Canadian Housing Prices Overvalued by 25%

A study from UBC says that many Canadian homes are overvalued, many by as much as 25%, as is reported in the Financial Post.

The study looked at 9 Canadian cities and found that houses were overvalued from $32,000 to $87,000. It looked at prices for single-family homes in Q2 2008 compared to what the prices would be in a balanced market based on the relationship between house prices and rents.

Some of the key facts include:

  • Only in Toronto are prices in balance with rents
  • In Halifax, Montreal, Ottawa, Regina and Winnipeg prices would need to drop by at least 20% to be in balance
  • In Calgary by 7% and in Vancouver by 11%
  • Edmonton house prices are actually below equilibrium, and would have to rise by 8% to be in balance
  • During the U.S. housing boom, which ran from 1997 to 2006, prices rose 132%, while in Canada over the 2001-08 boom prices in the nine cities rose by an average of 87%The amount house prices would need to fall to bring prices back into balance was ($):
  • Calgary $32,000
  • Halifax $58,000
  • Montreal $68,000
  • Ottawa $81,000
  • Regina $87,000
  • Vancouver $85,000
  • Winnipeg $74,000
  • Annual house prices increases during the Canadian housing boom from 2001 – 2008 were:
  • Regina 14.5%
  • Calgary 12.4%
  • Vancouver 10.6%
  • Winnipeg 10.2%
  • Montreal 8.1%
  • Halifax 5.7%
  • Ottawa 5.7%
  • Toronto 7.2%

Related Topics

Economic News / Mortgage News / Mortgages

Leave a Reply