Investors counter ‘housing crash’ forecast

Tuesday, March 24th, 2015

Jennifer Paterson

A new book predicting Canada’s biggest housing market crash has investors responding – blow by blow – with their own reasons why the market is safe from a U.S.-style correction.

“Fact is that banks are still lending their money at 80 per cent loan-to-value,” said investor Todor Yordanov. “Fact is that builders are still undertaking big and bigger projects.

“And fact is that even with seemingly unreachable real estate prices, most buyers are still finding ways to get into the market.”

The book, ‘When the Bubble Bursts,’ written by financial analyst and author Hilliard Macbeth, warns Canadian homebuyers about Canada’s “inevitable” housing crash and says the market is 50 per cent overvalued.

“A 40 to 50 per cent drop in prices, while possible in theory, is not likely,” said Yordanov. “A 50 per cent drop in home prices will devastate the entire economy for a very long time and it will bankrupt nearly every Canadian.”

Jamie Johnston, broker of record at Re/Max Condos Plus, said that since MacBeth lives in Edmonton it isn’t likely he has a view of other markets in Canada. “People who live in and understand the Toronto market have a different view,” he said.

“Those who just look at cranes or track stats over a 40-year period without taking into account current market conditions can always justify their numbers. The reality is that most critics of the market are academics who rely on Stats Can, which is not reliable.”

And savvy investors who have weathered these types of overvaluation predictions before believe their experience in real estate investing has put them in good stead.

A comment on the CREW website said: “I’ll take my chances using proper due diligence, a long-term investment strategy, and hard work over someone yelling from the bench that things are about to come off the rails.”

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