Part 3.  Is Canada’s real estate market headed for a repetition of bust and its plunging values and distressed sales experienced in Arizona? They don’t think so. Do they know something we don’t – or are they nuts? There definitely are differences between the two markets, but is it enough to make Canada immune to a crash?

Is the Bust Underway?  Canadian housing market conditions have cooled slightly, with prices down nearly 2% in the first-quarter of 2012. Demand has cooled due to moderate income growth and tighter mortgage insurance rules. In addition, there are more houses up for sale in most parts of the country.

Meanwhile, the Bank of Canada cautioned last year that the Toronto market looks overbuilt and could see prices drop. That has left some industry observers thinking prices could drop as much as 25%, according to a forecast by Capital Economics.

The best article I have seen on the subject, Toronto Condo Boom Stirs Bubble Fears is not by a Canadian, but by Steve Bergsman*. As an Arizona resident, he is uniquely qualified on the subject, having seen first hand our real estate boom and its building frenzy as if it would never end, and the consequences of that miscalculation.

In his article, Mr. Bergsman observes that in my hometown of Toronto, they are building condos at a record pace: “Toronto, with high-rise condo towers sprouting like last decade’s Dubai, looks like a bubble ready to explode.” Yet he interviewed Torontonians in real estate who denied any boom-ending bubble was imminent. To that Bergsman asked “when is a bubble not a bubble?”

Conservative lending has dampened demand.  Helping keep things in check is that Canada’s banks have traditionally been conservative lenders. These tighter and more measured lending practices by Canada’s financial institutions have prevented a U.S. like housing crisis so far. Realtors report that lenders have been, and continue to be, being quite strict on the qualifications for mortgages.

Observers say that much of the growth in Canada’s real estate has been said to be dependent on low interest rates. But low rates have never continued for decade after decade. And if things do get bad, you can bet on the banks being even more stingy lenders.

Is Canada different due to immigrants?  Contributing to the end of the boom here were declines in population of US cities, decreases which accelerated as the real estate depression took hold. So one difference between the US and Canada might be the increasing number of people, many from Asia, immigrating to Canada. Michael Polzler, the executive vice president of Re/Max Ontario-Atlantic Canada Inc., stated “[t]he key to Canada’s housing evolution has been an increase in population,” and that portends “continued investment and continued growth in Canadian housing values.”

A great example is Toronto. Its metropolitan area was estimated to have had a population of 5,741,400, in 2010 (which is roughly ½ million less than the population of Arizona for that same year). Population growth from 2000 to 2010 grew by 24.6%, and is expected to keep on climbing. By 2031, metro Toronto is predicted to grow by nearly 50%, to 8.6 million people, and add 1.8 million new jobs. This translates to strong demand for housing throughout the region and a continuing tight supply of homes for sale.

According to the Toronto Region Research Alliance, the city attracts more than 100,000 immigrants from across the world annually. And these newcomers are not destitute. David Ferrari, broker-owner of Re/Max Realty Enterprises, says that “[a] lot of the newer immigrants have been coming here with money.” They come to Toronto looking to purchase, and are buying homes, condominiums or townhouses, Ferrari said.

Furthermore, there are lots of investors from Asia. Gaining knowledge of the opportunities, perhaps due to their relatives moving to Canada in considerable numbers, it makes sense that investors living in the Asian Pacific region would buy Canadian (especially Vancouver area) real estate. So the market sustains itself by a unique mix of newly arrived buyers, investors and ordinary demand.

But what happens if the immigrants stop coming in numbers, or if they come without the funds or credit to buy? It could occur if Canada decides to put the brakes on immigration, or if a global catastrophe results in destitute refugees instead of well-to-do buyers. Or what if such a catastrophe prevents people leaving their home countries or investing in others?

All I know is that it can’t last forever, so Canadians should be planning now for a slow down if not the end of the boom. I’m not sure if that will happen until it’s too late.

*Steve Bergsman is the author of several books. His latest book, “Growing Up Levittown: In a Time of Conformity, Controversy and Cultural Crisis,” is available for sale on Amazon.com.