The Deutche Bank released a study today unveiling that Canada’s homes are the most over valued in the world be by 60%. Deutche economist Peter Hooper came to this conclusion from taking the average of the ratio of home prices to rent values (88%) and home prices to income (32%) comparing them to historical averages. It also concluded that based on median house price to the median household income Vancouver a coastal city is actually more expensive than the financial capital of the world New York!
Canada housing bubble about to burst?
It seems like this topic keeps coming up. Around the world and even in Canada many people believe we are in a housing bubble. With property prices so high in the major cities, people who are on the fence to buy are holding back because the bubble is going to burst.
Bank of Canada’s (BOC) governor Stephen Poloz certainly doesn’t think that is the case and has forecasted the overnight lending rate to stay at 1% until 2015. Although Canadians have increased their housing debt, insurance providers are claiming that there is less default and the credit score of the applicants are higher. With tighter regulations and underwriting processes it is becoming tougher to qualify.
RE/MAX, one of the country’s top real estate offices, has predicted a very healthy year in 2014 for real estate. Despite a slow start in 2013, home buying activity and values across the country are reaching the highest they have been since 2009.They estimate 466,000 real estate transactions to take place in Canada over 2014 wich would be an increase of 3% from 2012 sales. This optimism is based on Canada’s economic growth second only to the United States among the group of seven countries. Though it seems rather rosy, they have been able to predict accurately in the past.
Interest rates will fluctuate with the economy. Canadian economy is strongly correlated to our neighbors in the south. As their economy strengthens and unemployment rates decrease, there will be less need for a stimulus. With bonds yields going up so will fixed mortgage rates.