Victoria real estate prices, demand and market should remain stable

February 2, 2012

Worried about a housing bubble and burst impacting Canadian real estate markets? Expect a slow cooling suggests a leading bank economist, as markets correct and affordability concerns are addressed.
In early January, BMO Capital Markets chief economist Sherry Cooper asserted that the Canadian housing market, unlike the U.S. market which burst in 2008, will slowly deflate. Despite the rising household debt, low interest rates and rising home prices, Cooper expects Canadian homeowners to escape a sudden correction.
"The main take-away is that the national housing market appears somewhat pricey, but is far removed from bubble territory," Cooper said in the report, titled Will Canada's Housing Boom Forge On, Fizzle Out, or Flame Out?
The study, co-authored by BMO senior economist Sal Guatieri, says that despite rising home prices in most of Canada's major cities, that growth doesn't seem to be excessive.
According to the report, on average, home prices have risen 104 per cent in the last 10 years. Along with that, the average price of a home has risen against the average income in Canada. In 2001 the price-to-income ratio was 3.2 nationally, rising to 4.9 in 2011.
"Although growing debts are a concern, we do not believe that most households are close to an American-style 'debt wall', or that they will run into one when rates climb," it says.
Cooper and Guatieri point specifically to Vancouver where, along with the rest of British Columbia, housing prices have begun to decline.
The BMO report points to four urban centres where the price-to-income ratios have increased beyond most of the country: Victoria, Vancouver, Toronto and Montreal. Vancouver, the authors say, has had the highest jump in housing prices — up 159 per cent in the last decade — and has seen the price-to-income ratio in the city double to 10.
The authors say that much of the increases in Toronto and Vancouver are due to the influx of immigrants from China and the great deal of capital that they bring with them.