Call it what you want, but economists at Scotia Capital think the Canadian housing market is a bubble that faces downsides into next year – and the numbers continue to prove it.
Teranet’s measure of Canadian housing prices, the closest equivalent to the U.S. S&P/Cash Shiller Home Price Index, was just 0.1% off its all-time record high in November 2009.
“The gains are accelerating in recent months, and the December print is likely to firmly set a nationwide all-time record high,” Derek Holt and Karen Cordes said Wednesday.
While Canadian house prices went down like most other countries, they didn’t stay there. In fact, Teranet’s measure of house prices is up 92% nationwide since the beginning of 2000, blowing most other asset classes out of the water.
The economists compared this with U.S. home prices, which climbed 105% from the start of the decade until they peaked in 2006.
Regionally, Calgary is up 120% in the decade, Vancouver 116%, Montreal 110%, Ottawa 90%, Halifax 85% and Toronto 66%. But Scotia does not buy the assertion that only select markets are in frothy territory.
“All regions of the country have participated with hefty price gains over the past decade on the march to record nationwide prices,” the economists said.
They cited the downside risk posed by a further recovery in supply, a material increase in variable and fixed mortgage rates, a leveling off of new mortgage product adoption rates and exhaustion of pent-up demand from the crisis period.