Canada Real Estate Slump Only Just Beginning, Madani Says

Canada’s housing slump has only just begun and it is premature to say the market will have a so-called soft landing, said David Madani, an economist at Toronto-based Capital Economics Ltd.

“We don’t expect prices to rebound this year,” Madani said today at the Bloomberg Economic Summit in Toronto.

Finance Minister Jim Flaherty has acted four times in the past five years to make mortgage-lending rules more restrictive amid concern that the Vancouver and Toronto markets were overheating. Flaherty has said he welcomes a slowdown of condominium construction in the two cities and has warned consumers, who have a record debt-to-disposable-income ratio of 165 percent, not to become overextended.

Madani, a former senior economist at the Bank of Canada, was the only person surveyed by Bloomberg News during the past two years who consistently predicted the central bank wouldn’t raise borrowing costs. Madani previously forecast home prices in the country would fall by 25 percent in the next few years.

Canadian housing starts declined for the first time in three months in April, led by multiple-unit projects, according to Ottawa-based Canadian Mortgage & Housing Corp.

Work began on about 174,900 homes at a seasonally adjusted annual pace in April, down 3.5 percent from March and 31 percent below the year-ago pace.

Canadian home resale prices rose in April at the slowest annual pace since 2009 as Vancouver posted declines, according to the Teranet-National Bank Composite House Price Index. (TNBHICP)

The country’s mortgage changes didn’t have a “dramatic” effect, Phil Soper, chief executive officer of Brookfield Real Estate Services, said at the conference. Residential real estate markets only have 6.5 to 6.8 months of inventory at the current rate of sales, he said.

“All indications are we will have a soft landing” as developers slow development of new projects, Soper said.

To contact the reporters on this story: Katia Dmitrieva in Toronto at; Christopher Donville in Vancouver at

To contact the editor responsible for this story: David Scanlan at

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