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Is the Canadian Housing Market Overvalued? A Post-crisis Assessment

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  • Evridiki Tsounta

Abstract

Canadian house prices have increased significantly between 2003 and early 2008, with a marked downward trend since mid-2008, especially in the resource-rich western provinces. This paper estimates the evolution of equilibrium real home prices during this period in key provinces and finds that, following recent declines, home prices are now generally close to equilibrium throughout Canada. However, house prices in Alberta and British Columbia remain around 8 percent overvalued at the end of the sample (second quarter of 2009). Despite the limitations of econometric estimates of house-price dynamics, the measured small degree of overvaluation suggests that the Canadian housing market is essentially at equilibrium.

Suggested Citation

  • Evridiki Tsounta, 2009. "Is the Canadian Housing Market Overvalued? A Post-crisis Assessment," IMF Working Papers 09/235, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/235
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=23336
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    References listed on IDEAS

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    1. Refet S. Gürkaynak, 2008. "Econometric Tests Of Asset Price Bubbles: Taking Stock ," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 166-186, February.
    2. John Kiff, 2009. "Canadian Residential Mortgage Markets; Boring But Effective?," IMF Working Papers 09/130, International Monetary Fund.
    3. Vladimir Klyuev, 2008. "What Goes Up Must Come Down? House Price Dynamics in the United States," IMF Working Papers 08/187, International Monetary Fund.
    4. Nathalie Girouard & Mike Kennedy & Paul van den Noord & Christophe André, 2006. "Recent House Price Developments: The Role of Fundamentals," OECD Economics Department Working Papers 475, OECD Publishing.
    5. Malpezzi, Stephen, 1999. "A Simple Error Correction Model of House Prices," Journal of Housing Economics, Elsevier, vol. 8(1), pages 27-62, March.
    6. Jason Allen & Robert Amano & David P. Byrne & Allan W. Gregory, 2009. "Canadian city housing prices and urban market segmentation," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 1132-1149, August.
    7. Hajime Tomura, 2008. "A Model of Housing Boom and Bust in a Small Open Economy," Staff Working Papers 08-9, Bank of Canada.
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    Cited by:

    1. Alan Walks, 2014. "Canada's Housing Bubble Story: Mortgage Securitization, the State, and the Global Financial Crisis," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 38(1), pages 256-284, January.
    2. Kronick, Jeremy, 2015. "Do Loan-to-Value Ratio Regulation Changes Affect Canadian Mortgage Credit?," MPRA Paper 73671, University Library of Munich, Germany.
    3. Diego Vílchez, "undated". "Assessing the House Price Dynamics in Lima," IHEID Working Papers 09-2015, Economics Section, The Graduate Institute of International Studies.
    4. Vílchez, Diego, 2015. "Evaluando las Dinámicas de Precios en el Sector Inmobiliario: Evidencia para Perú," Working Papers 2015-013, Banco Central de Reserva del Perú.
    5. Carmen Silva & Camilo Vio, 2015. "Housing prices and macroeconomic factors: evidence from Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 18(1), pages 4-24, April.
    6. repec:nbb:ecrart:y:2017:m:june:i:i:p:61-77 is not listed on IDEAS

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