Report projects fairly stable market

Barrie, Ont., and Regina may not leap to mind as the most likely locales for short-term house price corrections in Canada, but that’s what Moody’s Analytics is predicting in a new report being released Wednesday.

“The largest corrections will be in those metro areas that have a combination of recent house price declines, high overvaluation and slower projected income growth,” according to the report from the research arm of Moody’s Corp. “Barrie and Regina lead the list, which can also include Prince Edward Island.”

Moody’s Analytics, which operates separately and independently from ratings agency Moody’s Investors Service, projected median single-family home price growth (or contraction) over the coming year based on year-to-date figures.

Overall, the report projects a fairly stable Canadian housing market with no major shortterm correction over the next five years. In markets where there are house price increases, those are expected to continue to moderate, and could be offset by higher income.

“Median family income growth will have a good chance of keeping up with and even outpacing house prices in coming years, improving affordability,” the report says.

Moody’s Analytics predicts interest rates will rise through 2020, which could push mortgage rates back up to around six per cent from the current fiveyear rate of around 4.4 per cent. But the absence of “significant” house price declines should reduce the risk of mortgage debt “deteriorating ” over the period, the report concludes.

A downside risk highlighted in the report is the potential for higher mortgage rates to combine with policies and borrower “stress tests” aimed at tamping down demand in hot markets such as Toronto and Vancouver to “push down demand in the Atlantic and Prairie provinces.” The report says this could lead to “a full house-price correction and a perceptible drop in sales in these regions.”

The Moody ’s Analytics report noted mortgage delinquency rates in Alberta, Saskatchewan, and the Atlantic provinces are “significantly ” higher than the national average.

Single-family homes in Toronto and Vancouver are still trending very high when it comes to valuation, according to the report.