āDr. Doomā warns Canadaās housing bubble about to burst
- CBC – About 53,000 new condo units are due to be completed in Toronto over the next 18 months.
Itās the doctor versus the governor in the ongoing debate over theĀ direction of Canadaās housing market.
On the pessimistic side thereāsĀ Nouriel Roubini, the man known as āDr. Doomā for his pessimistic outlook on the global economy. He recently pinpointed Canadaās housing market as aĀ bubbleĀ set to pop.
Canada is in the company of other housing markets that Roubini (known as one of the few to correctly predict the U.S. housing crash) says are showing āsigns of frothiness, if not outright bubbles,ā including Switzerland, Sweden, Germany, Australia and New Zealand.
More optimistic is Bank of Canada governor Stephen Poloz, who reiterated again last week thatĀ he doesnāt see a bubble. Instead, he believes there will be a gradual slowing of sales activity in the years to come.
āThe bank continues to expect a soft landing in the housing market,ā he said, repeating calls economists have been making for the past several months.
So far, predictions on both sides are proving to be incorrect as CanadaāĀ housing market continues to defy expectations. Thatās despiteĀ rising borrowing ratesĀ being offered by the banks and government moves to tighten mortgage conditions to prevent a U.S.-style crash.
ā2013 was a year of pleasant surprises for Canadaās housing market,āĀ BMOĀ Capital Markets senior economist Sal Guatieri said in a recent note. āFar from extending last yearās deep sales dive on mortgage-rule turbulence, the market pulled up sharply and is cruising at an above-normal altitude.ā
Even the major cities expected to drag down the data,Ā namely Toronto and Vancouver, have outperformed, BMO notes.
In Toronto, Canadaās largest city responsible for about one-fifth of national sales, BMO says activity is up 20 per cent year-over-year for the months of August-to-October, as prices continue to climb.
Thatās despite ongoing calls for a crash, particularly in theĀ condo marketĀ where overbuilding of units has been an ongoing concern.
āThe number of newly built, unoccupied condos is not high when normalized for population growth,ā Guatieri writes. āFor the most part, markets are balanced, but sellers rule and bidding wars prevail in certain pockets where listings are scarce.ā
In high-priced Vancouver, which many believe has the greatest risk of a housing collapse, the market has bounced back strong from a dip in sales earlier this year.
Sales were down 33 per cent at the worst point earlier this year, but have since āpole-vaultedā 50 per cent to ānear normal levels,ā says BMO.
āBuyers held the upper hand last year, but the pendulum has swung toward balance today,ā Guatieri says, predicting housing prices to fall slightly as mortgage rates continue to creep higher.
Overall, Canadaās housing market is rebounding across the country with sales up about 8 per cent in October compared to the same time last year, according to the Canadian Real Estate Association. Preliminary data for November also shows continued strength in sales.
Both the cautious and the extremely pessimistic camps have yet to be proven correct in their calls for Canadaās seemingly unpredictable housing market.
Eventually, one side will claim victory. Ā Which one remains anyoneās guess.
Read More @Ā http://ca.finance.yahoo.com/

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