Why Canada's housing market has done so much better than the US

I found this interesting article by Steve Bulwa in his Bulwa Tech Report that focuses on the primary differences between our Canadian housing market and that of the US.


In a two-part Blog, we will examine those differences and what makes Canada such a success.



While U.S. real estate markets struggle to stabilize at significantly lower levels than the highs established in 2007, most Canadian markets continue to show strength and even make new highs.


One of the most obvious reasons the Canadian markets have remained strong is regulation that requires a more conservative loan to value (LTV) ratio than in the U.S. Most Canadian lenders require at least a 5% down payment , resulting in both a more financially stable purchaser and a more committed owner. With 100%+ LTV, as was rampantly available in the heat of the U.S. market bubble, a 10% decrease in housing values was enough to put a purchaser underwater in their investment and consider walking away.


Location, location, location is the oldest adage in real estate. The biggest contributor to the stability and growth prospects of any real estate investment is its location. And population distribution has helped Canadians benefit from this location premium. Among the most desirable locations in Canadian cities like Toronto and Vancouver are those close to the downtown core. This is because the downtowns in these cities are dynamic centers that offer their occupants opportunities both to work and to play. Public policies leading to safety and security in Canadian downtown cores likely also contribute to their residential desirability. Strict gun laws have made cities in Canada safer, while social programs have mitigated the wealth disparity that causes class division and strife in many U.S. cities.


A 2011 livability ranking  done by the Economist’s Intelligence Unit ranks 3 Canadian cities, Vancouver (1), Toronto (4) and Calgary (5) in the world’s top ten, while USA’s only entrants in the top 30 are Honolulu (26) and Pittsburg (29). The study states "Those that score best tend to be mid-sized cities in wealthier countries with a relatively low population density. This can foster a range of recreational activities without leading to high crime levels or overburdened infrastructure. Seven of the top ten scoring cities are in Australia and Canada, with population densities of 2.88 and 3.40 people per sq km respectively."


(part two tomorrow).


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