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Fitch: Canadian homes 20% overvalued

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Guest | 03 Mar 2013, 04:37 AM Agree 0

Fitch does not, however, expect a collapse and says that if prices were to drop it could take several years to revert to their "sustainable values," depending on factors such as government support and credit availability. In fact, it argues that an observed decline in prices could be limited to as little as 10 per cent.
Of the four major provinces – Alberta, British Columbia, Ontario and Quebec – the agency judged Alberta to be the least overvalued given its continuing climb back from the 2007 correction that cut back historical peaks.
Home prices in B.C., however, have reached highs that aren’t justified by economic fundamentals, Fitch says, pegging Ontario's overvaluation at 21 per cent. Alberta prices are overvalued by 15 per cent, it wagers, with both B.C., and Quebec at 26 per cent.
A key concern for the agency is household debt, which has increased more than 50 per cent since 2000 and was at a high of around 160 per cent of disposable household income in the third quarter of 2012.
While the agency offers a relatively rosy forecast for Canada, expecting falling unemployment and moderate growth, it says Canadian consumers are more vulnerable to external economic shocks such as a sustained increase in unemployment or sharp rise in interest rates.
  • Peter MacInnis | 05 Mar 2013, 09:34 PM Agree 0
    The thing all these experts fail to recognize when making these assessments of Ontario real estate values is the impact Smart Growth legislation has had on the market, particuarly in the GTA. If there are no near or long term changes in this legislation, there is only one way for real estate values in the GTA to go, and that is up. The only exception might be condo values which are impacted by outside influences such as offshore investors.
  • Omer Quenneville | 05 Mar 2013, 09:42 PM Agree 0
    What science are they using to measure this over valuation? History repeats itself until new stimulus are introduced into the market and then no one really knows for sure. We are very much part of a global economy for the first time and we need to get use to that. No one country can control its market anymore. Bring in more regulation and all that will be accomplished is squeezing more locals out of the market.
  • Zed | 06 Mar 2013, 01:53 AM Agree 0
    God help these ratings agencies still believe they have relevance ?? And why corporations are still paying them so they can continue to exist is beyond me.. One of these days they may get it right. By the way prices are up 2.2% year over year with lower volumes.
  • Jim Reid Realtor Economist | 06 Mar 2013, 05:25 PM Agree 0
    First The Economist, then Moody's, and now Fitch. They are all using the same systemically flawed research and analyses. My analysis of their research indicates they don't have a grasp of the real factors that affect property values and prices in Canadian markets. Also, they are too quick to assume our housing is similar to that in other countries.
    Presently, GTA prices are a touch below the long-term trend line, so if a decline occurs it will be because of a self-fulfilled prophesy created by the panic promulgated by these foreign rating agencies who showed their incompetence in the years leading up to 2008.
    They do understand that the Canadian banks own 70% of the mortgage market and property is a major factor in their strong balance sheets. Perhaps these are merely jealous attacks against our much stronger financial institutions?
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