Jim Flaherty, Canada’s Finance Minister, is working hard to dispel rumors of an imminent housing bubble in both Vancouver and Toronto. He notes that Canada’s real estate market is healthy, despite the recent slowdown in sales and price points. Flaherty noted that the moderation of prices, particularly in these two markets, are actually corrections, and not at all unanticipated, even considered healthy.
But some economists disagree. Among them are those who put out the Q3 House Price Survey at Royal LePage. The report showed that some key markets were seeing a five percent reduction in sales. Other economic reports are hinting that the price of homes might see an average drop of 25 percent within the next year..
Capital Economics noted in their own report that the housing adjustment is only the beginning. With less people being able to qualify, Canada may end up with a glut of homes on the market, which would vastly reduce the price. Their report also noted that the decrease in sales over the last few months is not just because of new mortgage rules.
The 25 percent figure being bandied about is almost twice as high as predicted by many bank economists and may temper the plans of investors and tighten the money market. Flaherty still believes that the reduction will be much less than that 25 percent and that Canada is in for a soft landing, rather than the crashing fall some economists are predicting.