Photo: Benson Kua/Flickr
In their latest analysis, the International Monetary Fund (IMF) says real house price overvaluation in Canada sits between seven and 20 per cent, depending on region.
It’s a far cry from Deutsche Bank’s belief that homes in Canada are overvalued by as much as 63 per cent and also a hair less than the Bank of Canada’s December assessment of up to 30 per cent overvaluation in the country’s housing market.
In a statement, the Washington, DC-based organization said that “after a brief pause, Canada’s housing market rebounded in 2014, fuelled by low and declining interest rates although there are some welcome signs of cooling especially in overheated markets.”
Despite the inflated values, the organization doesn’t believe growth will come to a complete standstill, instead suggesting momentum will continue this year as the market cools and becomes more balanced.
The IMF expects a “soft landing” and outlines the downside risks, including further declines in the price of oil. The “domestic vulnerabilities” in housing markets “remain elevated but contained from a financial stability perspective.”
The report echoes the concerns outlined in the November report, which also predicted a soft landing for the Canadian housing market. In the fall, the IMF had said, “[a]ction to further limit exposure of taxpayers to the housing market and encourage appropriate risk retention by the private sector would be desirable.”