Thursday, June 30, 2011

New Warnings About The Canadian Housing Bubble "About To Burst"

There is a popular financial blogger that has kept calling for the Canadian housing bubble to burst, but has said so for quite some time. He may get more ammuniation now that a  research firm warned that "Canada's housing market is in a bubble that's set to burst and prices could plunge by as much as 25 per cent".

Capital Economics says: “Housing valuations have lost all touch with fundamentals and household debt is at a record high,”
“Our fear is that, with the housing bubble now close to bursting and commodity prices retreating, Canada will go from leader to laggard.”

They says house prices could fal by as much as 25 per cent over the next three years.

Canada’s economic success could "become the thorn in its side" as the threat of a downturn in the housing sector looms. A domestic housing boom coupled with high commodity prices worldwide have spared the economy the severe recession felt by other developed countries.

The report adds that Canadian house prices are overvalued by approximately 25 per cent, close to excessive levels seen in the frothy U.S. market at its 2006 peak and that over-building is already visible; the number of unoccupied houses and condos is at a record high. It "closely resembles the 1994-95 housing slump", when the construction industry experienced a severe downturn.

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