TORONTO – Canada’s housing market continues to show strength overall, with a slowdown in a few urban centres, but it “may only be a matter of timing” before there’s a full-blown correction, warns an economist, reported Yahoo News.
Capital Economics economist David Madani, known for his bearish outlook on Canada’s housing sector, believes the market is overdue for a correction of as much as 25 per cent.
He says the recent softness in cities such as Halifax, Winnipeg and Victoria are just the beginning. Larger “overvalued markets” such as Toronto and Vancouver, are expected to follow.
While many economists are calling for the “soft landing” in Canada’s housing market, Madani forecasts something more severe.
“Overall, with house prices already declining in some smaller regions, it may only be a matter of timing then before prices in other larger and much more overvalued markets begin to fall more sharply,” he says in a new report.
“We still firmly believe that the housing market will ultimately experience a hard landing with prices falling by as much as 25 per cent.”
Home prices rose 7.6 per cent year-over-year across Canada in April, to an average $409,708, according to the Canadian Real Estate Association (CREA), which continues to call the Canadian market “in balanced territory.” CREA says the MLS® Home Price Index rose 5 per cent year-over-year in April.
Despite a few “lingering hotspots,” BMO Capital Markets senior economist Sal Guatieri says Canada’s housing market is “stable, if not boring, which is good in the face of dire warnings about a crash.”
He notes strong population growth and economies in Western Canada are supporting market in B.C, Alberta, Saskatchewan and Greater Toronto, while Quebec and much of Atlantic Canada are seeing more pressure.
Madani acknowledges the performance of Canada’s housing market has been “astounding,” over the past year or so. Still, he’s not a believer.
