“The risks are less around the rapid house price appreciation per se than the fact that, relative to incomes, homes in Toronto and Vancouver are increasingly becoming unaffordable either to own or to rent,” Moody’s economist Paul Matsiras said in a recent report, according to the Globe and Mail. “Canadian household debt has risen faster than disposable income since 2011, greatly increasing the debt burden for consumers and the risks of a pullback in spending as interest rates rise.”
It’s perhaps unsurprising that Moody’s has issued such a statement, following Canadian Real Estate figures, released last week, that point to those two behemouth markets as major drivers of the industry.
The national average price for homes sold in September was $433,649, up 6.1% year-over-year.
The average price continues to be driven by gains in Vancouver and Toronto, the country’s hottest markets, according to CREA.
“If these two markets are excluded from calculations, the average is a more modest $334,705 and the year-over-year gain is reduced to 2.9 per cent.”
Despite the naysayers, Canada’s own central bank has reassured Canadians that the market isn’t bubbling to dangerous territory.
“We don’t believe we’re in a bubble,” Bank of Canada Governor Stephen Poloz said in April.
Those who argue against a bubble, including Poloz, point to housing that has kept up with immigration and demographic needs.
“Our housing construction has stayed very much in line with our estimates of demographic demand,” he Poloz said. “There’s no excess.”
It’s the sort of media coverage brokers don’t like to see, but one agency is adding its own voice to the chorus of overvaluation talk – especially in two major cities.