Scotiabank Late in Announcing the End of Canadian Housing Boom
The news arrives eight months too late, but it’s now official — the Bank of Nova Scotia has just announced that the longest real estate boom in Canada since the end of World War II is now over.
But if it’s any comfort, Scotiabank added that Canada was unlikely to experience the level of crisis that’s devastated the US real estate market.
In a recent report, the Bank’s senior economist and real estate specialist, Adrienne Warren, explained: ”This is not a U.S.-style bust caused by overbuilding, speculative buying and imprudent lending, but rather a cyclical slowdown accompanied by a valuation adjustment in several large centres where booming demand conditions and temporary supply constraints led to an overshooting in prices,” she said.
As further proof that the Canadian housing market won’t fall into US-style chaos, Ms. Warren pointed out that our current inventory of unsold new and resale homes is still “well-contained, compared with prior cycles”, though she admitted it was increasing steadily.
Not surprisingly, Canada’s red-hot western markets have been hardest hit, especially those in Vancouver, Edmonton and Calgary.
And it seems that the news has also finally trickled down to the man on the street. In a survey released earlier this week by the Canadian Association of Accredited Mortgage Professionals, one-in-three Canadians now believe house prices will continue to fall, a substantial increase from the one-in-seven who believed so last spring.
Despite the gloom and doom, the Scotiabank report did include some encouraging words from the International Monetary Fund. It found that Canada’s housing market was the “least overvalued” when compared to Ireland, Britain, Australia, France and Spain, and that, since its implosion, the US market is now only “moderately overvalued”.
But for another of Canada’s Big Five, Scotiabank’s revelation is old news. Bank of Montreal economists declared eight months ago already that Canada’s marathon housing boom was a bust.
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