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REPORT: Canadian homes overvalued by 10%

But market correction will be a 'soft landing' rather than a 'burst'.

TD Bank is estimating Canadian home prices are about 10 per cent overvalued given the expectations for rising interest rates.

The bank says a combination of softer demand and rising supply of homes for sale will likely pull some steam out of home prices.

While 2014 is likely to see stable prices on average, the bank estimated prices are expected to edge down by two per cent per cent in 2015-16.

It says markets like Toronto, Vancouver, Montreal and Ottawa are likely more overvalued than markets in the Prairie and Atlantic regions and will likely see more of an impact.

Economist Diana Petrumala says no matter which indicators you look at, current interest rates, future interest rates or long range interest rates, Toronto is 'unaffordable' compared to other markets.

But she says there is a slew of condos set to be completed, and that will help bring housing prices back in line.

The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.

Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.

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  1. HP posted on 02/03/2014 08:14 PM
    Based on recent surveys, Toronto's and Vancouver's markets are 30% overvalued, factor in an increasing interest/mortgage rate, you're looking at >40%...in 1980 with mortgage rates a 21.75%, it was a 50% decrease in resale values.

    History really does repeat itself.
  2. Sonny posted on 02/03/2014 08:20 PM
    It's good to know that TD Bank has an estimate but the real crash in Toronto will be in 2016 after the Pan Am Games leave...
  3. dudda posted on 02/03/2014 11:48 PM
    Over valued only by 10%?! In my opinion they have been over valued for years by over 100%!!!
  4. Starchild posted on 02/05/2014 09:37 AM
    Let me add few comments:
    1. It is evident that the house prices are over valuated. There is no way these 2x4 oversize chicken barns hacked together houses worth as much we pay for them. Of course one big cost is the extremely expensive governments all kinds of fees and taxes
    2. The banks are keep complaining about the high house prices and low interest rates but lets get real here; if the house prices would drop then suddenly lots of people would bankrupt because lower house prices mean higher interest rates. Lets be honest, lots of people can't afford higher interest rates. Banks are already make to much money because of the way they calculate interest rates. Normally this type of interest rate is called usury and used to be a criminal activity. It doesn't matter what is the interest rate you pay your house at least twice. So how much a house cost by the time it is payed? Think about how well we are screwed over...it is government aided financial criminal by banks
    3. Lets not forget, the property taxes. They are based on your property value and normally is around 1% of your property value for a year or more if you live in GTA. If the house prices drop then property taxes should drop. Is this going to happen? Hell no!!!! By the way property taxes are another interesting topic because it is unclear why do we have to pay that. It is your basic right as a human to own your property where you live and not something unusual. We already paying arms and legs for income tax and other crap. What we should be paying after our property is communal fees like snow removal, garbage, etc. and all that shouldn't more than few hundred per year.
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