Scotiabank is now warning about the housing market falling across Canada.
They are predicting a nationwide drop of 10% over the next two to three years.
That’s the national drop they predict, saying bigger drops are coming to Vancouver and Toronto.
But how much more overvalued are we on a national scale and what sort of drops will we see here and in Toronto to drive national prices down 10%? They don’t say, but they do remark on how long it took earlier market declines to recover:
The report notes that previous housing market downturns — in the 1970s and 1990s — took eight or nine years to bounce back to price levels seen before the decline.
“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand,” the report stated.
The bank also warned that “balance sheets heavily skewed to real estate leave Canadians vulnerable to an adverse shock, including a sharp rise in unemployment and/or a sharp drop in home prices.”
The report predicts a “spillover effect” into construction employment, which — thanks to the massive run-up in house prices — has seen employment grow twice as fast as the economy as a whole.
However, “the full impact of the slowdown may not become fully visible until mid-decade,” the report stated.
Read the full article here.