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3 concerns Canadian housing market experts say aren’t worth worrying about — yet

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Toronto real estate home sales July 2018



James Bombales

It can seem like there are endless things to worry about when it comes to the Canadian housing market.

Would-be buyers have to contend with headlines cautioning them about the deterioration of housing affordability, rising interest rates, and historically low rental vacancy rates.

But not every problem is made equal, and some may have been blown out of proportion by the news cycle. Every once in a while, industry experts weigh in to let the public know which issues they should take seriously, and which they don’t have to think about as much — at least for now.

Here are three topics to take off your worry list for 2019.

Household debt is high – but it’s going down

There’s been no shortage of worry about Canadians’ high household debt levels, and what they could mean for the stability of the country’s housing market. But according to experts, things are in a relatively stable place.

In fact, ever since stricter mortgage qualification rules were introduced in January, mortgage debt levels have been on the decline. Mortgage borrowing fell by $3.6 billion in the second quarter of 2018, according to Statistics Canada.

And, a new report from the Chartered Professional Accountants (CPA) of Canada found that Canadians’ credit quality remains strong — while they still have high amounts of debt, they’re good at paying it down on time.

“In contrast to the situation a decade ago in the US…the number of borrowers with high credit quality has risen from 66 percent in 2002 to 88 percent in 2017,” reads the CPA Canada report. “In turn, the number of low-credit-quality buyers shrank from 17 percent to three percent over that period.”

That means that, while ideally debt levels will continue to fall in the new year, the stricter qualifying rules should keep the market in good shape for the foreseeable future.

“The Canadian system seems likely to be ready for prospective challenges, even if the economy softens here or abroad,” reads the report.

Foreign buyers aren’t as big a factor as you might think

With the introduction of foreign buyers’ taxes in Toronto and Vancouver over the past two years, you’d be forgiven for thinking that foreign investors were dominatingrushing into the Canadian housing market.

But the reality is much less dramatic. Non-residents of Canada account for less than 5 percent of housing in the Greater Toronto and Vancouver Areas, according the Canada Mortgage and Housing Corporation (CMHC).

“The phenomena of non-resident ownership is most pronounced for condo apartments,” explained CMHC chief economist Bob Dugan earlier this year. “But what we’re seeing is that the share of condos owned by non-residents remains low and stable.”

That doesn’t mean foreign buyer taxes have no effect on the market – many experts believe that they have a psychological impact, causing foreign and domestic buyers to reconsider entering the market temporarily.

But foreign buyers are unlikely to cause the Canadian housing market to deviate from its relatively balanced state any time soon.
Dependence on alternative lenders is still under control

With stricter mortgage rules imposed on those seeking a mortgage from the big banks, more and more Canadians are seeking out alternative lenders.

Private lenders accounted for 20 percent of mortgage refinancing deals in Toronto in the second quarter of 2018, up 67 percent from 2016, according to online brokerage Realosophy and real estate data provider Teranet.

“Homeowners struggling to make ends meet today need a plan that does not include turning to high interest private debt,” writes John Pasalis, president of Realosophy, in the report. “In this late stage of Canada’s housing and credit cycle where house prices are moderating and interest rates are rising it’s not the time to be increasing your overall debt load — it’s time to deleverage.”

At the same time, Pasalis acknowledges that the majority of Canadians are still turning to banks to secure their mortgages.

And, now that the effects of the mortgage stress test have been absorbed by the market, it seems likely that the rate of private lending will ease in 2019.

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New home? Prepare for the unexpected

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(NC) Buying a house, getting married or having your first baby are all major life events that are likely to affect your finances. But whether you’re in the midst of a major life event or not, it’s important to check in on your finances regularly to maintain good financial health.

Your financial health encompasses things like your spending, savings, borrowing and future financial plans. It also means dedicating a set amount of savings for unexpected future events. It can even include optional credit protection insurance, such as TD protection plans, to help cover your debt balances in case of death, a covered critical illness or total disability.

Even though it can be tough to think about the unexpected, life is unpredictable and it’s important to plan for the unexpected. Find more information at td.com.

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Mortgage pitfalls to avoid

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(NC) Throughout life, you may have moments where you’ll make a large purchase or invest in a costly item, like your family home. But whether you’re in the market for your first new property or already have a mortgage, leaving this asset unprotected can be costly.   

Insuring your housing financial debt, as well as debt for other big-ticket items like a new boat for your lakefront cottage or keepsake jewelry like an engagement ring, is a smart investment in your well-being.

To help protect your debt balances like a mortgage, your bank may have optional credit protection insurance products.

“Your home is one of your biggest assets, yet illness can happen at any stage of life. Worrying about your mortgage when the focus should be on health isn’t a situation anyone would wish for,” explains Shirley Malloy, vice president at TD. “Fortunately, we offer mortgage protection to provide coverage for your outstanding balance should you face a covered critical health event.”

Mortgage protection can be purchased whether you’re in the process of applying for a mortgage or already have a home financing solution. But what about protection options for credit card debt?

“Given the unprecedented circumstances of this year, many Canadians are trying to plan for the unexpected to protect themselves and their finances,” says Malloy. “TD balance protection plus is an optional product designed to help you deal with your credit card payment obligations in the event of a covered event, such as loss of employment.”

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Is your internet too slow? It’s probably not you

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(NC) We all know the aggravation of a school lesson that just won’t stop freezing or the family video call that looks more like a photo montage. And, as we adjust to the impact of COVID-19 on our day-to-day, that slow connection can have frustrating consequences.

Working from home and learning remotely, both need fast, stable internet, something not enough Canadians have yet. Even if you have fast devices in your home, if the infrastructure in your area is not optimal, your connection won’t be either.

Right now, cities have the infrastructure needed to ensure access. But rural and remote communities are hugely underserved, with fewer than half having high-speed internet, and fewer than a third of households on reservations have high-speed connections.

Fortunately, change is coming. The Universal Broadband Fund is backing projects across Canada right now to ensure the reliable, high-speed internet connections families need to work, study, access services online, and safely stay in touch with each other.

The fund existed before COVID, but as a response to the pandemic, its timetable has been moved up by four years to a target of 98 per cent of Canadians with high-speed internet access by 2026. With the faster pace, at least 90 per cent of us should be connected by the end of 2021.

The fund is focused on improvements in rural and remote communities across Canada to fix the disconnect between internet access for urban and rural households.  This means more remote work opportunities, better access to remote learning and safer access to healthcare, no matter where you live.

It’s not just for good connections at home, either. The improvements mean much better access to mobile networks on highways between remote communities. The result is better, safer navigation and access to emergency services for your family, even on the road in the middle of nowhere. Mobile projects will be focused on serving Indigenous communities and the roads leading to them.

The shape these improvements will take in your area will depend on where you live. Canada is huge, and its communities are hugely diverse, with diverse needs. Keep an eye out for local projects — they’re a small part of something much bigger.

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