TD: Housing correction put on hold

Both of those pricey real estate markets are primed for a fairly mild correction of about 15 per cent over the next two to three years, according to a report from the big bank’s market analysts.

But the full brunt of that drop in home values won’t likely be felt for few years, and not the more-immediate correction some bank economists described earlier this year as all but imminent.

This week’s quieter alarm bell comes amid fears that the Canadian economy is likely to remain stagnant over the next six months as Europe grapples with a debt crisis now spread to Spain.

The concern is those external forces will continue to tamp down on interest rates, essentially encouraging more Canadians to add to near-record levels of debt.

It also means that the kind of correction TD predicts will likely be put off until the cost of money increases. There’s growing indication that the Bank of Canada won’t make a move to raise its own overnight rate until next year.

The effect on home prices in T.O. and Vancouver may ultimately be to further stimulate them.

"In our view, Vancouver's market is likely to show increased stability over the remainder of this year,” write TD economists Derek Burleton and Leslie Preston in the report, released Monday, “Meanwhile, there appears to be little stopping Toronto's market from recording robust gains and continuing to play catch-up with its West Coast counterpart."

 

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