The “bubble” that has yet to burst

Anyone who has followed Canadian economic analysis for the last number of years, especially the housing and construction sector, would certainly be familiar with the term housing bubble. The term refers to an alleged over-pricing in the housing sector that will eventually lead to a “burst” with a precipitous fall in prices.

There’s only been one problem with all this ongoing talk about a housing bubble. It hasn’t happened, and as a recent forum of B.C developers has indicated, it’s still not likely to happen any time soon.

Always focus long-term

First, let’s take a step back and examine Canada’s housing sector and why it matters. Specifically, it matters because economic observers, as well as investors, should never get caught up in short-term prognostication, but also because a long-term outlook is important when making investment decisions.

Back in 2008 was the start of the so-called Great Recession that adversely affected the global economy, including Canada, which entered both a short recession as well as a short correction in the housing market. Since then, the economy has been chugging along quite nicely, thank you very much, but the housing sector has perhaps been doing even better.

Look at the fundamentals

Month after month, and year after year, all the statistics related to the housing and construction sectors have been going up: prices, starts, permits — you name it. These increases have been so consistent and steady that governments at both the federal and provincial level have tried to put a stop to it, in part to prevent that dreaded “housing bubble burst.”

However, as speakers at this year’s Urban Development Institute’s “2019 forecast’ luncheon have indicated, and as reported by the Vancouver Sun, this year might still prove elusive for people waiting to see the bubble burst.

For example, Eric Carlson, founder and CEO of Anthem Properties, believes that various attributes of living in Canada — such as a growing and stable economy, rule of law, and free speech — mean that demand for people coming to Canada will remain high, as will a supply of housing to meet such demand. And, despite some experts at the luncheon acknowledging the prospect of a slowdown, a bursting of the bubble doesn’t appear to be in order any time soon.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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