The Forest Or The Trees?




Today I watched a presentation put on by some fabulous people at a local lending institution. A guest speaker from CMHC spoke about a number of topics. One that caught my attention was the debt that is carried by the average Canadian. We were informed that the average Canadian is carrying a ratio of debt at 1.68 or simply put we owe $1.68 for every dollar of disposable income we earn. I was alarmed at first to hear this. However later in the presentation, another startling fact came out. Apparently, 72% of Canadians own a home! Now let us consider that for a moment. Economists and politicians have been warning us for years that we carry too much debt and if you look at the statistics in a vacuum it would certainly appear that we are a spendy spendy nation living it up on credit cards and credit lines. However, note the second statement regarding home ownership being at 72%. If we compare ourselves to a nation considered fiscally responsible like Germany who has a debt to income ratio of just $.90 or 90 cents for every dollar earned then we appear to be irresponsible. Not true I say....I feel a huge point that seems to be overlooked is that pesky home ownership stat. You see only about 40% of Germans own a home. The vast majority rent which most economists would agree doesn't help build equity. So Canadians don't have a debt problem, they have chosen to invest in a home for themselves and their families which is not only a lifestyle choice but an equity builder. If you take away the home that most Canadians own and is "secured" debt and factor in Germans don't own homes in anywhere near the same ratio, you come to realize, most German debt is in fact "unsecured" consumer debt, while most Canadian debt is secured against an asset class that over time "always" increases in value. We don't carry much debt actually, we invest in an asset for lifestyle and security reasons. We are actually quite responsible people after all :)

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