Wednesday, May 13, 2015

Canada housing market correction could happen but not a bubble

The similarities are that there has been a good deal of home price inflation. There are increases in household debt related to mortgages.

But there are differences related to your financial system, which is slightly better regulated and supervised. So the excesses of subprime lending that occurred in the United States have not occurred in Canada.

In the U.S., a massive glut of supply led to the prices falling. Here, especially in Vancouver, some of the demand is driven by foreigners coming from Asia and buying property as a long-term investment. That demand is going to stay.

So I wouldn’t say the Canadian market is in a bubble. I would say there is some frothiness in terms of excessive price inflation and the valuation of homes compared to rentals.

I don’t see a housing bust in Canada. But there may be some correction in prices.