While the Canadian real estate market has had its fair share of ups and downs over the years, with the most notable downturn occurring during the global economic crisis of 2008, our current market situation is quite different from then.
Here’s a comparison of the 2008 crash with the current state of the Canadian real estate market:
A Snapshot of 2008
Leading up to the 2008 crash, the Canadian real estate market experienced a boom period where property values were rising, and construction activity was at an all-time high. The boom was fueled by low-interest rates, easy access to credit, and a surge in demand from both domestic and foreign buyers. The market was also characterized by speculation and risky lending practices.
Why 2023 is Different
In contrast, Canada is now in a very different environment. We are in a climate of high interest rates instead of low interest rates, there are stricter lending policies vs. easy access to credit, and real-estate prices are higher compared to 2008 making it more difficult for some groups to enter the market. Further, the market has also been affected by the COVID-19 pandemic, which has caused supply chain disruptions and labor shortages, leading to delays in construction and a rising cost structure for development materials.
The Difference in Severity – 2008 vs. 2023
The 2008 real estate crash was severe. The crash led to a recession, rising unemployment rates, and a decline in the value of properties. 2023 has not seen a full-blown recession. Instead, the market has seen a correction in values such that prices have stabilized or even fallen in some areas. Further, the impact of the COVID-19 pandemic on the real estate market is still being felt, but there is cautious optimism that the market will rebound in the coming years.
Government Intervention – 2008 vs. 2023
During the 2008 crash, the Canadian government introduced measures to stimulate the economy, including lowering interest rates and introducing stimulus packages. In 2023, the government also stepped in to provide support to the real estate market. For example, the government has introduced policies to help first-time homebuyers, such as the First-Time Home Buyer Incentive, and the Stress Test for mortgage lending has been adjusted to ensure borrowers can still qualify for a mortgage in a rising interest rate environment, but also ensure those who do take on mortgages have the wherewithal to handle difficult times.
Overall, while the Canadian real estate market is facing challenges in 2023, the situation is not as severe as what was experienced during the 2008 crash. The market is more stable, and the government is taking steps to mitigate risks and support the market’s recovery. The Canadian real estate market has shown resilience in the past, and it is likely to weather this latest storm as well.