Canadian Columnists Linda Leatherdale on 2008-05-04 posted on Canoe Money a timely article on the Canadian Housing Market - "Opening door on market"
"Some feverishly argue there's no way Canada's real estate market will crash and burn like the U.S. market, where one prominent analyst warns that the meltdown is more fast and furious than during the Great Depression".
"Others say, get real: Canada's largest trading partner is the United States, and if this one-time economic superstar is in a recession, we're going down, too".
Read the full article here.
The Royal Bank of Scotland recently released an advisory to its clients to braise for a "global stock and credit crash" over the next 3 months. The UK housing market may not recover until 2015. The housing market and debts problems in the US and UK, record high energy and food prices could eventually drag Canada into a housing down turn as we experienced in 1995 to 2001. Except, this time the problem could be very much worse than what we experienced previously.
Greater Vancouver Housing Market
The Saunder School of Business's housing chart for Greater Vancouver below shown that it took 8 years for the housing market to recover to it's 1981 peak at around $240,000. The housing downturn from 1995's peak at $420,000 took almost 9 years to recover. Using the charts presented here up to 2007, and plotting the trend lines for nominal and real prices, $540,000 seemed to be about the "right" price level where the Vancouver housing price should be. This represents a 30% to 35% price differential below the current Vancouver nominal and real housing prices.
The price gains over the past 30 over years is attributed to excessive liquidity and priming of the money pump, we have over-shot the price gain by 30% to 35%. If the housing down turn is going to hit Canada, we could be facing a more serious price decline from that happening in 1981 and 1995. Click here for the latest news on Richmond's real estate market.
The chart below for Greater Vancouver from the Real Estate Board of Vancouver plotting housing data up to May 2008 confirmed the sharp housing price gains that are "unsustainable". The escalation in prices since 2002 to present out-paced the gains in the past 25 years. 
Last week's 400 plus points drop in the Dow could signal the big one is coming. Canada is unlikely to be insulated and not affected by the financial meltdown.
The debate as posted by Linda Leatherdale will continue. My take is that our real estate market is not so different from the US and UK. Our housing market is way over-priced and overly propped up by past years price appreciation. It is a matter of time we will face a painful price correction resulting in huge financial losses by many home owners. You are welcomed to post your comments.
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