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Canada’s housing market could have a case of double bubble trouble, suggests an economist who has a much-publicized history of bearish takes on real estate.

David Madani, Capital Economics’ senior economist for Canada (see whether one of his forecasts stood the test of time) suggests not one but two of the country’s biggest housing markets are in bubbles.

“Overall, we believe that Vancouver’s housing bubble is in the process of bursting, judging by the slump in home sales,” writes Madani in a response to the latest Teranet-National Bank House Price Index.

“Prices will eventually follow. And that’s probably a fairly good indication of where Toronto’s market is eventually headed,” Madani, once labeled “the economist realtors love to hate,” continues.

Vancouver home sales have plummeted 21 per cent after peaking in November 2015. Over that period, listings plunged by 25 per cent to recession-like levels.

Yet home prices in the city are still well out of reach for the average buyer. And prices are even regaining some momentum about eight months after BC imposed its foreign-homebuyer tax for Metro Vancouver.

The index price for a Metro Vancouver home in March was $919,300, down 0.8 per cent from six months ago but up 1.4 per cent from this February.

The high cost of housing will drag home sales further down this year, Capital Economics suggests.

“If we are correct, this weakness will put much more pressure on prospective sellers to their asking prices, triggering outright declines in home prices next year,” Madani adds.

Dynamics playing out in the Greater Toronto Area aren’t quite the same. Sales surged on last month; a total of 12,077 homes changed hands in March, up from 8,014 in February and surpassing March 2016’s tally of 10,260.


But Madani notes that the Toronto market’s sales-to-new listings ratio (sales divided by new listings in a given month and expressed as a percentage) has been trending downward toward more balanced conditions.

Ratios between 40 and 60 per cent are generally considered to signal a balanced market. Above 60 per cent indicates a seller’s market, while below 40 per cent suggests a buyer’s market.

Historically, a falling sales-to-new listings ratio has been a bellwether of price declines.

“All bubbles burst and when Toronto goes it will have ramifications for the entire national economy,” Madani, true to form, adds.

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