Real Talk!

Some things to think about:

Ontario's rural population has risen by about 450,000 people (33 per cent) since 1971… and it continues to rise.

Rural areas account for over 95% of land in Ontario.

Ontario has the smallest proportion of rural populations of all Canadian provinces and territories, but the second largest in numbers (1.5 M). Still, it was one of only three provinces to experience rural population growth between 1996 and 2001.

Rural and small town residents have a more polarized age structure (and therefore a higher dependency ratio) with slightly higher proportions of the population falling within the lowest (children) and highest (seniors) age categories.

Residents in these areas have concerns and perspectives that are particular to living in the rural area of the province. These include: agriculture, transportation, policy issues, rural business, service-delivery, line fences, animal husbandry, the use of ATV's, snowmobiles, firearms and communication.

Rural is home to fewer newer Canadians and its residents generally tend to have lower incomes than those living in urban areas.

Rural has a rich and diverse heritage and an abundance of natural resources. It is a significant driver of the economy and the well being of all citizens. Our rural communities are significant to the health and vitality of the province.

While agriculture has been the traditional economic driver in rural Ontario, the rural economy has evolved into a diverse economic system. The population base has also changed to include a greater number of non-farm rural residents who either work in their community or commute to larger urban centres. Statistics show that while non-farmers make up 85 per cent of the province's rural population- there are 57,000 farms in Ontario and they account for about ¼ of the countries agricultural revenues.

Also, Ontario contains 17% of the countries forests (about 2% of the world’s forests)… and over 250,000 lakes and numerous rivers and streams- which accounts for a significant amount of the world’s fresh water resources.

The ability of rural residents to integrate and seek greater economic ties to non-traditional industries has risen with the expansion of the information economy and the development of telecommunications technology.

Many rural residents have made the conscious choice to live rurally and most of them know all about the advantages of living in a country setting- they've known them for a long time.

There are over one million people living in eastern Ontario. Over three quarters of which live in Ottawa along the Ottawa River to the north. The rural part of eastern Ontario has over 600 small towns, villages, hamlets, and settlements. In the rural part of Ottawa, about 5% live on farms, 53% in country lot subdivisions and scattered lots, and 42% live in one of the 26 villages.

According to the Ontario Ministry of Finance, the population of eastern Ontario is expected to grow to 1,526,790 by 2031, based on 1999 post-censal population estimates. The proportion of seniors in eastern Ontario is expected to grow at a greater rate than other areas of Ontario due to the wealth of health care amenities in the area and a preference to settle in bedroom communities . In Ontario, the population age 65 and over more than doubled from 1.6 million or 12.8 per cent of the population in 2005 and will climb to 3.6 million or 22 per cent in 2031.

The country or rural lifestyle remains a popular choice for Ontarians… and as for real estate prices, in most rural areas they remain far more stable than those in urban centers.

According to a recent poll by Nanos Research, Canadians are four times more likely to expect the economy to improve in the next six months, with 49% saying so compared with only 12% who expect it to worsen.

"A key driver for the optimistic mood relates to perceptions of real estate," Nanos said in a release accompanying its survey.

"Canadians are six times more likely to say the value of real estate in their neighbourhoods will increase (46%) in the next six months compared to those who say it will decrease (7.6%)."

Canadians are confident housing prices won't drop even though they remain nervous about economic stability. "Canadians clearly believe that the worst of the recession is behind them and that the real estate market is on the path to sustainable recovery," says Phil Soper, president and chief executive of Royal LePage.

Certainly, Canada's leading economic indicators show positive growth for the first time in two years.

However, the miraculous rebound in Canada's real estate markets continues to fuel speculation about whether a bubble is forming and a small, but growing minority of experts is now warning of a more severe real estate bust in Canada.

Bank of Canada Governor Mark Carney says excessive household debts pose the biggest threat to the recovery… people are taking on too much credit.

Carney says Canadians have been taking advantage of low interest rates and borrowing at a high rate. He warned banks and homeowners about the consequences they could face in the event of an interest rate increase.

"The combination of sustained growth of household debt relative to income and a rising interest rate environment could increase the vulnerability of households to an adverse shock," Carney told a business audience in Toronto.

There is already some indication that Canadians are mismanaging their debt, he said.

CIBC World Markets says that less than 4 percent of households are vulnerable to a rate shock, not the 5.9 percent predicted by the central bank.

Economist Sheryl King of Bank of America Securities-Merrill Lynch said there's no bubble yet but, citing variable-rate mortgages, acknowledged the seeds are there.

In a note titled “It's beginning to look a lot like a bubble,” Douglas Porter of BMO Nesbitt Burns said recently: “Before officially declaring this a Bubble with a capital B, we would again painstakingly point out that the reported price change is skewed by the surge in Vancouver and Toronto sales, two of the priciest markets.”

Porter also says, “We are on the bubble of a bubble. We could see a bit of a buying frenzy this spring followed by a pop in 2011. This will be but the first in a string of China style gains for Canadian home sales and prices,” Porter, of course, comparing the situation to that in China where the government is taking measures to cool the country's real estate market.

In a recent Globe and Mail column, economist David Rosenberg, chief strategist at Toronto-based Gluskin Sheff + Associates Inc., raised the spectre of a Canadian housing bubble that is on the verge of collapse. He figures prices are 15 to 35 per cent overvalued, based on relative rental rates and incomes.

“Canadians should pay attention”, says Mr. Rosenberg, a former Merrill Lynch economist, who was among the first on Wall Street to warn of a housing-led recession in the United States. He knows what a housing correction looks like.

Relative to income, homes are now less affordable in Canada than they've even been. So while Canada's banks may be financially sound, it appears that homeowners are not following suit. Many appear to be blindly following a path of excessive debt, enticed by low rates.

The ratio of mortgage debt to household incomes in Canada are reported to have recently hit a record 70 per cent, up from 65 per cent a year ago and 40 per cent of homebuyers have opted for short-term, variable-rate mortgages…

Rates will eventually ratchet up… and this may leave some owners facing financial trouble…

Personally, I remember the mid 90s all to clearly… it wasn’t fun having to tell financially strapped cottage owners that they would have to list for 40% of what they had recently paid for their properties- fortunately THAT downslide didn’t last for very long and those who were able to hang on soon gained back their equity.

My advice… do your homework… engage the services of a good Realtor ® don’t get caught overpaying for your cottage or country property and don’t rely on the currently low interest rates to help you carry the costs. Be practical- afterall, that’s what country life is all about!