Overvalued real estate markets in Canada and elsewhere show an "unhappy resemblance" to the conditions that existed in America prior to the financial crisis, according to The Economist, showing that homes are at least 25 per cent overvalued in the Great White North and eight other countries.
One of the reasons was that low interest rates were driving up the housing market since the 2008 financial crisis. Consumers thus had an easier time borrowing money, which also contributed to rising household debt-to-income ratios.
Analysts have long predicted that Canada could be headed for a housing crash. Capital Economics in May predicted a 25 per cent drop in prices over the long term, having observed slowdowns in areas such as Halifax, Winnipeg and Victoria.