“Structural changes” appear to justify the current house prices across Canada, a new report by Moody’s Analytics stated.
Study author Mark Hopkins said it may be possible that the two decades of lower and more stable
mortgage rates have resulted in the rise of risk-adjusted returns on housing investments, alongside the regulatory safeguards.
“This would shift readings such as the ratio of house prices to rents and to median incomes upward,” he said.
Moreover, Hopkins stated in the report: “This is comparable to levels reached in 1981 and 1990, periods followed by significant price declines as interest rates rose and the economy went into recession. Nevertheless, the Bank of Canada (BoC) said the recent upward creep in valuations has been more gradual, pointing toward a softer landing.”
Last week, BoC suggested that housing may be anywhere from 10% to 30% overvalued although they downplayed talk of a crash, the Financial Post reported
The Moody’s report also stated that growth in Canadian house prices will slow through 2017 as interest rates rise.
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