As Bank of Canada Governor Stephen Poloz warns of a housing bubble or overvaluation of 30% in the Canadian housing market, an assistant professor from the University of British Columbia (UBC) claims this does not mean much for renters.
Thomas Davidoff, a faculty of UBC’s Sauder School of Business Strategy and Business Economics Division, agrees that prices in cities like Vancouver could drop by as much as 30%. However, he argued that it is “very difficult” to forecast home prices in these areas as well.
“A large fraction of the value of homes near Vancouver consists of peoples’ willingness to pay to live here, and that can fluctuate a lot. Canadians who own homes hold a risky asset. They have enjoyed a tremendous increase in wealth, but much of their wealth is at risk,” he said.
He noted that for homebuyers waiting for better affordability before buying, falling prices would be good news.
“But for renters, overvaluation does not mean much. Yet a price crash could trigger a recession, as home equity withdrawals through refinancing have likely helped stave off recession the last five years or so,” Davidoff added.
He also claimed that while costs in Vancouver are sky-high, “rents actually aren’t that badly off here.”
“If you think of affordability, we shouldn’t be so worried if people can’t buy, but we should be worried if people can’t rent,” Davidoff said.
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate
More market watch: