Canadians Turn to Property Investment to Prepare for an American Recession

Although the U.S. National Bureau of Economic Research is waiting for definitive evidence that a recession has started in the United States, many economists are saying that it’s already here. Because the Canadian economy is so closely tied to that of its American neighbors, a U.S. recession is an unwelcome event not just in the U.S., but in Canada as well.

In the last few years, the Canadian economy has been booming, but things are starting to slow down. About 75% to 80% of Canada’s exports head to the United States, so the U.S. downturn is already having an impact. However, most economists agree that regardless of whether the U.S. experiences a downturn or an outright recession, Canada’s economy will only slow, not stop altogether. Experts still expect a 2.2% increase in GDP in 2008.

Canadian investors see real estate as a lower-risk option

Despite the lack of an official declaration of recession, savvy Canadians are already gearing up to tighten their belts. After enjoying several years of higher-than-typical economic growth, especially in the real estate market, many Canadians are in a strong position to save some of their assets for a rainy day.

In the stock market, Canadians are starting to shift around their holdings in order to mitigate some of the looming risk. Many investors are steering away from the more volatile stocks in favor of more resilient investments that have a better chance of withstanding a recession. Real estate is once again proving to be a solid investment that grows the hard-earned dollars of homeowners.

Being financially prepared for a U.S. recession should give Canadians the breathing room they need to ride out the toughest times. The government has also lowered interest rates recently, in an effort to help Canadians buy new properties, as well as to afford the payments on their existing mortgages or other loans.

Canada expected to be largely unscathed by a U.S. recession

Many economists are predicting that, regardless of an impending recession in the United States, Canada will escape the worst of it with very few battle wounds. Yes, the economy will be affected, but not enough to start a full-fledged Canadian recession. It’s estimated that the effects in Canada will be both comparatively small and most likely temporary.

The growth that Canada has experienced in recent years has been truly remarkable. The prices of houses have skyrocketed and more people are living in Canada today than ever before. However, although this growth has been astounding, it has also been something difficult for many Canadian cities to manage. The demand for houses escalated so dramatically that properties became overpriced and completely beyond the means of many looking for a place of their own. Rental vacancy rates also dropped to practically nil.

Now, as a possible U.S. recession approaches, the Canadian market is beginning to correct itself. Prices of homes and many other things are once again becoming affordable. Canadian cities are getting a moment to catch their breath. Residents and investors alike are turning to real estate for a safer, more profitable investment. Yes, difficult times may be ahead, but with a bit of planning and budget tightening, it looks like Canadians will have the ability to weather the storm.