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Canada Housing Crash Feared Among Analysts: Reuters Poll

Housing Crash Feared Among Experts
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Canada's real estate market may be resting on a house of cards, say some experts in a Reuters poll.

The news agency surveyed 16 housing experts and almost all of them are worried that prices could fall after a decade of rapid growth.

Three said they were "very concerned," two said they were "concerned" and eight said they were "slightly concerned." Three said they were not concerned at all.

However, the analysts also didn't believe that a housing crash would happen any time soon. In fact, prices are expected to rise 2.2 per cent this year, one per cent in 2015 and 0.8 per cent in 2016, Reuters reported.

"Outside of Toronto and Calgary, the housing market is largely cooling, though far from crashing," Sal Guatieri, senior economist at BMO Capital Markets, told the agency.

Concerns about a housing crash arise amid positive signs for the country's real estate market. The average price of a Canadian home rose between 1.2 per cent and 3.8 per cent in the fourth quarter of 2013, said a Royal LePage survey.

But the market also remains vulnerable, as prices could fall by as much as 25 per cent due to spiking interest rates or an "economic shock," a TD Bank report said earlier this month.

The report by economist Diana Petramala found that Canadian housing is massively overvalued — by 60 per cent compared to rental rates and by 30 per cent compared to people's income.

However, the report also said that much of the imbalance in the market reflects "frothier conditions in the larger urban centres of Toronto and Vancouver."

Bank of Canada Governor Stephen Poloz warned in early January that long-term interest rates could rise in response to tapering by the U.S. Federal Reserve, though he also did not appear in any hurry to hike them.

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