Recent figures showed that August saw the biggest month-on-month decline in property sales in Canada for over two years. While some economists believe that this shows the countryÃ¢â¬â¢s post-recession housing boom is set to end with a crash, others believe that a small price correction is overdue and will not have a bigger impact on the countryÃ¢â¬â¢s economy.
So, is Canada set to see a US style property crash? Keep reading to learn more.
Canadian property set to see modest price falls but no crash
According to the Toronto Sun, figures showing a slowdown in CanadaÃ¢â¬â¢s property market were Ã¢â¬Ëlargely expectedÃ¢â¬â¢. And, the head of Bank of Nova Scotia, believes that a market correction will not have a significant impact on the Canadian economy or on its big banks.
Rick Waugh said: Ã¢â¬ÅThere can be some hardships, but because the Canadian economy is so well diversified - we have a strong national balance sheet, we have a strong income statement for our country, and our banks are the same ... (so) that while we have to be concerned - we should be - it is nothing like what has happened in other jurisdictions.
Ã¢â¬ÅWhat we see now is probably at worst a soft landing.Ã¢â¬Â
The latest Canadian Real Estate Association (CREA) figures showed that the month-on-month fall in Canadian house sales between July and August was the largest for two years. The data prompted the industry group to cut its property sales and price forecasts for this year and next. CREA now forecasts sales will rise just 1.9 per cent in 2012 and then decline by 1.9 per cent in 2013.
The Toronto Sun reports that Ã¢â¬Ëmany economists have forecast a price correction of between 10% and 15%, while more bearish experts see a 25% drop in prices, similar to what happened in the 2009 U.S. housing collapse.Ã¢â¬â¢
However, Waugh, the head of CanadaÃ¢â¬â¢s third-largest bank, said that all indications so far point to a fairly modest correction that will not significantly affect lenders. He added: Ã¢â¬ÅThe numbers weÃ¢â¬â¢re seeing are really not a huge surprise. They are well within our expectations of, say, 10% (declines) in sales volume and 10% in prices.Ã¢â¬Â