Canadian housing crash fears overstated - Moody’s

by Ephraim Vecina24 Oct 2016
In a report released last week, Moody’s Analytics assured that while the Canadian real estate sector will experience a more relaxed pace in home price growth over the next half decade, rumors of a massive crash are greatly exaggerated.
“There has been a lot of speculation about Canada’s housing markets overheating during the past two years,” Moody’s economist Andres Carbacho-Burgos said in the report, as quoted by Global News.
“The house price outlook calls for a deceleration of house price growth, not for a serious decline, though there are exceptions for smaller regions,” the analyst added.
The Moody’s report predicted that prices for detached single-family properties will rise by 9 per cent in 2016, and by around 2.9 per cent a year for the next five years.
Ontario is expected to be a focus of growth with four out of the five strongest metropolitan markets nationwide. In particular, Barrie prices will increase by 7.9 per cent annually over the next five years, with Toronto and Oshawa prices coming close at 6.7 per cent growth per year.
“Toronto and possibly Oshawa benefit from strong foreign capital inflows, and most of the metro areas in Ontario also benefit from good projected income growth and from the lack of any extended house price correction in the historical data, pointing to weak mean reversion effects thanks to non-measurable factors such as wealth and good mortgage credit quality,” the report stated.
The Moody’s study came in the wake of the Canada Mortgage and Housing Corporation’s statement that there is a strong possibility of major movements in Toronto and Vancouver due to continuous home price growth.
Observers warned that home prices might fluctuate wildly amid new federal mortgage rules, which mandated among others a harsher “stress test” on borrowers. Fears about that this might lead to less construction—and thus more limited supply.

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