Canadian Housing Crash Fears Overblown!
In a report released last week, Moody’s Analytics assured that while the Canadian real estate sector will experience a more relaxed pace in home price growth over the next half decade, rumors of a massive crash are greatly exaggerated.
“There has been a lot of speculation about Canada’s housing markets overheating during the past two years,” Moody’s economist Andres Carbacho-Burgos said in the report, as quoted by Global News.
“The house price outlook calls for a deceleration of house price growth, not for a serious decline, though there are exceptions for smaller regions,” the analyst added.
The Moody’s report predicted that prices for detached single-family properties will rise by 9 per cent in 2016, and by around 2.9 per cent a year for the next five years.
Ontario is expected to be a focus of growth with four out of the five strongest metropolitan markets nationwide. In particular, Barrie prices will increase by 7.9 per cent annually over the next five years, with Toronto and Oshawa prices coming close at 6.7 per cent growth per year.
“Toronto and possibly Oshawa benefit from strong foreign capital inflows, and most of the metro areas in Ontario also benefit from good projected income growth and from the lack of any extended house price correction in the historical data, pointing to weak mean reversion effects thanks to non-measurable factors such as wealth and good mortgage credit quality,” the report stated.
The Moody’s study came in the wake of the Canada Mortgage and Housing Corporation’s statement that there is a strong possibility of major movements in Toronto and Vancouver due to continuous home price growth.
Observers warned that home prices might fluctuate wildly amid new federal mortgage rules, which mandated among others a harsher “stress test” on borrowers. Fears about that might lead to less construction—and thus more limited supply.
But if we are not producing just the right amount of housing to supply our needs we will get a rising market again driven by rising demand.
Have you ever heard the phrase “real estate is cyclical?” If not… you are about to:
Real estate is cyclical!
In other words, like the repetition of seasons, breakfast, and so on, real estate follows a pattern that can be observed and thus predicted. However, unlike the consistency of autumn or the regularity of pancakes, the real estate cycle moves at its own pace, and that is the difficult thing to predict.
No one can predict the real estate market with 100% accuracy.
I know you came to this post to try and figure out where the real estate market is headed, but unless you are some kind of prophet or psychic, there is no way to know the future of the real estate market.
However, If you are a real estate investor you should understand that wealth can be built in any market if you focus on the essentials and avoid getting caught up in the hype!
When the market is hot, make hay while the sun is shining! When the market is over heated, stick to your guns and hustle for opportunities that work. Or if prices are simply too crazy, find a market that is working.
But If it is a bubble and you do hear the pop, think of it as a champagne cork celebrating a new era of property stability!
Are you looking to buy a property? If you like, I can tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much I could save you right now if you have an existing mortgage.
Until next time,
Your mortgage expert Evgeny Kamenskiy