Eric Beauchesne
Province
OTTAWA — Canadian housing prices need to fall nearly 10 per cent further to bring them back into line with incomes, a bank economist warned yesterday.
And that assumes continued moderate growth in incomes, according to the Bank of Montreal’s Sal Guatieri, suggesting that should incomes falter, housing prices would have to fall even farther to bring them back into balance.
“After six years of unsustainable growth, prices have run smack into the affordability wall,” Guatieri said, reinforcing a similar warning issued in a study by the University of B.C. last week.
The study said prices in some major cities would have to plunge 25 per cent to bring them back into balance.
Guatieri noted that since 2002, house prices have increased twice as fast as incomes.
“Homeowners who purchased six years ago would still have hefty capital gains, but those who bought during the past two years would face temporary losses,” Guatieri noted.
The latest house-price warning came in the wake of a Statistics Canada report yesterday that new home prices edged up just 0.1 per cent in July to produce an annual gain of 2.7 per cent, the weakest gain in seven years.
