TD Warns Of Overvalued Canadian Housing

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.


3 responses to “TD Warns Of Overvalued Canadian Housing

  1. Ah, good ol’ “solid” CMHC:

    “Stress tests are regularly run to assess what would happen under extremely adverse scenarios, including a precipitous decline in real estate valuations. And, a large portion of the real estate tied loans are insured. Accordingly, financial institutions can continue to provide strong incentives for households to borrow, without running undue risks to their solvency”

  2. The ‘B’ word no one dares to utter
    Calgary Sun, March 17, 2012


    A big obstacle is the low number of homes available.

    On March 14, there were 3,291 single-family homes for sale compared to 4,563 three years ago, says Mike Fotiou, of First Place Reality {whoops}

    “Lower inventory has definitely resulted in tighter market conditions currently, but I wouldn’t call it a boom.”

    Read the entire article here

  3. Great news for the home builders

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