Toronto real estate home sales July 2018

Photo: 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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