Late last year, Fitch published a report that sounded the alarm on the risk that increasing home prices posed to the Canadian economy.
In its November 2013 report, the ratings agency said Canadian real estate prices were overvalued by 21 per cent nationally and prices could fall by up to 10 per cent in the next five years.
Today the agency published its “Global Housing and Mortgage Outlook” and it appears that its rhetoric has softened, at least as far as a significant price drop in the Canadian housing market goes.
Canada was one of the 17 countries Fitch surveyed for its report and it concluded that Canadian house prices are expected to remain “broadly flat” in 2014.
“For all 17 countries we evaluated, the mortgage and housing market outlook has either improved or remained broadly the same compared with twelve months ago,” said Gregg Kohansky, a Managing Director at Fitch.
The agency also predicted that mortgage lending volumes in Canada would fall slightly 2014 and 2015 as a result of government measures to moderate the market.
While it maintained its view that the housing market is overvalued by about 20 per cent, Fitch said that a stable unemployment rate and strong government regulation of the housing market would help Canada avoid a major price correction in 2014.