Overbuilding

Canadian housing bubble fears inflated: Report

Wednesday, March 26, 2014

A new report from The Conference Board of Canada says that while fears of a Canadian housing bubble are exaggerated, national and local housing prices may be headed for a modest decline.

According to the report, the following findings indicate that a national housing crash is not in store for the country:

  • Mortgage costs are relatively low, indicating affordability for home buyers.
  • Resale markets in major cities are balanced.
  • Ratios of house prices to apartment rents and house prices to incomes are misleading.
  • Canadian employment opportunities are increasing.
  • The overall Canadian population is growing.
  • Housing starts are in line with demographic requirements and Canada’s 25-year average.

“Mortgage costs, not just house prices, are the principal deciding factor for potential homebuyers,” says Robin Wiebe, senior economist at the Centre for Municipal Studies. “Mortgage rates are expected to rise this year, but not dramatically, because the Canadian economy remains in a slow-growth mode. The housing market may be undergoing a correction in some regions and market segments, but it is more likely to be a soft landing than a bubble bursting.”

The outlook goes on to state that a modest market correction in areas such as Ontario and Quebec could affect the national average housing price. The report includes a regional analysis of Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal.

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