Average home prices set to slip 10 per cent over two to three years: Scotiabank

TORONTO – Scotiabank says the Canadian housing market is beginning to cool, especially in what has been the red hot markets of Toronto and Vancouver.

The bank says average Canadian home prices will eventually decline 10 per cent over the next two to three years as demand softens and conditions for a buyers’ market re-emerge.

Senior economist Adrienne Warren says Canada is expected to avoid the sharp drop seen in the U.S., but that downside risks in the housing market are increasing.

She says the price correction will be concentrated in Toronto and Vancouver, where supply risks and affordability pressures have the potential to trigger larger price adjustments.

Record prices combined with tighter lending rules have reduced affordability and the housing market’s momentum.

Affordability will also be increasingly strained when mortgage rates eventually drift up from the historic lows where they have been for several years.