Canadians have taken full advantage of the low interest
climate to overhaul the housing market, say economists. According to a report,
though Canadian homes are overvalued, the country’s housing market is not at a risk
of a collapse. But at the same time, economists agree that the prices are
seeing a correction and moving lower. Another cause for concern is the bigger
household debt, which the housing market needs to tackle.
Despite the high debt and overvalued homes, the Canadian
housing market is still doing a lot better than its American counterpart. This
is largely due to the fact that Canadian lending standards are not as reckless and
the average Canadian mortgage lender
is much more conservative.
In the last 15 years, the rate of borrowing to purchase
homes has increased by 7.5% annually. That having been said, there are some
Canadians who feel that this is not a good time to purchase a home. Economists
agree that the current slowdown in home-purchasing activity will continue.
Developers are also worried by the prevalent sentiment, with housing starts
dropping by almost 25% in Ontario in the last month.
Slower housing starts are attributed to the slow pace of
employment growth, smaller number of first time home buyers and Canadians’
preference to purchase from the resale market. With the demand for homes
cooling off, the supply side seems to be making similar adjustments. The one-month
decline in housing starts (from September to October) stood at 9.2%.
