Despite assurances all along that the housing situation in Canada was nothing like what was happening in the United States, Canadians have still been somewhat reluctant to take advantage of favourable buying conditions.
Although this customary Canadian cautiousness has served us well over time, it has also caused us to miss out on certain opportunities. A couple of weeks ago, TD Economics released an excellent comparative analysis of the two countries situations.
In the United States, housing starts had been exceeding demand for four years. Overbuilding causing a large inventory of houses was excessive. In Canada, what appeared to be overbuilding was, in fact, a compensatory response to a decade of undersupply.
In a couple of major urban centres in other provinces, there may be examples of oversupply or inventory, but not in Manitoba. There is no anticipation of price devaluations here. As a matter of fact, home values continue to increase.
Mortgage interest deductibility from personal income tax, steering households towards larger mortgages, encouraging "flipping" and discouraging the accumulation of home equity hurt the U.S. market. Canada's tax laws do not permit similar deductions and we find a great degree of comfort in home ownership.
Homeowner equity in the U.S. was below 40 per cent before the economic tailspin. Obviously, it is much lower now. In Canada, we have not allowed credit to overextend our capabilities and equity averages over 55 per cent.
In Manitoba and Saskatchewan, that number is even higher. Canadians can afford to own their houses, diminishing the likelihood of the snowball effect of foreclosures south of the border.
New home ownership remains a sage investment in Canada and Manitoba. The market continues to be strong with no signs of a duplication of the American situation. Now is definitely a good time to investigate the purchase of a new home.
This column prepared by the Manitoba Home Builders' Association.
