Brokers may be in for a difficult year, with consumer sentiment regarding the health of the housing market eroding, according to one recent report.
According to the recently released Bloomberg Nanos Canadian Confidence Index, 38 per cent of Canadians believe housing prices will increase; a drop from the 46 per cent who believed the same in July.
“The months-long decline in consumer confidence could hopefully be a harbinger of a soft landing for the housing market and an easing of the growth in household credit,” said Robert Lawrie, a Bloomberg economist. “Of note is the steeper drop in confidence among younger cohorts, who are less risk-averse and more likely to take on debt.”
According to the same report, 46 per cent of Canadians believe home prices will stay the same; 13 per cent believe they will decrease and just under three per cent are unsure.
“Of note, the decline has been primarily fueled by dampening forward perceptions of the strength of the economy and the value of real estate” said Nanos Research Group Chairman Nik Nanos. “Confidence in the energy rich Prairie provinces has hit a new 12 month low, although confidence in that region is still comparatively stronger than Quebec and Atlantic Canada.”
The report follows a number of estimates about the overvaluation of Canadian housing.
Deutsche Bank, the most recent organization to join the discussion, provided the most sobering estimate, stating that Canadian house prices in Canada are overvalued by 63 per cent, which it attributes, in large part, to high levels of household debt.
TD Bank and the International Monetary Fund (IMF) both believe Canada’s house prices are overvalued by ten per cent, while Fitch Ratings suggest they are overvalued by 20 per cent.
The Economist, meanwhile, believes the figure sits around 30 per cent.