Canadian housing crash fears overstated - Moody’s

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.

Related Stories:

Canada, Australia, NZ headed for ‘painful unwinding’ - economists

Housing critic warns of ‘change and pain’ under new rules

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate


  • by Matt Busch 2016-10-26 10:56:01 AM

    The government has implemented these new restrictions to TRY and slow down our booming Toronto and Vancouver markets. We may see a moderation in home price appreciation year over year, that is not to say that the markets are going to decline, maybe just a slower appreciation in value (ie. Homes in the GTA increased 21% year over year.)

    Essentially the changes only affect 25% of the market, being purchasers placing less than 20% down. When placing 20% or less it will cause your lender to require mortgage insurance. The new rules directly affect this group, and will limit their spending.

    When it comes to the market, the most important thing to remember is that this whole thing is about demand, and we have to remember that housing inventory is still down 30% year over year.

    The qualifying rate 4.64% is much different than the contract rate, typically about 2.44% (the actual amount) Meaning the amount people are paying for borrowed money does not change. Meaning affordability stays the same. Also important to note is the Bank of Canada rate has stayed at 0.5%, nothing has changed there to slow down/ speed up markets. This Drives the Prime lending rate; the bank adds 2.2% = 2.7%

    See the attached to see what you would qualify for based on your income. Your GDS and TDS ratios need to work of course. Have you been pre-qualified?

    Don't forget...if you don't have 20% down-payment it's not the end of the world. There are always creative ways to get it done. Whether it be a mortgage from family to get you up to 20%, or purchasing for a lesser price.

Get help choosing the best mortgage rate

Just fill in a few details, and we'll arrange for a Mortgage adviser to help you find the best mortgage for your needs

  • How soon do you want a mortgage?
  • Name
  • Where do you live?
  • Phone number
  • E-mail address

Industry news

Submit a press release


Do you invest in commercial properties?