Deutsche Bank’s chief international economist Torsten Sløk has circulated a chart deck looking at global housing markets, and Canada stands out as having quite a few problems.
According to the report, homes in Canada are 63 per cent overvalued, greater than the 50 per cent levels in Australia and Norway, Deutsche Bank AG said in a report Thursday.
Values in Canada are 35 per cent higher when the median house price is compared to the median household income than the historical average and 91 per cent higher compared with average rentals.
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Sløk dedicated seven charts to the country.
Simply put, debt levels are very high, and with sky-high home prices cooling off, we could see pressure on the Canadian financial system and the labor markets.
While US households have been deleveraging since the Great Recession, Canadian household debt as a percent of household income is higher than ever:
Torsten Slok/Deutsche Bank
The mortgage credit market has been slowing down, which is a bad sign for the housing market:
Torsten Slok/Deutsche Bank
Other forms of debt have also been exploding, while income has grown at a much slower rate:
Torsten Slok/Deutsche Bank
Construction of houses has been level over the last decade, while multifamily units like apartments have reached record highs:
Torsten Slok/Deutsche Bank
Canada’s biggest housing market, Toronto, has been slowing down over the last couple years:
Torsten Slok/Deutsche Bank
Meanwhile, Canada’s West Coast metropolis of Vancouver has held steady:
Torsten Slok/Deutsche Bank
Any difficulty in the Canadian housing market could bleed over into the larger economy, since construction is a much larger part of Canadian employment than US employment:
Torsten Slok/Deutsche Bank
Source:: National Post
