Nov. 27, 2013 | CREBNow
Report Says Canadian Housing Market Headed for 'Soft Landing'Canada's real estate market could be in for a "soft landing" according to a report from a global rating agency.
The 12-page report from Fitch Ratings claims Canada's housing market as a whole is "overvalued" with some markets overpriced by as much as 26 per cent. While the report lists British Columbia and Quebec as the most overvalued markets in the country (both overvalued by 26 per cent), prices in Alberta were relatively spot on, overvalued in the report by only 15 per cent.
"Canadian buyers reaching for homes at high prices are pushing household leverage to record levels, leaving borrowers susceptible to interest rate shocks,' said director Stefan Hilts. "With a high level of employment and individual net worth tied to the value of the housing stock, a housing downturn could have serious consequences for the overall economy in Canada."
However, Bank of Canada governor Stephen Poloz was quick to counter the report's findings.
"Our judgement is (the housing market) is a situation that is improving, this is not a bubble that exists here that would have to be corrected," he said. "If there is a disturbance from outside our country that's another analysis."
According to the Fitch report nominal home prices in Canada would fall by no more than 10 per cent over the next five years in a down scenario after taking into account momentum and inflation.
Though Fitch projects a decline in home prices, there are several factors that could point to a "soft landing" where nominal prices simply flatten out or experience relatively small reduction.