Housing prices to be corrected in Canada
Canadian Economists foresee almost 15% correction in the Housing prices in Vancouver and Toronto in the years to come.
Toronto-Dominion Bank has issued a report recently. Economists like Derek Burleton and Leslie Preston mention the slow economic growth and a less flexible interest rate as the correction factors.
Vancouver’s housing market has not given any good news whereas Toronto’s housing market continues with a strong growth.
“Economists opine that the housing markets in Canadian big cities have been overvalued by 15%; hence correction is likely to take place.”
The Bank economists point out that housing prices have risen sharply in the last few years favouring bigger mortgages and other debts.
The rising prices have been facilitating accumulation of debt. Reversal of prices would be a shock for many as Canadians have been planning their finances on the house of cards.
The economists wrote that, “The correction is likely to be gradual as neither Vancouver nor Toronto is showing bubble like symptom similar to the U.S. market prior to its massive 30% adjustment.”
Royal Bank of Canada says that the “current inventory levels show that the housing market is balanced in Canada.”
It is calculated that if the housing prices are dropped by 10% then there will be a decline of 1% in consumption leading to a slower growth of economy.
Craig Alexander, Chief Economist of TD bank says, “The fact that the central bank devoted its winter reviews on one topic only-debt-proves the seriousness of the issue.”
Alexander also believes that the housing prices will see a correction of 15% in the days to come.
Bank of Canada plans to increase the interest rates in the fourth quarter of the on-going year. This in turn may result in slowing down of housing demand. Nationally, the housing prices will fall down.
TD economists expect a correction of more than 15% due to the present crisis in Europe and slow economy in United States.
When the world suffered from extremities in economy, Canada could manage some stability for itself. In the given scenario, there are many who believe that this could be the time for Canadians to invest in housing.
Also, the Canadian dollar is gradually rising against U.S. dollar, giving another to invest in buying a house in Canada.
Last year when U.S. housing prices had plunged, Canadian housing prices had risen by 30% during the same period.
The past records support investment in buying a house in spite of the speculated corrections.