Canada house prices to push higher on speculation, foreign buys: poll

Wed Jun 8, 2016 5:03pm EDT
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By Anu Bararia and Rahul Karunakar

(Reuters) - House prices in Canada will climb further over the next few years, driven in part by bets that urban centers Toronto and Vancouver have more steam left, even as household debt reaches historic highs, a Reuters poll found.

The Canadian property market has been buoyed by low borrowing costs as well as foreign investment over the past decade, even as the U.S. economy was brought to its knees following a collapse in the housing market in 2007.

The U.S. market is now many years into a mild recovery, while Canadian house prices have risen in nearly a straight line, almost doubling over the past decade.

The latest Reuters poll of 19 analysts conducted May 18-June 7 suggested the upswing in the already stretched Canadian housing market will continue over the next three years.

House prices are expected to rise 5.5 percent in 2016, the fastest since polling for 2016 began two years ago. Just three months ago, analysts had predicted a 3.3 percent rise.

Although house price inflation is predicted to cool to just under 3 percent next year, that would still be the highest since polling began for 2017 over a year ago. The consensus for 2018 was for a 2.0 percent rise.

"There appears to be two things ... An influx of foreign wealth and more recently there appears to be greater investment speculation," said Sal Guatieri, senior economist at BMO Capital Markets.

"As prices are going up, they are being pushed even higher by foreign wealth or investor speculation, and that is forcing more households to take on bigger mortgages and debt to get into the housing market."   Continued...