Taken from The Globe and Mail
David Rosenberg
Globe and Mail Update
Published Thursday, Sep. 23, 2010 6:56PM EDT
The Bank of Canada's decision to embark on a series of interest rate hikes is already throttling back on growth. Thanks to those hikes, we have a Canadian dollar that is at least a nickel above any realistic estimate of its fair value, and a pace of overall economic activity that is now falling at a surprising rate.
Real estate: The slowdown
Poll
Are we in a housing bubble?
Yes No Maybe
Results & past polls
.63% 1552 votes Yes
.23% 565 votes No
.14% 332 votes Maybe
The central bank’s decision to raise interest rates was based on Canada’s initially strong rebound from the depths of the recession. Unfortunately, the nature of that recovery may have sown the seeds for trouble ahead.
By my calculations, every basis point of the Canadian economic recovery was the result of the boom in the housing sector. That goose is no longer laying any golden eggs. In fact, from recent peaks, single-family housing starts have plunged 32 per cent, residential building permits have sagged 17 per cent and home prices on average are down 6 per cent. In the absence of an export resurgence, which seems unlikely given the ongoing sluggishness in the U.S. economy, the downturn in housing is bound to keep the pace of domestic activity rather sluggish in coming quarters.
I estimate real GDP for this quarter will grow at a meagre 1.5 per cent annual rate. That is a huge deceleration from the peak pace of 5.8 per cent in the first quarter of this year when Canadians were patting ourselves on the back for our apparent ability to “decouple” from the listless U.S. economy.
Canada’s economy is now slowing down at a more pronounced rate than is the case south of the border and the Bank of Canada's latest 2.8 per cent forecast for third quarter real GDP growth is looking stale, to put it charitably.
There is no doubting the fragility of the recovery, which suggests that the Bank of Canada should put further rate increases on hold for a while. But its recent decisions illustrate how difficult it is for a central bank to navigate the right path between stimulating the economy with low interest rates and cooling off irrational exuberance with higher rates.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters..
Even though I was one of the “doves” advising the bank to refrain from raising rates earlier than planned, there was method in its madness. When the bank followed the U.S. Federal Reserve on the path towards microscopic policy rates in the opening months of 2009, it pledged to maintain such an unprecedented degree of stimulus “conditional” on a prolonged period of economic malaise.
The problem, especially for interest rate doves like me, is that instead of seeing a listless economic recovery in Canada, we saw a bounce back of massive proportions. In short order, Canadian employment has soared to record highs while the U.S. is still more than seven million jobs shy of its pre-recession peak.
Canada’s dramatic recovery has been taken as evidence of the fundamental strength of the country’s financial system – but the rebound was founded on a surge in credit growth and housing-related spending that must have the Bank of Canada feeling a bit uneasy.
Bank-wide mortgage lending has risen 10 per cent in the past year, compared with only a 4 per cent rise in wage and salary income. This is clearly not sustainable.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them. .
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
The ratio of total household debt to income has surged to 146 per cent, right where the U.S. peaked at the height of its credit bubble. Anecdotal evidence suggests that the home ownership rate has risen to record levels of 70 per cent, also close to where the U.S. peaked out during the housing bubble.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
Just to be clear, the Bank of Canada wasn't alone in spurring this huge – and unanticipated – housing boom. Canada Mortgage and Housing Corp. (CMHC) relaxed underwriting criteria in ways that made housing tremendously more affordable for marginal borrowers. Those home buyers could get a mortgage with almost no money down at near-zero short-term interest rates.
People can argue endlessly about whether the Canadian housing market constitutes a bubble. The reality is that we will probably find out at some time in the next year, as all the speculative high-ratio loans come due at interest rates above where they stood at the time of origination, courtesy of the Bank of Canada's tightening cycle, which may or may not have fully run its course.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters as lower home prices cut into household wealth, confidence and spending plans.
At the same time, housing deflation and a rising tide of mortgage delinquencies will bite into CMHC reserves and, at the margin, undercut the quality of Canadian banks’ seemingly pristine balance sheets, which hold $500-billion of residential real estate loans, equivalent to 30 per cent of total bank assets.
It may well be that Canada escaped a housing bubble and its inevitable aftershocks. But it is a close call. If it wasn’t a bubble, it was at least a giant sud.
Bubbles
•Five bubbles set to burst in 2010
•Beware the gold bubble
•'Mini-bubbles,' not big ones, on tap for commodities markets
•The trouble with bubbles: They're elusive
•Bond bubble? Not if you consider the facts
Tuesday, September 28, 2010
Saturday, September 18, 2010
Canadian home sales rise, prices stable
A real estate agent puts up a sold sign in front of a house in Toronto. Home sales increased in August, only the second time that's happened in calendar 2010. (Darren Calabrese/Canadian Press)
The average price was higher or stable on a yearly basis in two-thirds of the cities where CREA tracks data. On a monthly basis, the average price was slightly lower than the average selling price of $330,351 in July 2010.
It is also the third consecutive month that average sale prices have dropped after increasing at a torrid pace for the previous year.
The number of new listings on the agency's Multiple Listings Service was more than double than the number of sales. A 2-1 ratio of listings to sales is generally viewed as a "balanced" housing market, BMO economist Doug Porter noted.
"Rising interest rates and a projected slowdown in job growth mean that the Canadian housing market is expected to continue to cool," CREA president Georges Pahud said.
"A further tightening of regulations could negatively impact Canada’s softening housing market and consumer confidence."
In terms of sales, activity was 4.1 per cent higher, on a monthly basis, in August. It's the first monthly increase since March and only the second monthly gain of the 2010 calendar year.
Activity was up most in Ontario and British Columbia, with monthly gains in these two provinces accounting for most of the improvement in national sales activity.
Canada's real estate market was abnormally active in late 2009 as buyers rushed to take advantage of low interest rates, so yearly comparisons are likely to be negative for the rest of 2010, the agency warned.
"High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months," CREA economist Gregory Klump said.
"This makes the return to more normal levels of sales activity look like a steep downward trend.… The hangover from accelerated home purchases is likely to persist over the rest of the year."
MLS listings were 1.9 per cent higher during the month compared to July, which pushed inventory to 6.9 months at the end of August 2010 on a national basis, down slightly from the seven months of inventory at the end of July 2010.
Inventory is the term used to describe how long it would take to sell the entire available housing stock at the current sales.
"While home sales are still nursing a bit of a hangover from the real estate party in the first half of the year, it looks like conditions are stabilizing," Porter said.
Monday, September 13, 2010
Region sets pace for home prices
Statistics Canada is reporting that new home prices fell in July for the first time in 13 months. But while the average decline in new home prices in July was 0.1 per cent, Waterloo Region was home to Canada's largest new home price increases at 0.6 per cent.
"It just confirms what we've always believed that Kitchener-Waterloo, compared to some areas across Canada where prices have gone down, it just shows that we have a lot of confidence in our marketplace," Ted Scharf, President of the K-W Real Estate Board, says in response to the surge in new home prices here. "There are a lot of positive things happening and those things are leading to people buying houses, people buying cars, people buying any number of consumer goods."
As for the increase itself, Scharf believes it simply reflects what is available in the local real estate market. Home builders are merely building what buyers are demanding and, right now in Waterloo Region, buyers seem to be attracted to more expensive homes.
"It's not that there aren't people buying lower-priced houses or that people aren't out in the marketplace in other price ranges," Scharf muses. "It's just that, in general, the type of housing we have available right now is a little bit more expensive in July than it was in June."
The fact that buyers seem to be attracted to these higher priced homes is equally unsurprising to Scharf. He looks at the local economy and the positive jobs numbers (unemployment is down to 7% from 7.3) and sees consumer confidence.
"We're creating more jobs so more people have the ability to buy houses," Scharf says by way of analysis. "I think that's what's pushing people into the marketplace, too. Employment is really important and (we have) lots of jobs. And they're good-paying jobs."
The July home price declines were led by Vancouver (down 0.8%) and the Ontario centres of Greater Sudbury and Thunder Bay (both down 1.9%), and London (down 1.8%).
Thursday, September 9, 2010
New home prices drop for first time in 13 months
CTV.ca News
The price of new homes fell 0.1 per cent in July after a 0.1 per cent increase in June -- the first drop in more than a year, according to Statistics Canada's latest report.
The agency's New Housing Price Index released Tuesday lists Vancouver, London and Greater Sudbury and Thunder Bay, Ont., as the top contributors to the decline.
Between June and July, prices decreased most in Greater Sudbury and Thunder Bay, which dropped 1.9 per cent; London, down 1.8 per cent; and Windsor, Ont., which fell 1.5 per cent.
Meanwhile, construction on new housing units fell 3 per cent between July and August, according to the Canada Mortgage and Housing Corporation. The seasonally adjusted rate of housing starts was 183,300 units in August, compared with 188,900 in July, the organization reported Thursday.
"Housing starts moved lower in August, reflecting a decrease in both single and multiple starts," Bob Dugan, chief economist at CMHC's Market Analysis Centre, said in a statement.
Statistics Canada attributes the slump in new home prices in part to the introduction of the Harmonized Sales Tax, which isn't included in the index's calculations.
Prices rose in three of the 21 cities examined. The largest increase occurred in Kitchener-Cambridge-Waterloo, Ont., where they climbed 0.6 per cent as builders raised their prices.
The index was up 2.9 per cent year-over-year in July, following a 3.3 per cent rise in June.
Monday, September 6, 2010
Think Tank Experts Warn of Looming Burst of Rare Housing Bubble
Property values in largest cities could fall by nearly 40 percent over 3 years.
By Jim Fox
Ledger Correspondent
Published: Saturday, September 4, 2010 at 4:52 p.m.
A national "think tank" warns of a possible big drop in property values in Canada's largest cities while the country's housing market has cooled more than expected.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
Canada's dollar has advanced to 96.02 cents U.S. while the U.S. dollar returns $1.0415 Canadian, before bank exchange fees.
Stock markets were higher Friday, with the Toronto exchange index at 12,123 points and the TSX Venture Exchange 1,550 points.
By Jim Fox
Ledger Correspondent
Published: Saturday, September 4, 2010 at 4:52 p.m.
A national "think tank" warns of a possible big drop in property values in Canada's largest cities while the country's housing market has cooled more than expected.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
The Canadian Centre for Policy Alternatives said a rare "housing bubble" has developed and could burst, leading to values falling by nearly 40 percent in some cities over three years.
It's the first time in 30 years that house prices have increased faster than "historic comfort levels" simultaneously in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the report said.
The average house price in those cities exceeds $300,000.
Bank economists agree there will be price corrections but in the range of 10 percent to 15 percent.
Second-quarter economic growth has slowed more than expected because of cautious consumer spending and less demand for housing and renovations.
The economy expanded by only 2 percent from April to June compared with 5.8 percent in the first three months of the year.
House sales dropped 6.8 percent in July from a month earlier and were off 30 percent from a year ago, the Canadian Real Estate Association said. Renovations fell 0.8 percent after a year of growth.
Higher interest rates, the new combined federal and provincial sales taxes in Ontario and British Columbia and the end of federal tax rebates for home improvements were said to be factors.
PHONE REBATES
Canada's major phone companies have been ordered by federal regulators to refund from $25 to $90 to each of their customers within six months.
The Canadian Radio-television and Telecommunications Commission directed Bell Canada, Bell Aliant, Telus and MTS Allstream to give rebates amounting to $310.8 million to their urban home phone customers.
The companies collected $770 million since 2002 from customers to fund infrastructure projects in rural communities and the rebates amount to the unspent money.
The remaining money is being used to expand Internet broadband services in remote locations and improving accessibility to telecom services for persons with disabilities.
News in brief
The Alberta government is asking federal officials to try to convince Walgreens executives to end a boycott of oil from the province's oil sands. The U.S. drug store chain is switching to suppliers who aren't using fuel containing oil sands crude that is said to emit more carbon dioxide to refine than from other sources. The Gap, Levi Strauss and Timberland are also said to be considering a similar environmental-driven move.
A public opinion poll in advance of Labor Day shows 82 percent of Canadians would take a pay cut in exchange for a better work-life balance. The Harris-Decima poll also found that 57 percent feel they have more job security now than a year ago when only 46 percent felt secure in their work.
Facts and figures
Fewer house sales prompted the Bank of Montreal to drop its fixed-rate mortgage rates to 3.59 percent for a five-year renewable term, down from 3.79 percent.
A slowing economy has led to predictions the Bank of Canada might pause this month in raising the key interest rate after two previous 0.25 percent increases. The rate is 0.75 percent while the prime lending rate is 2.75 percent.
Canada's dollar has advanced to 96.02 cents U.S. while the U.S. dollar returns $1.0415 Canadian, before bank exchange fees.
Stock markets were higher Friday, with the Toronto exchange index at 12,123 points and the TSX Venture Exchange 1,550 points.
Wednesday, September 1, 2010
Housing bubble threatens in six cities: Report
By STEFANIA MORETTI, QMI Agency
Last Updated: August 31, 2010 12:21pm
A perfect storm has created a housing bubble in Canada that could lead to a drop in property value of nearly 40% in some markets, according to a report by the Canadian Centre for Policy Alternatives.
For the first time in 30 years, house price increases have climbed faster than historic comfort levels in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the think-tank said.
In the past, inflation-adjusted home price in these “red-hot” markets have held steady at between $150,000 and $220,000 in today’s dollar. But current average price tags in all six cities are now and well over $300,000.
"The bursting of housing bubbles is a rare event in Canada, but the steep rise in house prices in so many cities displays all the hallmarks of an accident waiting to happen," said the report's author, David Macdonald, in a release Tuesday.
Benjamin Tal, a senior economist and real estate expert at CIBC World Markets, said he wouldn’t use the word “bubble” to describe the present situation but did say prices are definitely “overshooting” and will go down.
But Canada’s big six markets are less stable than a generation ago, especially after the steep price increases between 2002-07, the report said.
Ten years ago, prices tended to hover around three to four times the provincial annual median income. Today, prices are pushing anywhere between 4.7 to 11.3 times annual median income.
As prices rise, mortgage holders are more and more vulnerable to rate changes, Macdonald said. As interest rates come off near-zero levels, variable rate holders may struggle to make rising monthly payments.
“Rate-setters at the big banks are in the driver's seat now as mortgage rates inch up. They need to hit the brakes lightly."
Either way, Canada’s real estate markets could be in for a correction at best or, at worst, a bubble burst, Macdonald said.
Using the 2006 housing market collapse in the U.S. as a model and simulating current market conditions, the Centre for Policy Alternatives predicts homeowners in Edmonton and Montreal could be hardest hit, losing 38% to 34% of their property value respectively in less than three years, in a worst-case scenario.
In terms of dollar value, Vancouverites would be worst hit and stand to lose nearly $200,000 on the average home.
“I really don’t see what would trigger this kind of sharp decline,” Tal said.
His forecasts are far less grim because as he sees it, the market fundamentals are still strong. Tal sees price drops to the tune of 10% on average and by 15% only in select cities.
“I’m not in this camp that sees disaster happening,” Tal said.
Canada has seen three housing bubbles burst, twice in Vancouver and once in Toronto, the report said.
Last Updated: August 31, 2010 12:21pm
A perfect storm has created a housing bubble in Canada that could lead to a drop in property value of nearly 40% in some markets, according to a report by the Canadian Centre for Policy Alternatives.
For the first time in 30 years, house price increases have climbed faster than historic comfort levels in Toronto, Vancouver, Calgary, Edmonton, Montreal and Ottawa, the think-tank said.
In the past, inflation-adjusted home price in these “red-hot” markets have held steady at between $150,000 and $220,000 in today’s dollar. But current average price tags in all six cities are now and well over $300,000.
"The bursting of housing bubbles is a rare event in Canada, but the steep rise in house prices in so many cities displays all the hallmarks of an accident waiting to happen," said the report's author, David Macdonald, in a release Tuesday.
Benjamin Tal, a senior economist and real estate expert at CIBC World Markets, said he wouldn’t use the word “bubble” to describe the present situation but did say prices are definitely “overshooting” and will go down.
But Canada’s big six markets are less stable than a generation ago, especially after the steep price increases between 2002-07, the report said.
Ten years ago, prices tended to hover around three to four times the provincial annual median income. Today, prices are pushing anywhere between 4.7 to 11.3 times annual median income.
As prices rise, mortgage holders are more and more vulnerable to rate changes, Macdonald said. As interest rates come off near-zero levels, variable rate holders may struggle to make rising monthly payments.
“Rate-setters at the big banks are in the driver's seat now as mortgage rates inch up. They need to hit the brakes lightly."
Either way, Canada’s real estate markets could be in for a correction at best or, at worst, a bubble burst, Macdonald said.
Using the 2006 housing market collapse in the U.S. as a model and simulating current market conditions, the Centre for Policy Alternatives predicts homeowners in Edmonton and Montreal could be hardest hit, losing 38% to 34% of their property value respectively in less than three years, in a worst-case scenario.
In terms of dollar value, Vancouverites would be worst hit and stand to lose nearly $200,000 on the average home.
“I really don’t see what would trigger this kind of sharp decline,” Tal said.
His forecasts are far less grim because as he sees it, the market fundamentals are still strong. Tal sees price drops to the tune of 10% on average and by 15% only in select cities.
“I’m not in this camp that sees disaster happening,” Tal said.
Canada has seen three housing bubbles burst, twice in Vancouver and once in Toronto, the report said.
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