Olive: Canadian real estate prices are falling – not the sky
Everything in moderation.
Recent homebuyers can’t be cheered by forecasts of a looming slump in house prices so soon after paying record prices in what may be the tail end of a 13-year-long Canadian housing boom.
But hold the Prozac.
First, while house prices are widely forecast to soften this year, no one’s expecting a U.S.-style crash of the sort that had prices in overheated markets like Florida, California and Arizona plunging by 70 to 90 per cent between 2007 and 2009.
That cataclysm set off defaults, foreclosures, a Wall Street meltdown, and the global Great Recession. By contrast, expect prices in admittedly overheated Canadian markets – conspicuously the GTA and Vancouver – to ease by 5 per cent to 10 per cent this year. And then to recover and begin making gains over purchase prices in 2013.
There’s an unduly alarmist tone to the latest forecasts of declining Canadian house prices. The headlines give one the impression of an imminent sharp fall.
A recent Maclean’s article linking patterns in Canadian residential real estate activity with record household indebtedness is headlined, “Time to panic about the housing market.”
Even a house fire isn’t something to panic over. You’ll just get in the way of the firefighters.
What we’re actually witnessing is a competent effort by the powers that be to prevent a torrid escalation in property sales and prices. Ottawa has been working on this for two years now, with frequent warnings to Canadians by the Bank of Canada and the federal finance minister to ease up on debt-financed consumer spending, including house purchases.
Read the rest of the article
Recent homebuyers can’t be cheered by forecasts of a looming slump in house prices so soon after paying record prices in what may be the tail end of a 13-year-long Canadian housing boom.
But hold the Prozac.
First, while house prices are widely forecast to soften this year, no one’s expecting a U.S.-style crash of the sort that had prices in overheated markets like Florida, California and Arizona plunging by 70 to 90 per cent between 2007 and 2009.
That cataclysm set off defaults, foreclosures, a Wall Street meltdown, and the global Great Recession. By contrast, expect prices in admittedly overheated Canadian markets – conspicuously the GTA and Vancouver – to ease by 5 per cent to 10 per cent this year. And then to recover and begin making gains over purchase prices in 2013.
There’s an unduly alarmist tone to the latest forecasts of declining Canadian house prices. The headlines give one the impression of an imminent sharp fall.
A recent Maclean’s article linking patterns in Canadian residential real estate activity with record household indebtedness is headlined, “Time to panic about the housing market.”
Even a house fire isn’t something to panic over. You’ll just get in the way of the firefighters.
What we’re actually witnessing is a competent effort by the powers that be to prevent a torrid escalation in property sales and prices. Ottawa has been working on this for two years now, with frequent warnings to Canadians by the Bank of Canada and the federal finance minister to ease up on debt-financed consumer spending, including house purchases.
Read the rest of the article
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