Canada Housing Crash Feared Among Analysts: Reuters Poll.
Posted: 02/26/2014 1:06 pm EST
Canada’s real estate market may be resting on a house of cards, say experts in aReuters poll.
The news agency surveyed 16 housing experts and almost all of them are worried that prices could fall sharply after a decade of rapid growth.
Three said they were “very concerned,” two said they were “concerned” and eight said they were “slightly concerned.” Three said they were not concerned at all.
However, the analysts also didn’t believe that a housing crash would happen any time soon. In fact, prices are expected to rise 2.2 per cent this year, one per cent in 2015 and 0.8 per cent in 2016, Reuters reported.
“Outside of Toronto and Calgary, the housing market is largely cooling, though far from crashing,” Sal Guatieri, senior economist at BMO Capital Markets, told the agency.
Concerns about a housing crash arise amid positive signs for the country’s real estate market. The average price of a Canadian home rose between 1.2 per cent and 3.8 per cent in the fourth quarter of 2013, said a Royal LePage survey.
But the market also remains vulnerable, as prices could fall by as much as 25 per centdue to spiking interest rates or an “economic shock,” a TD Bank report said earlier this month.
However, the report also said that much of the imbalance in the market reflects “frothier conditions in the larger urban centres of Toronto and Vancouver.”
Bank of Canada Governor Stephen Poloz warned in early January that long-term interest rates could rise in response to tapering by the U.S. Federal Reserve, though he also did not appear in any hurry to hike them.
Economic crashes happen, regularly (which many forget). No one, however, has yet been able to predict when they occur. Unfortunately, the more governments and central banks interfer in trying to mitigate such crashes, the worse the eventual collapse is. This is what happens when we think we can control a complex, dynamical system with numerous feedback loops and time delays. It’s like the discovery that not allowing the occassional forest fire to ‘renew’ a forest by putting down small fires before they get going, actually results in massive forest fires that are far beyond our control. We continue to push the wrong buttons and pull the wrong levers then act shocked when the ‘unexpected’ happens. Combine the thoughts in this article with the one that shows Canadian households are, once again, at record levels of debt (not to mention record debt by corporations and various levels of government) and one begins to see the parallels with the 1920s. The monetary experiment attempted at that time didn’t end well as I remember. But then again, all fiat currency experiments have ended badly, eventually…