Canadian housing market Photo: Michelle Zaporojets/Flickr

Homes in Canada are 63 per cent overvalued, and that spells “serious trouble” for the housing market and the economy as a whole, says Deutsche Bank chief international economist Torsten Sløk.

With seven graphs, Sløk lays out his reasons for concern, starting with this chart, via Business Insider, showing Canada’s rising debt to income ratio compared to that of the US.

canadian housing market chart

Besides rising household debt, Deutsche Bank warns of risks associated with Canada’s slowing mortgage credit growth, rising non-mortgage debt (credit card, personal lines of credit, etc.), record-high construction of multi-family dwellings (is the condo boom sustainable?) and the amount of Canadians working in the construction industry (seven per cent, double of that in the US — what happens to jobs if the industry slows?).

Of course this isn’t the first time that we’ve heard Canada’s housing market is overvalued. Deutsche Bank itself was singing the same tune a year ago. Still, other banks and institutions, like the Bank of Canada, say a soft landing is likely. And, it should be noted, that no other group goes anywhere near Deutsche’s 63 per cent overvalued figure. Fitch Ratings said 20 per cent in July, IMF said 10 per cent in October, the CMHC simply said “modestly overvalued” in November, and the Bank of Canada went as high as 30 per cent in December.

For more on the Deutsche Bank analysis, including a look at the six other charts, check out the Business Insider article here.

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