CIBC deputy economist Benjamin Tal is lashing out at people who compare the Canadian housing market to its American counterpart and is downplaying fears of foreign investment.
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In a report co-authored with senior economist Andrew Grantham, the say they want no part of the cross-border comparison.
“We purposely did not compare the current situation in Canada to the U.S. market in 2006. That would be setting the bar too low. Comparing Canada to the pre-crisis U.S. market is not only wrong but also irresponsible. And looking at Canada in absolute terms reveals a multidimensional market and differing directions at the same time,” they write, adding it is still possible for the domestic housing market to overshoot.
“One reason why it’s unwise to compare the Canadian housing market of today to the U.S. market before it crashed is that, unlike the situation stateside, there isn’t anywhere near the same degree of overbuilding in Canada relative to household formation. In fact, the ratio of housing starts to household formation is not far from its long-run average of 1.03.”
The economist also took dead aim at the issue of foreign investors in the housing market which has so spooked Canadians that even the mayor of Vancouver is now calling for a special tax aimed at speculators.