Todd Korol/Reuters
New houses are seen as a construction worker works on building new homes in Calgary, Alberta.
Housing prices could fall 25%, research firm warns
Jun 29, 2011 – 1:54 PM ET | Last Updated: Jun 29, 2011 4:08 PM ET
By Mario Toneguzzi
Canada’s housing market is a bubble ready to burst as valuations have “lost touch with fundamentals” and household debt is at a record high, says a report by Capital Economics.
The independent research firm’s report says it fears that house prices could fall by as much as 25% over the next three years.
“House prices have been growing rapidly for nearly a decade now and it has reached the point where housing is so overvalued relative to incomes that a downward correction seems unavoidable,” says Capital Economics.
“Relative to disposable income per capita, our calculations suggest that housing is around 25% overvalued, which is approaching the level of excess that the U.S. market reached at its peak in 2006.”
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