Unlike BMO (Canada’s unofficial housing cheerleaders), TD has been vocal for some time about the risks they feel the housing market is facing.
In a new report issued today, TD economics believes Canadian real estate in general is overvalued by 10-15%. This is an analytical assessment based on local market price trends, economic fundamentals (i.e. income, employment, interest rates, demographics, and geography) and the capacity to borrow by households.
While they say a catalyst is needed to induce a correction (higher interest rates or unemployment) they still feel that there will be a “gradual decline in sales” and “a modest pullback in prices over the next several years,” regardless.
Vancouver, Toronto, Montreal and Quebec city remain cities of the highest concern but “it is natural to assume that it will be a shock to all real estate markets when interest rates eventually rise from their prevailing exceedingly low levels.”
Contrary to CAAMPs recommendation, TD also suggests that further regulatory actions such as shortening amortization periods and slightly increasing the minimum downpayment amount would be prudent.
Read the entire report: REAL ESTATE OVERVALUATION AND CONSUMER DEBT POSE RISKS TO ECONOMY