The risks of a long-feared housing meltdown in Canada might be easing if recent data is any indication, according to market observers working with the country’s largest financial institutions.
With latest numbers from Teranet and the Canadian Real Estate Association showing only modest price adjustments (2.3% year-over-year) in October, national home sales have veered even closer to the 10-year average.
The situation might prove to be a model case for other governments on how to avoid crash-causing mismanagements of housing booms.
“Overall, yes the medicine is working,” Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal told Bloomberg. “We are reaching some sort of landing, how soft it will be I don’t know, but we aren’t in a free-fall by any stretch of the imagination.”
At the rate trends are going, price adjustments might end up being where they are in the sedate 1990s levels, Bank of Montreal senior economist Robert Kavcic stated.
“It looks like we’re settling into this environment in Canada where price growth is going to be flat in real terms.”
Read more: Rate hikes, regulatory changes moderating mortgage risk – BoC
A series of interest rate hikes and stricter mortgage regulations largely contributed in bringing about moderation in home price growth nationwide, according to Royal Bank of Canada Global Asset Management chief economist Eric Lascelles.
“It’s a pretty good spot to be in, avoiding boom but avoiding bust as well,” Lascelles said. “The rule changes that have been made have been effective in cooling these markets down.”
However, this is by no means an assurance of trouble-free sailing from here on, as there remains other significant risks like the current economic climate that has pushed younger generations – predicted to become the largest buying demographic in a few years – out of the market.
“There is no pre-ordained conclusion here,” Lascelles warned.
Purchasing power will be the first casualty of possible rate increases
Insolvency filings expected to rise: CAIRP