Indeed, the global credit rating agency continues to maintain that Canadian house prices are overvalued by approximately 20 per cent, but that a soft landing, not a crash, is likely.
“A number of positive market factors are expected to moderate any negative price pressure,” Fitch said in its report. “Most importantly, the Canadian mortgage market does not have significant exposure to riskier mortgage products that would be at high risk of default.”
For much of the country Fitch predicts modest house price declines in the medium term, but warns that “downside risks exist,” particularly in markets that have been dependent on robust construction and real estate activity in recent years.
And some regional markets are showing signs of weakness. In Alberta, low energy prices have been placing downward pressure on the economy and house prices have been volatile, Fitch says. In Quebec, where GDP growth has trailed the rest of the country, prices have trended flat-to-downward in for several years now. However, Toronto and Vancouver continue to set new home price records and are less likely to fall, Fitch says, as they are being supported by stronger economies and population growth.