Housing market news has left Canadians worried and confused.

By: Daniel Rattanamahattana on August 11, 2012

All throughout the summer it seemed every other day there was news Canada’s housing market was doing fine followed by a report the next day warning of a bubble that was about to burst; back and forth over and over again, it has left Canadians looking to buy and sell completely confused about what is actually going on. Finally though it appears numbers have been calculated that now will provide some actual clarity on where things are going from here.

The numbers appear to reach a middle ground between all the news highlights as the market is indeed cooling off but not bursting as some analysts predicted; at least not yet. Home ownership is at a record high in Canada of 70 percent and this coupled with the government’s latest changes in mortgage lending rules, will cause home prices to fall 10 percent over the next two to three years according to a report from the Bank of Nova Scotia. Across the board the report suggests the ownership levels have peaked due to changing demographics that are reasons for a coming drop in demand. The bank also uses examples from countries with similar aging populations like the U.S. which saw its peak at 70 percent ownership before cooling off. It says the cooling off will affect specific regions of the country in different ways too. Vancouver and Toronto are two examples cited as being hit hardest by falling housing and condo prices while areas like Calgary and Saskatoon may actually avoid the worst of the cool-off.

Financial advisor Garth Turner says in addition to the slowdown being felt differently region by region, it will also affect segments of the population differently. He cites the babyboomers as one group who will feel the chill most; as retirees and coming retirees look to ensure they have enough cash to live out their golden years, many struggling with debts will be forced to sell their homes and a 10 to 15 percent drop in home value will leave some boomers with less than they can live off. Turner also says the younger generation who have bought the condos in downtown Toronto and Vancouver will be another hard hit group; as prices fall and many are without any equity as they get through school or start their lives, condos that are worth less than what they paid two to three years ago will build younger peoples’ debts even higher.

While not all financial experts agree with the Scotia report most do agree that a cooling off period is hitting Canada, the extent of how big a drop is coming is debatable. But as home value does begin to drop and Canadians try to prepare for what could be another recession, what most experts will agree on is that for the next couple years it’s going to be a bumpy ride.