OTTAWA - Canadian housing is 10 to 15 percent over-valued, Canada’s second largest bank warned, as it called for more action to constrain lending growth.
Toronto-Dominion Bank chief economist Craig Alexander said last week in an analysis that if the overvaluation were unwound rapidly, the market correction would be three times the magnitude of the housing market correction of the early 1990s.
Alexander said it is more likely that there will be a gradual decline in sales and prices over the next several years unless there is a sharp rise in joblessness or interest rates. He warned against complacency, however.
“We need to acknowledge that a significant imbalance has developed and it poses a clear and present danger to Canada’s medium-term economic outlook,” he wrote. “It also suggests that further actions to constrain lending growth may be prudent.”
At greatest risk is Vancouver, a magnet for foreign buyers, along with the Toronto condo market, and the broad housing markets in Quebec City and Montreal, he said.
Friday, March 30, 2012
