Canada’s real estate market is about three years behind the American market in terms of valuation, so says Merrill Lynch economist David Wolf.
We’re catching up fast though. Wolf says that one year ago Canada’s market was 13.1% undervalued. Today it’s only 3.4% undervalued. (Editor’s note: We’ve requested a copy of this report to ascertain the valuation methods.)
This trend could accelerate further thanks to the advent of Canada’s own subprime mortgage market. Subprime lending is growing rapidly in Canada, and it’s making mortgages more accessible to all.
This, in turn, may add upward pressure to home prices.
Cities in Canada that are currently overvalued, according to Wolf’s research, include Victoria, Edmonton, Vancouver, Calgary, and Saskatoon. None are yet in”bubble” territory but Wolf believes Edmonton is getting closer at 29% above fair value.
For some perspective, in 1981 Calgary was 101% overvalued. In 1989 Toronto was 66% overvalued. Last year, Miami, FL was 62% overvalued.
Thunder Bay, ON and St. John’s, NL are the most “undervalued” Canadian cities, according to Wolf’s findings.