Housing bubble fears are over exaggerated, says a report by the Conference Board of Canada.

That’s because mortgage costs, along with home prices, drive housing trends. And this year, “mortgage rates are expected to rise…But not dramatically [since] the Canadian economy remains in slow-growth mode,” says Robin Wiebe, senior economist for the Centre for Municipal Studies.

He adds, “The housing market may be undergoing a correction in some regions…but it is more likely to be a soft landing than a bubble bursting.”

Read: Housing market to stay strong through 2015

Nothing to fear

Housing bubble reports revolve around the comparison of home prices to both rental rates and incomes. While prices seem high right now, says the conference board, these ratios can be misleading.

It adds that comparing mortgage payments to rental rates and incomes is more useful and accurate. What’s more, the conference board finds Canadian employment is increasing, albeit modestly, so people are starting to be able to afford home prices.

Read: What’s up with housing?

Housing starts are also healthy, says the conference board. Total housing starts in Canadian cities with at least 10,000 residents ended 2013 at just below 170,000 units—although that’s down from nearly 194,000 starts in 2012, this is in line with Canada’s 25-year average.

Even better, a low proportion of Canadian mortgages are in arrears, says the conference board. As a result, a market downturn in Canada would not be amplified by a wave of distressed home sales (that’s what occurred in the U.S. in the 2000s.)

Read: Canadian housing market still well-balanced

Housing market assessment

The board provides the following overview of six major Canadian markets.

  • Vancouver’s resale market moved back into balance last spring. Sales were up briskly from a year earlier in each of the last three months of 2013. Prices are also growing strongly, although the current pace is unsustainable and slower advances are expected in 2014.
  • Calgary’s resale market is approaching sellers’ conditions since sales haven’t fallen on a year-over-year basis since April 2011. As well, price growth accelerated sharply last year.
  • Edmonton’s resale market is currently balanced since sales rose briskly in 2013 and price growth is picking up along with sales.
  • Toronto’s resale market is healthy since sales stabilized in June 2013: they rose on a year-over-year basis during each of the six months leading up to the end of 2013. Also, price growth remains healthy, and a major price correction is hard to envision due to solid employment and population growth. While the condo market is at some risk, a soft landing appears to be the most likely scenario. Read: Toronto New home sales improve and Investment’s role in condo boom revealed
  • Ottawa’s resale market is steady, though falling employment is contributing to sluggish resale conditions. Sales were largely flat last year, but prices continue to rise gently. Total housing starts remain soft by historical standards.
  • In Montréal, sales and average prices were largely below 2012 levels in 2013. Both single-detached and multi-family starts slowed last year.


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