Skip to main content

SUPPLIED

It has become a Canadian pastime to talk about the piping hot housing market characterized by bidding wars and oversized offers that are making some people rich — and many others, house poor.

Thane Stenner, senior portfolio manager, Stenner Wealth Partners+ of Canaccord Genuity Wealth ManagementSUPPLIED

While it’s true a mortgage can be considered “good debt” for some households, there’s a concern about how much leverage Canadians are taking on, especially as interest rates are set to start rising. The impact could be widespread for homeowners and investors alike.

“The Canadian real estate market is very stretched,” says Thane Stenner, an investment advisor and senior portfolio manager with Stenner Wealth Partners+ of Canaccord Genuity Wealth Management, which works with ultra-wealthy clients with a net worth of more than $25-million across Canada.

He compares Canada to the United States (see chart): South of the border, income and home prices have moved largely in line, but not in Canada, where house prices have run far beyond what people are earning.



According to Statistics Canada, mortgage borrowing hit a record $63.8-billion in the second quarter, more than double versus the first quarter. Household credit market debt as a proportion of household disposable income rose to 173.1 per cent, from 172.6 per cent in the first quarter, driven by “vigorous mortgage borrowing,” the agency said.

Another concern is the winding down of government stimulus programs that have supported workers throughout the pandemic, which Mr. Stenner says could send household debt levels even higher.


SOURCES: North Cove Advisors and Stenner Wealth Partners+ of Canaccord Genuity. www.stennerwealthpartners.com. Canaccord Genuity Wealth Management is a division of Canaccord Genuity Corp., Member-Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.


While he isn’t forecasting an imminent housing market crash in Canada, Mr. Stenner believes investors should brace for at least a “long, protracted sideways period” in the real estate sector if not a major real estate correction of 10 to 20 per cent.”

It’s a red flag for FIRE investors, he says. Not to be confused with the Financial Independence, Retire Early Movement, Mr. Stenner is instead referring to investors in the Financial Insurance and Real Estate industry, who could be impacted by a housing market retreat.

“These sectors could see some challenges ahead — and investors would be wise to be ready,” he says.


Listen to Thane’s podcast here: https://stennerwealthpartners.com/bnnbloombergpodcasts.


Advertising feature produced by Globe Content Studio with Stenner Wealth Partners+ of Canaccord Genuity. The Globe’s editorial department was not involved.