Canadian Housing Market Crash Not Likely.

Canadian Housing Market Crash Not Likely

Recently a study was released by a Canadian Institute (C.D. Howe), which says that Canada is not prone to a housing crash as it happened in America. According to the report, the policies to avoid sharp decline in undertaking standards worked well, which has lessened the probability of housing burst in Canada. This report is quite contradictory to the one from CCPA (Canadian Centre for Policy Alternatives), which said that the housing market bubble in Canada is on the verge of bursting.

Virtually, most of the economists are of the opinion that a U.S. – like meltdown is not going to happen in Canada. Well, CCPA also shares the same view here, which says that the U.S. bubble burst was an extreme case, which is unlikely to happen in Canada.

However, all of them still accept that some corrections are still required. According to the TD bank, the average prices of houses are going much higher, by around 10-15%. While Canadian Imperial Bank of Commerce estimates this value at 14%. And CCPA says it can stay anywhere between 9-21%.

The current hysteria about the housing market in Canada is influenced by the U.S. experience – says Jim MacGee, an associate professor (University of Western Ontario, Economics). He says that a comparison between the two markets, i.e. the Canadian and the United States makes it clear that there is little likeliness of a U.S. – like heave in foreclosures or a crumbling of the prices in Canada.

In between 2000-06, house prices in the United States climbed almost twice as it was in Canada. It then declined by 30% in the following years from 2006-09. The declination in house prices was way behind the States and it was very much muted, as prices continuously appreciated till 2008, it then declined by another 9% between August 08’ and April 09’. The decline was complied by a sharp upward bounce, with prices returning to the pre-recession high.

One powerful point of strength for the Canadian market is that, it was not involved in too many risky loans, which made the southern part of the border an easy target for the recession. Low documentation, adjustable rate mortgages and interest only, these were the driving forces of sales for many markets in the United States.