Nationwide? I don't think so. In Toronto and Vancouver (and maybe Calgary)? Most definitely.

Example. I bought my condo in Ottawa in 2007 for about $280 000. Today, it's worth about $320 000. This is a condo that's literally beside a bus rapid transit stop, that's due to be upgraded to a light rail station in a few years. That's less than 3% annually. Overvalued? I think not.

On the other hand. There's stories about ordinary mid-town bungalows in Toronto, going for over $1 million. Now, not all of that is froth. The province has restricted the urban boundary, forcing density higher. In a city where condominium buildings now routinely have 30-40 storeys, a bungalow most certainly will be expensive. Ditto for anything near a major subway line or a reasonable driving distance from the core. But accounting for all, there's still no way these properties should be worth a million dollars.

Most importantly, prices are getting out of whack with both rents and incomes in cities like Toronto and Vancouver. That's a sure sign of a bubble.

Sirs:
Presumably your methodology is based wholly or in large part upon a calculation of the ratio of rental costs to purchase prices.
Have you considered the possible effect of provincial rent controls on this method of assessing the size of the "bubble"? To the extent that building rental units is rendered economically unattractive, will not this market distortion continue to support artificially and indeed to some extent justify seemingly inflated Canadian house prices?
Robert Seiler,
Locust Hill, Ontario

Canadian mortgage interest is not tax deductible and mortgage insurance for unconventional mortgages is provided by a crown corporation (CMHC) with real rules that confirm employment. The net result is the people who have these mortgages live in the homes and want to pay them off. Housing prices have been inflated by low interest rates and foreign money so there are few bargains in high profile cities like Vancouver, Toronto and Calgary. The rest of Canada is pretty boring, which doesn't mean prices won't come down but that people will not have incentive to walk away from their obligations. So yes Canada is not an exciting investment for real estate but neither will it be that interesting to write about in terms of massive defaults.

Canadian interest rates could easily jump quite rapidly. The big three ratings agencies and Dagong all give Canada AAA status but as we now know they are all fabulists who will say anything for a buck. Take a look at this http://www.wikirating.org/wiki/File:Wr_swi_worldmap_2011-9-26.png Canada is not as safe as it wants to think it is.

House prices in Canada will rise, drop, and stay flat depending on the economy in the different regions. Do not look for a bubble to burst and blanket all of Canada unless interest rates increase rapidly. This is unlikely with the current situation.

There will be a correction in the larger markets (Toronto, Vancouver) to be sure, but unless interest rates spike (not likely), it will be a softer landing (maybe 5%-10% drop). After that, prices will probably stay flat for a while. Canadian lenders have been relatively more responsible than their American counterparts over the years, and so quality of mortgage loans are better. That being said, it will be interesting to see what happens a few years from now when many mortgages come up for renewal and rates have risen in the meantime. I suspect that most people who took advantage of the lower rates (especially variable rate loans) used them to maximize leveraging, rather than look for something cheaper and use the savings to pay the house off faster.

I think prices will drop but not fast.

The housing market is not uniform across the country. Markets in key areas - Toronto, Vancouver, Montreal may experience some distress but outside these hubs it will be a wobble.

Prices will drop, but perhaps not so far or fast as in the US or Ireland despite the level of household debt.

I live in Vancouver, and I make a top-5% salary, and buying my very-nice-but-not-fancy current house in the suburbs at current prices would give me cold sweats at night.

I look around, and I cannot understand how any normal human being entering the market can afford a house. I ask real-estate agents how this can keep on going, and they tell me it's all Asian money.

It just can't continue. All we can hope for is a soft landing.