Newsletter February 2018

Welcome to the Guardian Financing February, 2018 monthly newsletter. This month’s issue is on why a Chinese pullback may hurt the Canadian housing market.

Why a Chinese Pullback May Hurt the Canadian Housing Market

There is no denying that the prices of residential homes in Toronto and Vancouver have continued rising, compelling organizations like Housing Corporation and Canada Mortgage to warn citizens about vulnerabilities in such markets. Even though experts agree that the country’s economy is healthy and very stable, and recession isn’t expected anytime soon, the focus has now shifted to China’s economy and its drivers.

There are specific reasons why China has to be watched very closely when considering the housing market in Canada. Firstly if you consider the demand within a market like Vancouver, the housing demand is not spurred by a healthy economy. But instead, the growth is primarily driven by overseas investors; particularly Chinese investors.

It has been noted that most investors in Vancouver are affluent Chinese people, who are trying to get their money out of China. They are attracted to a city like Toronto because it is a mature city with good regulations and few obstacles concerning the flow of capital in and out of the country. Additionally, Vancouver is known to have low restrictions as far as purchasing residential properties is concerned.

Secondly, it is not only Vancouver being targeted by Chinese investors. The same type of investors are also active in similar markets such as Sydney, and currently, Sydney happens to be the second-highest and most overvalued city in the world as far as residential housing markets are concerned.

Finally, there are random and arbitrary economic events, which may result in a pullback, which in turn, will reduce the buyer demand for different properties all around the world. If that happens, and the flow of the Chinese Yuan stops flowing into the Canadian housing market, or there is a large disruption of any nature into the flow, then the Canadian housing market, especially Vancouver and Toronto, would be greatly affected.

Due to the above factors, China and events happening within its economy are being watched attentively throughout the Canadian housing market. We can only remain hopeful that a pullback will not occur even though the dominant players in the market are still foreigners.

Guardian Financing is a direct mortgage private mortgage lender. We serve the greater Montreal area, providing short term residential mortgage loans, typically ranging from $50,000 to $750,000. Contact us today to discuss your file at 514-700-3121 or by email at files@guardianfinancing.ca.