It's finally here.  The bubble will burst.  Or maybe it won't.  Ever since the housing meltdown occurred in the States, many industry analysts have been warning that Canada would not be far behind.  And after last year's cooling subsequent re-heating, many doubted that Canada would see a true housing meltdown.  Until now.          

Recently, a perfect storm has arisen.  First, there was the recent announcement from Ottawa that they would be tightening the rules around mortgages.  There has been a very real fear that people were taking on more debt than they could afford to purchase a home.  This past Tuesday, Ottawa announced new requirements: The first is that borrowers of insured mortgages be qualified at the five-year fixed rate, even if they opt for a shorter term. Also, buyers of investment properties must come up with a 20% down payment and consumers who already own a home can borrow up to 90 per cent of the value of property instead of the current 95 per cent.

Second, is the impending harmonized sales tax in Ontario and third is the expected increase in interest rates.  All three will combine to deflate any real estate bubble.

In the meantime, expect the residential housing market to remain healthy in the coming months, as buyers rush to purchase before the new mortgage requirements come into effect April 19.

What are your thoughts?  Will interest rates rise?  If they don't will the housing market remain strong?  Are these government initiatives proactive? And finally, why is the government of Canada concerned about not creating a housing bubble?

We would love to hear your thoughts and comments.