If there was a competition for ‘most bearish outlook’ on Canadian real estate Deutsche Bank would take home the prize.
When local banks say real estate is overvalued in Canada they usually go with a safe 10-20% figure. The Bank of Canada recently said 10-30% overvalued which is pretty damn bearish, but not quite as extreme as this.
Research by Deutsche Bank chief international economist Torsten Slok even manages to out-bear the Economist Magazines estimations:
Broken down, Slok sees the market as being 35-per-cent overvalued when compared to incomes, and 91-per-cent overvalued when compared to rents. That’s a more bearish assessment than most. The Bank of Canada estimates the market is overvalued by between 10 per cent and 30 per cent.
But those are similar numbers to those at the Economist magazine, which for years has been calling Canada’s housing market overvalued. It pegs the overvaluation at 32 per cent, when compared to incomes, and 75 per cent, when compared to rents.
“Canada is in serious trouble,” reads the title of a chart from Slok’s report, showing Canada’s household debt, as a percentage of income, climb to 50 per cent above current levels in the U.S.
See the charts and read the full article here.
