Canada’s housing market is more overvalued than the US’s market was at its peak, and Canadians are carrying a larger debt burden than Americans were before the crash, a report from The Economist states.
It was a good run. And now, in 2012, it is time for Canada's housing market to stop running and catch its breath.
Three things have pushed me, growling and snarling, into the bearish camp. First is the seemingly relentless upward march in housing prices, which eventually will stop rising faster than incomes. Second is household debt, which has reached great peaks and will surely begin to wobble. Third is the heady share of domestic output that is being absorbed by housing construction, displacing arguably more productive investment elsewhere, which it cannot forever continue to do.
a Comprehensive Report on the State of Housing in Canada
OTTAWA, ONTARIO--(Marketwire -12/29/11)- Housing-related spending accounts for more than 20 per cent of Canada's Gross Domestic Product, contributing about $330 billion to the Canadian economy in 2010 - up 7.1 per cent from $308 billion in 2009. This and other key findings are in the ninth annual Canadian Housing Observer, released today by Canada Mortgage and Housing Corporation (CMHC).
Ottawa's real estate market is showing signs of finally settling down.
In the new-home sector, builders scaled back in 2011, starting an estimated 5,750 homes (final numbers aren't in yet), compared to 6,446 units in 2010 and 5,814 in 2009, according to figures from Canada Mortgage and Housing Corp. (CMHC).
Bank forecasts a sales drop of 15% and a home-price decrease of 12% in 2012
VANCOUVER (NEWS1130) - According to economists at the TD bank, "a larger-than-average price and sales correction looks to be in store" for the housing market in Vancouver. It forecasts a sales drop of 15% and a home-price decrease of 12% over the 2012-2013 period."
During 2005-2006, we experienced a housing bubble in the United States which was accompanied by valuations in many regions trading at more than twice their normal historic levels. Today, we have similar housing bubbles in many countries with prices that are at twice or thrice their typical valuations relative to rents, incomes, and most other standard-of-living benchmarks.
CALGARY — A report by Bank of America Merrill Lynch says Canadian home prices are now showing many of the signs of a “classic bubble.”
“We estimate the housing market nationwide is about 10 per cent over valued,” says the report released on Monday by economists Ryan Bohren and Sheryl King. “Even so, the only way these valuations can be explained is by the record low mortgage rates. Under more normalized interest rates, home prices would actually look 25 per cent overvalued based on current prices.”
In this age of spin, rare are the voices that speak with candour. Certainly, the federal government’s vast apparatus can’t be counted on to speak the truth, not with the Harper party’s partisan manipulation of every utterance. Nor can anyone count on the opposition parties, whose game it is to embarrass the government.
Canadians have set a new record for household debt, a sign that many families are leaving themselves vulnerable to an economic shock.
The debt burden of Canadian households has surpassed levels of both the United States and the United Kingdom and, by at least one measure, they are hurtling toward those countries’ peak levels of 2007, new Statistics Canada data show.
OTTAWA — The Bank of Canada is warning of a global epidemic of contagion spreading from Europe, saying Canada’s economy and financial systems are already being affected and risks of further damage are elevated.
The central bank’s semi-annual financial stability review released Thursday states bluntly that Canadians need to start worrying about the worsening debt mess in Europe and its ability to hit home hard.
The Bank of Canada has a warning for condo investors – the boom times may be over.
In its December economic review, the central bank said that "certain areas" of the housing market could see prices fall as the economy weakens.
"Certain areas of the national housing market may be more vulnerable to price declines, particularly the multiple-unit segment of the market, which is showing signs of disequilibrium," the bank warned. "The supply of completed but unoccupied condominiums is elevated, which suggests a heightened risk of a correction in this market."
It could well become the cocktail-party question of the holiday season: Is Canada’s gravity-defying housing market headed for a fall?
Britain’s venerable magazine The Economist says Canada is one of nine countries in the world where housing is overvalued by 25 per cent or more right now — and among four where prices are in line with those in the U.S. “at the peak of its bubble.”
The others are France, Australia and Belgium, it says under a headline that claims “the bursting of the global economic bubble is only halfway through.”
A new study of global housing markets by The Economist warns that markets in Canada and some other countries still appear "uncomfortably overvalued." Indeed, the magazine calls it downright frothy in its latest update of house prices indicators.
Overall, the report shows prices falling in eight of 16 countries studied in terms of a price-to-income ratio, which measures affordability, and a price-to-rent ratio.
The bursting of the global housing bubble is only halfway through
MANY of the world’s financial and economic woes since 2008 began with the bursting of the biggest bubble in history. Never before had house prices risen so fast, for so long, in so many countries. Yet the bust has been much less widespread than the boom. Home prices tumbled by 34% in America from 2006 to their low point earlier this year; in Ireland they plunged by an even more painful 45% from their peak in 2007; and prices have fallen by around 15% in Spain and Denmark. But in most other countries they have dipped by less than 10%, as in Britain and Italy. In some countries, such as Australia, Canada and Sweden, prices wobbled but then surged to new highs. As a result, many property markets are still looking uncomfortably overvalued.
If the public reaction to The Huffington Post Canada’s report on income inequality and housing prices is anything to go by, Canadians are growing worried about a housing bubble, and about the influence of foreign investors on major real estate markets.