Canadian house prices overvalued by 35 per cent, report says
A realty sign is posted in front of a home for sale in this Jan. 8, 2015 file photo. (AP / Rogelio V. Solis)
Published Monday, April 20, 2015 4:15PM EDT
In a global tracking of housing prices, a prominent British publication says properties in Canada are overvalued by 35 per cent when compared with income and rent.
The Economist’s latest housing index figures found that prices are rising in 19 of 26 markets surveyed around the world.
In Canada, 89 per cent of properties are overvalued relative to income. The figure prompted The Economist to note that the International Monetary Fund “had such places in mind” when it recently warned that financial regulation aimed at lowering risk may not help prevent a housing bubble.
Canada ranked among seven markets, including Australia and Britain, where prices are overvalued by more than 25 per cent.
The report said central bankers in the markets surveyed have kept monetary police “ultra-loose,” which is resulting in historically low mortgage rates.
The rates are driving demand, but also increasing housing prices.
In Canada, advertised fixed rates for a five-year term fell below three per cent as the country enters a busy spring housing season.
“Due to the drop in mortgage interest rates since January, the Canadian housing market continued to outperform other areas of the economy in the first quarter of 2015,” TD bank economist Diana Petramala told The Canadian Press.
In a monetary policy report released earlier this month, the Bank of Canada said the most “likely scenario” as the economy gains strength is a “soft landing” in the national housing market.
Recent figures released by the Canadian Real Estate Association show that Toronto and Vancouver remain hot housing markets.
With files from The Canadian Press