From ‘How bad could it get in the housing market?’ video at Globe and Mail, 20 Jun 2011 –
Rob Carrick: “You’re predicting a 25% decline over 3 years, is that the worst case scenario?”
David Madani, Economist, Capital Economics: “No, it’s basically a baseline view .. the fact that prices have risen so much relative to income… we can’t see how income growth alone will close this very large gap between price and income…”
Carrick: “Where do rising interest rates fit into that?”
Madani: “Actually our outlook right now for the next few years is one of interest rates remaining where they are…”
Carrick: “So if interest rates were to rise, that could make things substantially worse”
Carrick: “The Canadian market is often distorted by what’s going on in Vancouver… I mean, that market is just unstoppable…”
Madani: “25% is an average… this is not just a Vancouver story, we see this bubble-phenomenon across Canada.. … we don’t think it’ll get as bad as in the US, but we do think a ‘substantial decline’ is in store for Canada .”
So, 25% basic vanilla pullback across Canada.
In extreme markets like Vancouver, with or without interest rate hikes?
We’d bet Madani would now say “over 50%, easy”.
We at VREAA now foresee a 50%-66% price crash for Vancouver.