The Canadian housing market isn’t as dangerous as some experts warn, reports The Globe and Mail.
An analysis has found that a tactic commonly used by economists often underestimates the rate by which rents have been rising in the market. This, in turn, inflates what is known as the price-to-rent ratio, which fuels fears that the market is becoming overheated.
A report to be released Wednesday by housing economist Will Dunning arrives at a similar conclusion, but takes the argument to another level by stating that price growth may have been overestimated.
Economists generally believe that house prices are too high, and lower interest rates have forced homebuyers to take on more mortgage debt than they otherwise might.
Despite the backlash, it is a legitimate cause for concern, and finance Minister Jim Flaherty and the Bank of Canada are keeping a close eye on the situation. Both sides have expressed concern about certain subsections of the market that require special attention, such as Toronto condos. It is possible that house prices could drop, and the market will be tested when rates increase.
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