By: Hugh Smith
Canadian housing prices may experience a slight decline, but will not experience a bubble burst, according to a new report released by the Conference Board of Canada.
The report, titled Housing Briefing: Bubble Fears Overblown, studied six major markets across Canada: Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal.
The report concluded that most markets are balanced with steady growth, while Montreal and Ottawa’s home sales are flattening out. It predicted that real estate markets in Canada will experience a soft landing in the next couple of years as opposed to a bubble bursting.
Robin Wiebe, lead author of the report, predicted the drop in prices would be relatively minor.
“I wouldn’t be expecting something on the order of 15 to 20 per cent,” Wiebe told Humber News. “Two or three per cent perhaps.”
A senior economist with the Centre for Municipal Studies, Wiebe said he was motivated to do the study by the misconception of a housing bubble in Canada.
“[I’ve heard] media reports elsewhere and analytical comment that Canada’s housing market was in a bubble and that bubble was going to burst with dire consequences,” he said.
What Wiebe found was the opposite.
“I looked at the six largest markets and concluded that most of them are in pretty decent condition.”
Wiebe said the forecasters predicting a bubble burst are simply unfamiliar with the Canadian market.
“Not all housing analysts describe Canada’s current market situation as a bubble,” he said. “Most of those who do are not Canadian.”
In particular, Wiebe referred to international publications such as The Economist and US market observers, who were viewing Canada’s markets from an American perspective.
“Most of the domestic analysts are forecasting a soft landing.”
John Pasalis is the broker owner of Realosophy Realty Inc., a residential real estate brokerage. He said he found the report’s conclusions were in line with his own views of the real estate market.
“They’re pretty accurate in particular as it relates to Toronto’s market,” Pasalis told Humber News. “I do agree with most of their conclusions.”
As for when the price drop should occur, Wiebe said it’s not in the immediate future.
“If there were to be a price drop, I don’t think I’d be looking for one in Toronto this year. Maybe next.”
Pasalis agrees.
“I don’t think there’s any soft landing in the next year,” he said. “I think realistically what’s probably going to happen is that we’re probably going to see prices decline when we hit a recession. And I don’t expect that to happen until the construction slows down.”