June 6, 2020

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Bubble won't burst suddenly: economist

Hey there, time traveller!
This article was published 22/3/2012 (2997 days ago), so information in it may no longer be current.

IS Winnipeg's resale-homes market in a bubble?

The Toronto-Dominion Bank, among others, has been warning for months that some of Canada's most overheated markets -- Toronto and Vancouver in particular -- have formed a bubble that is about to burst.

But one of its economists, Sonya Gulati, said Thursday that's not the case in Winnipeg.

While TD estimates houses here are overvalued by about 12 per cent after double-digit price increases in seven of the last nine years, Gulati said it would be overstating things to say a bubble exists or a sudden and severe drop in prices is just around the corner.

She said a price correction is in the cards, but it will spread out over three to four years as increases moderate and property values gradually return to normal levels.

Here are six reasons why she's forecasting a soft landing rather than a hard one:

-- the strong and growing local economy;

-- the high employment rate;

-- strong consumer confidence;

-- the growing population, fuelled by rising immigration numbers;

-- despite price increases, homes here are still among the most affordable of any major Canadian city;

-- the percentage of household income needed to own a home here is also among the lowest of any major Canadian city -- 17 per cent versus 29 per cent in Toronto and a staggering 54 per cent in Vancouver.

"That also mitigates the risk" of a severe market correction, she said.

However, not all Winnipeg homeowners are upbeat about the future.

A survey late last year by the Canadian Association of Accredited Mortgage Professionals found homeowner fears of a looming Canadian housing market correction were highest in Manitoba, Saskatchewan, Quebec and Ontario.

It also found 32 per cent of the Manitoban households surveyed said they were either very uncomfortable or somewhat uneasy about their current equity positions.

However, 68 per cent said they were very or somewhat comfortable with their situation.

murray.mcneill@freepress.mb.ca

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