IMF slightly alters real estate prediction

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The ups and downs of Canada’s housing market are set to continue according to the IMF, which has recently altered its overvaluation estimate for Canadian real estate.

“After a brief pause, Canada’s housing market rebounded in 2014, fueled by low and declining interest rates although there are some welcome signs of cooling especially in overheated markets,” the International Monetary Fund states in its recently released report on the Canadian economy. “IMF staff analysis suggests a national real house price overvaluation between 7–20 percent although with important regional differences.”

The IMF warned about Canada’s housing market in late November as well, stating that we are likely to see a soft-landing. It also stated a crash could be exacerbated if further lending tightening isn’t implemented.

At the time, the IMF estimated that the market is overvalued by between 5 and 20 per cent. The organization also reiterated its view that banks should be taking more risk on residential mortgages with the CMHC reducing its exposure.

However, in its most recent report, the IMF states that the Canadian banks, at least, are expected to operate in a healthy manner.

“Canadian banks remain highly profitable, with favorable loan quality, low nonperforming loans, and improving capitalization,” the report states. “Stress tests suggest that banks are resilient to credit, liquidity, and contagion risks due to their strong capital position, stable funding sources, and low exposures to the energy sector, as well as extensive government-guaranteed mortgage insurance.”
  • Anonymous = Troll on 2015-02-04 12:49:52 PM

    I prefer to align my findings with non-bios Deutchebank suggestions as to 60+% overvalued Canadian housing market, specifically for central and southern Ontario as discussed in forum from 02 Feb 2015, "What do low rates mean for a potential housing bubble? by Justin da Rosa". And I assume that BC/Vancouver Greater Area is the most affected because of the closest proximity to Pacific region. Like I said, if math and science do not prevail, than there is something wrong no matter what the preference in words is (slightly, brief pause, soft landing versus robust, healthy, etc).

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