Monday, March 24, 2014

Fears of housing market crash in Ottawa overblown, report states

Fears that a housing bubble is in danger of bursting in Ottawa are exaggerated, the Conference Board of Canada said in a report published Monday.

The report by the Ottawa-based think-tank said the city’s resale market is sluggish and the amount of new home construction remains soft by historical standards.

But the housing market in Ottawa remains balanced between sellers and buyers, the report said.
“The housing market may be undergoing a correction in some regions and market segments, but it is more likely to be a soft landing than a bubble bursting,” Robin Wiebe, a senior economist, said in a statement.
The report said the ratio between houses sold and the number that are put on the market has been in a downward trend since 2009 and 2010, which is largely due to falling employment in Ottawa.

The number of new homes built compared to the population growth is in line with historical averages, the report said. It stated that in some Canadian markets, housing prices may be headed for a modest decline.
“Mortgage costs, not just house prices, are the principal deciding factor for potential homebuyers,” Wiebe said. “Mortgage rates are expected to rise this year, but not dramatically, because the Canadian economy remains in a slow-growth mode.”

The report said that housing-bubble fears hinge on the ratio of house prices to apartment rent and house prices to income. While the ratios are high, the Conference Board of Canada says they are misleading.
“Better indicators of affordability are the ratio of mortgage payments to rents and mortgage payments to incomes, and neither presents much cause for alarm about a housing bubble,” the report said.

The Conference Board of Canada’s report, called Housing Briefing: Bubble Fears Overblown, looked at the housing markets in Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal.

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