|Housing: Will the bubble burst?|
June 21, 2012 advisor.ca
Housing is top of mind in Canada these days.-
So far, Canada has avoided the kind of catastrophic housing crash that precipitated the 2008 financial crisis. And, while it’s unlikely a popping of Canada’s housing bubble would resound worldwide, it would be a downer domestically.
In that light, Ottawa’s actions to decrease amortization periods for residential mortgages appear squarely aimed at cooling some of the runaway price appreciation in the country’s larger cities. By restricting lending, the government is essentially acting to take some air out of the bubble before it bursts.
The change, though, has implications for Canadian investors and advisors. Most of your clients likely predicate their net worth largely on the values of their homes. If those slide, even 10% or 20%, it may make them feel less wealthy and ultimately increase their aversion to risk.
It will fall to you, then, to discourage them from obsessing over such valuation shifts – much the way you had to do when equity markets lost value a few years ago.
Here are some related articles to catch you up on the topic, and give you ideas and takeaways to discuss with clients:
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