Volatility is expected to be the norm in the near future, observer says
2022 might prove to be a more volatile environment for the Canadian housing market as a whole, according to mortgage sector observer Rob McLister.
This is particularly apparent when taking into account the degree of overvaluation in Canada, McLister said. Citing data from the National Bank, he noted that the total value of Canadian real estate was roughly 500% higher than national disposable income as of Q2, compared to the average of 300% seen before the Bank of Canada’s recent rate-hike cycles
“Almost no other country in the world [compares to that ratio],” McLister told BNN Bloomberg. “When you get that all-important leg on the table – which is interest rates – being kicked out next year, couple that potentially with some more tightening by regulators and a higher potential mortgage qualifying rate, it raises a lot of questions about real estate next year.”
Read more: Rate hikes a near certainty amid current market realities – BMO
McLister echoed the predictions recently made by Bank of Canada Deputy Governor Paul Beaudry, who said that the surge of investors into Canadian housing has impelled outsized price growth, in turn amplifying the risk of a correction.
In a cruel twist, the investing demographic is the most exposed to this correction risk, McLister said.
“I think that where you see the challenge is with investors who have multiple properties,” McLister said. “So they can sell off one or two and they've still got a roof over their head; and then you see that type of thing snowballing a little bit, and then you see individuals maybe taking some money off the table… It’s like any other asset. You know, you see Gamestop go up to US$300, that corrects real quick because prices get totally detached.”
