Not too hot, not too cold, but ‘just right’ – the Goldilocks scenario that appears to be playing out in the Canadian housing market.
Mark Chandler, head of fixed income and currency strategist at RBC Capital Markets, noted that the latest round of mortgage measures – instituted in the summer of 2012 – looks like a success in terms of cooling demand.
“After an initial period of weakness in resale activity and subsequent rebound, sales have broadly stabilized,” Mr. Chandler said. “At present, there remains few signs the ‘holding pattern’ we have seen in the sector is apt to change.”
While acknowledging that house prices are still stretched when compared to rents and incomes, he noted that despite the recent deterioration in housing affordability, it remains broadly with ranges seen during the recession and recovery period.
“A sharper downturn in house prices is possible, though we fail to see the potential trigger at this stage,” Mr. Chandler said. “In the event of a substantial correction, the economic fallout could be noteworthy, but the systemic effect still looks likely to be contained.”