the bigger picture, whereas the US sub prime mortgage market made up about 98% of all their lending.

 

Taking a look at the bigger picture of Canada as well as BC we are on good economic footing. We have been conservative in our lending processes and cautious in our ways. While there are people out there who have over extended themselves in a mighty way, I don’t believe that we will follow in the US footsteps that are now mired heavily in the mud. While the 700 Billion dollar bailout has just passed through the senate and the House of Representatives, this may take a while to work its way through the system.

 

Stephen Harper has repeated the same sentiments over the course of the debates in the wake of our looming Federal election, “we will not see the same thing here (Canada) as in the US” stressing that our financial institutions and consumer markets are in much better shape and can ride out a storm as heavy as this.

 

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