A report by Capital Economic says 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.
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.
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.”
Source: Montreal Gazette
… Good thing that here in Quebec the market remains stable. Not up, not down. Just stable.
Posted by: Deya Bautista - Real Estate Broker working as part of the McGill Immobilier team. Specializing in high end condos in downtown and Old Montreal. For buying or selling contact Deya at: 514.917.7889 
I think its a good news for buyers that Canada's housing bubble close to bursting. I am happy.
Back to reality…