Are Canadian homes selling for 20 per cent more than their true value?
That’s what Fitch Ratings thinks.
The American credit agency is calling for more government regulation of Canada’s housing market to avert a future crash.
But not everyone thinks home prices aren’t reflective of their true value.
Local realtors point to statistics from last month, which show that the Kitchener-Waterloo market saw more homes exchanged than in any June since 2009.
“We’re still very stable,” says realtor Nathan Flanagan.
Flanagan does see cause for concern in cities like Toronto, Vancouver and Calgary, where house prices are increasing by 10 per cent per year, but says Kitchener-Waterloo’s slower growth rates are actually a positive sign.
“I do believe we’ll have some sort of correction, but how much it’ll affect Kitchener-Waterloo, I’m not sure,” he says.
Paul Anglin agrees that significant market drops don’t appear imminent.
As a professor at the University of Guelph’s management and economics school, his research focuses on the real estate industry.
While there might be an overvaluation in the Canadian housing market, he says a 20 per cent figure is likely “more extreme” than the reality.
Anglin points to signs that the Bank of Canada wants to eventually bring interest rates back up as one factor that will help slow the market’s rapid growth.
“The Bank of Canada is still sending the same message – ‘We’re going to keep interest rates low for a little while and then eventually raise them, and you should not borrow too much on housing,” he says.
Anglin’s advice for those looking to buy is to be aware of how much is reasonable to spend on a home and always be willing to walk away from a bad deal.
