Fears of a Canadian housing bubble are exaggerated, according to a report from The Conference Board of Canada.
"Mortgage costs, not just house prices, are the principal deciding factor for potential homebuyers," states Robin Wiebe, senior economist, Centre for Municipal Studies, in the report entitled, Housing Briefing: Bubble Fears Overblown. "Mortgage rates are expected to rise this year, but not dramatically, because the Canadian economy remains in a slow-growth mode.
"The housing market may be undergoing a correction in some regions and market segments, but it is more likely to be a soft landing than a bubble bursting."
Over the medium-term, a modest market correction, particularly in market segments in Ontario and Quebec as projected rising interest rates potentially crimp affordability, could produce a moderate decline in the national average housing price.
Fears of a housing bubble hinge on the ratio of house prices to apartment rents and house prices to incomes. The Conference Board's view is that while these ratios are high, they are also misleading.
"Mortgage costs, not just house prices, are the principal deciding factor for potential homebuyers," states Robin Wiebe, senior economist, Centre for Municipal Studies, in the report entitled, Housing Briefing: Bubble Fears Overblown. "Mortgage rates are expected to rise this year, but not dramatically, because the Canadian economy remains in a slow-growth mode.
"The housing market may be undergoing a correction in some regions and market segments, but it is more likely to be a soft landing than a bubble bursting."
Over the medium-term, a modest market correction, particularly in market segments in Ontario and Quebec as projected rising interest rates potentially crimp affordability, could produce a moderate decline in the national average housing price.
Fears of a housing bubble hinge on the ratio of house prices to apartment rents and house prices to incomes. The Conference Board's view is that while these ratios are high, they are also misleading.
