.png)
But while the CCPA is raising an alarm, others are not so concerned. Ted Tsiakopoulos, a regional economist with the Canadian Housing and Mortgage Corporation, says that with Canada’s steady labour market and relative lack of speculative housing purchases, there is little indication that high prices reflect a housing bubble.
“There isn’t convincing evidence that a housing price bubble exists,” says Tsiakopoulos.
He says the CMHC and many others are expecting an adjustment next year, but it won’t be dramatic and is more reflective of the cyclical nature of demand and supply in housing markets than anything else.
“This adjustment is not an adjustment driven by market that is juiced up and is correcting,” he says.
He discounts any suggestion that Canadian housing prices are above true market levels.
“We’ve done some work that suggests that we haven’t seen that kind of over valuation in the Canadian market place…. What we are seeing here is a cyclical adjustment in housing activity.”
That price adjustment, he adds, will be “quite orderly” because of Canada’s strong labour market and solid mortgage financing system.
Tsiakopoulos says changes to mortgage rates are expected to be quite measured, according to statements from the Bank of Canada, and that with two-thirds of Canadians in fixed mortgages, even those changes will have little impact on many homeowners.
He also said many homeowners are already paying above their monthly payments in an effort to pay off their principal more quickly.
“The effect is, if rates go up, they are already prepared and won’t feel the impact as much.”
Canada has only had three housing bubbles burst, twice in Vancouver and once in Toronto, notes the CCPA report. The study simulates the conditions of the two most recent bubbles, as well as the 2006 housing market collapse in the U.S., and predicts homeowners in Edmonton and Montreal could lose 38 percent to 34 percent respectively of their property value in under three years in a worst-case scenario.
Vancouverites would be worst hit, in dollar value, losing almost $200,000, said the report.
Economists from Canada’s major banks, including CIBC and Bank of Montreal, have also said in media reports that the market has not reached the kind of pricing that would indicate a bubble and that while an adjustment is evident, it will not be so dramatic as the CCPA’s report suggests.
