Fears of a brewing housing bubble in Canada are overblown, according to a new report by the Conference Board of Canada.
While house prices may be headed for a modest decline in some markets, there is no bubble to pop, the report adds.
As the price of homes continues to rise, low interest rates and low mortgage rates are keeping affordability at reasonable levels, according to the report.
Average home prices in February progressed an annual 10.1% across Canada, with large hikes in Ontario, B.C. and Alberta.
The report says those calling it a bubble are looking at the wrong statistics — by focusing on the ratio of house prices to incomes and the ratio of house prices to rents.
Instead, the report looks at the ratio of principal and interest costs to incomes and to rents, and finds that they are in the same range they have been in for the past 20 years.
The report also looked at the real estate markets in six major Canadian cities, and found there to be a good balance of buyers and sellers in each, indicating a healthy market.
In February, the IMF and TD Bank said the Canadian housing market is 10% overvalued, while in a report released last November, ratings agency Fitch said prices in the Canadian market are overvalued by 21%.
All three said the market would find a soft landing, without a painful crisis when prices drop.
