Canada housing boom expected to cool, crash fears linger: Reuters poll

Tue Feb 25, 2014 1:27pm EST
 
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By Leah Schnurr and Deepti Govind

(Reuters) - Canada's housing market boom will fade out over the next three years and although analysts say prices won't fall from record highs most are at least somewhat worried about the risk of a crash, a Reuters poll found.

In the survey of 16 forecasters, eight said they were "slightly concerned" that after more than a decade of rapid increases in home prices, they may be at risk of a sharp fall.

Two respondents from the sample of top property market analysts and senior economists at Canada's largest banks said they were "concerned" while three said they were "very concerned". Only three said they were not concerned at all.

Still, the consensus contains no house price fall over the next three years. Instead, they are expected to rise 2.2 percent this year, 1.0 percent in 2015 and 0.8 percent in 2016.

"Outside of Toronto and Calgary, the housing market is largely cooling, though far from crashing," said Sal Guatieri, senior economist at BMO Capital Markets.

Canada's housing market weakened a bit in 2009, hit by the global financial crisis, but record low borrowing costs and a pick-up in the economy helped it bounce back quickly, booming again by 2012.

Lofty prices and record-high consumer debt have since raised fears that once interest rates rise again, Canada's housing market could be in for a collapse like the one the United States suffered during the crisis.

Meanwhile, household debt keeps piling up. The ratio of Canadian household debt to income rose to a record high of 163.7 percent in the third quarter.   Continued...

 
A sold sign is displayed in front of a home in Toronto December 15, 2009. REUTERS/Mike Cassese