From Winnipeg Free Press Publication, January 28, 2012

OTTAWA — Canada will likely avoid a crash or serious correction in its “somewhat pricey” housing market, with the possible exception of Vancouver, says a new paper from the Bank of Montreal.

The analysis by BMO economists suggests alarms about Canada’s housing market by international observers, from the International Monetary Fund to The Economist magazine, are exaggerated or simplistic.

“The main takeaway is that the national housing market appears somewhat pricey but is far removed from a bubble,” said economists Sherry Cooper and Sal Guatieri in the report released Monday.

“In our view, the (market) is more like a balloon than a bubble. While bubbles always burst, a balloon often deflates slowly in the absence of a ‘pin.’ ” The report said house sales remain strong in Alberta and Saskatchewan and in major urban centres such as Toronto, Montreal, Winnipeg, Halifax and Ottawa.

The report says Winnipeg has seen the greatest price appreciation of 11 major cities during the past decade, at 171 per cent. But it notes Winnipeg housing is still among the most affordable because the average-price-to-family-income ratio remains one of the lowest at 3.2 per cent. Vancouver’s ratio is 10 per cent, followed by Toronto at 6.7 per cent. The report estimates half the new condos in the Toronto area are purchased by investors and about 22 per cent are rented.

The one exception to the sanguine view appears to be Vancouver and parts of British Columbia, where home prices and demand from an influx of non-resident Chinese investment is elevating prices and construction. 

— The Canadian Press / staff