Canada's housing bubble close to bursting: Capital Economics
Prices could fall 25% in the next three years
CALGARY — Canada’s housing bubble is now close to bursting as housing valuations have “lost touch with fundamentals” and household debt is at a record high, says a report by Capital Economics.
The report says it fears that house prices could fall by as much as 25 per cent over the next three years.
“House prices have been growing rapidly for nearly a decade now and it has reached the point where housing is so overvalued relative to incomes that a downward correction seems unavoidable,” says Capital Economics.
“Relative to disposable income per capita, our calculations suggest that housing is around 25 per cent overvalued, which is approaching the level of excess that the U.S. market reached at its peak in 2006.”
The report says the downturn in the housing sector will severely constrain economic growth over the next couple of years as consumption expands at a more “muted” pace and housing investment “shrinks.”
“We also anticipate that the end of the housing boom will lead to a marked decline in housing-related activity and employment,” it says.
Capital Economics says signs of over-building are evident as unoccupied housing units are at historically high levels, similar to 1994-95 when housing construction was last mired in a slump.
“Another sign of over-building, or perhaps over-consumption, is the sharp increases in the home ownership rate over the last 10 years,” it says. “This run-up has coincided with a housing price boom fuelled by rising financial leverage.
“Our concern is that these excesses will eventually lead to a house price correction, which would greatly impact household wealth, consumer confidence and the economic recovery.”
I dunno about the rest of the country, but I personally don't see any signs of real estate prices going down in GVRD any time soon.
Yes, prices have lost touch with people's income. But Vancouver is distinctly different from the rest of the country because we continue to get waves of rich immigrants buying up real estate properties like there is no tomorrow.
It's still gonna be a really bad sign for us in the regular working class la...
In Vancouver at least, I don't think it's a bubble because I don't see it bursting any time soon law. Even with the reduced investment type immigrant count, the overall number of new immigrants are still gonna be about the same because of all the backlogs. So rich immigrants are still gonna come and scoop up the houses la...
Definition of a bubble is that a valuation is justified based on an assumption that seems to be bullet proof, but it's simply still a false assumption.
Assumption that rich immigrants are unlimited, and every immigrant will want to buy a place at current valuation and rental income return... I don't know if this is a solid unshakable assumption, or if's a false assumption. Unless one's as bright as the ones who called the housing bubble in the US, it's hard to tell a fundamental assumption, to one that looks like one, but is simply false and self-reinforced...
發表於 2011-6-29 07:15
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