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.