Credit Suisse: Not clear whether housing market will land hard or soft

by MBN | 30 Nov 2013

In its annual Global Wealth Report, Credit Suisse paints a opaque picture of the Canadian financial picture; which it attributes, in large part, to an unclear housing forecast.

“Rapid growth in mortgages has fuelled a continuing rise in household debt,” the report stated. “Mortgage terms were tightened in 2012 and the market cooled somewhat, but there are continuing concerns; it is not clear whether the final landing will be soft or hard.”

The report was written by Anthony Shorrocks, director of Global Economic Perspectives Inc. who has a PhD in economics from the London School of Economics; Jim Davies, Economics professor at the University of Western Ontario; and Rodrigo Lluberasis, Economics PhD candidate at the University of London.

The report also touched on the modest household wealth growth experienced by Canadians.

“Measured in US dollars, household wealth grew at an annual rate of 6.7% between 2000 and mid–2013,” the report stated. “Discounting exchange rate effects, the rise in wealth is a more modest 3.7% per annum. The 25% contraction in USD wealth in 2008 is also much less evident when expressed in Canadian dollars.”
And although it admits Canada has experienced a smoother recovery from the economic recession than the United States of America, it also states that our wealth holdings are similar.

“In some respects, the pattern of wealth holdings in Canada resembles that in the USA: in both countries, for example, financial assets account for more than half of household wealth,” the report said. “Canada has lower wealth per adult than the USA, and the gap grew last year from 9% to 17%, reflecting both USD appreciation and better stock market performance in the USA.”

However, the distribution of wealth in Canada is more equal; which has resulted in a higher median wealth than our southern neighbours.

“As a result of a more equal wealth distribution, Canada has much higher median wealth: USD 90,300 compared to USD 44,900 for the USA,” the report said. “Relative to the USA, Canada has both a smaller percentage of people with less than USD 10,000 and a larger percentage with wealth above USD 100,000.”