Goldman Sachs: Canadian housing has a 30% chance of correction

By: Loretta Phinney Team

Goldman Sachs: Canadian housing has a 30% chance of correction

Tags: Real Estate, Housing supply, Toronto, Housing markets

Goldman Sachs conducted a study on housing markets in G10 countries. They found that Canada had the third highest risk for a housing correction out of the G10.
 
Sweden and New Zealand have the most risk for a housing correction at 35 and 40% chance respectively. A housing correction, according to Goldman Sachs, is a price decrease of 5% or more per year.
 
Part of the reason for Canada’s housing risk is an oversupply, but not in the places that actually need supply. There was a surge in housing construction in Alberta and Saskatchewan during the oil boom. But not with low oil prices, there are not as many people moving to or staying in the prairies.
 
On the other hand, Toronto and Vancouver have supply shortages. It is clear that Canada has quite varied residential real estate markets across different regions. But high debt levels are more consistent across Canada. The average Canadian’s debt is currently 167% of their income which contributes to the risk of housing markets.
 
Goldman Sachs says that there is not imminent danger for real estate markets in Canada, but highlighted there are significant imbalances. These could have significant effects down the road.
 
Photo Courtesy of AlexCaban