Homes overvalued by 10% in Canada, TD says

Softening demand and rising supply will likely pull some steam out of home prices, the bank suggests.

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TORONTO – TD Bank is estimating Canadian home prices are about 10 per cent overvalued given the expectations for rising interest rates.

The bank says a combination of softer demand and rising supply of homes for sale will likely pull some steam out of home prices.

While 2014 is likely to see stable prices on average, the bank estimated prices are expected to edge down by two per cent per cent in 2015-16.

It says markets like Toronto, Vancouver, Montreal and Ottawa are likely more overvalued than markets in the Prairie and Atlantic regions and will likely see more of an impact.

The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.

Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.

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