March 5, 2011
Regardless of their poor track record at predicting bubbles and booms in housing, banks continue to report on the future of Canada’s housing market.
In two conflicting reports this week, Scotiabank claims Canada’s housing market is on solid ground, whereas BMO says Canada’s housing market is nearing the edge of an abyss.
Scotiabank’s chief economist Warren Jestin said he saw no risk of a collapse in the housing market as the country’s economic fundamentals remain strong. Low interest rates and strong job growth will keep Canada’s housing market healthy this year. Scotiabank predicts the price of Canadian homes will rise by about 2% in 2011.
BMO on the other hand (maybe they’re grumpy because of how cold it is in Montreal) is warning that Canada’s housing market is approaching bubble territory. BMO’s new report says our housing market is reaching the limits of sustainability and could tumble if there is no moderation.
BMO is so concerned because home prices are rising significantly faster than incomes in across Canada. The ratio between average resale prices and personal incomes has entered the “danger zone” in five provinces; Saskatchewan, Newfoundland, British Colubmia, Manitoba and Quebec.
Thankfully, Ontario is not on the list, Phew.