Last year was marked by an onslaught of reports from across the globe, claiming Canada’s housing market is overvalued, but at least one economist believes you shouldn’t pay much attention to those reports.
“The key is that people should ignore these evaluation studies and should pay attention to the people who track these markets every day,” says Ben Myers, the senior vice president of market research and analytics for Fortress Real Developments. “To try to distill an entire market down to two numbers, then on top of that to divide one number by the other, divide flawed data by flawed data will just increase the ‘misleadingness’ of the data.”
Myers’ comments come on the heels of a new report from the International Monetary Fund (IMF) that warns against uninsured mortgages, which it says contributed to its claims that the Canadian market is overvalued by up to 20 per cent.
But average housing prices and average rents – traditional metrics that many institutions use to determine the valuation of a market – aren’t an accurate representation of the entire Canadian market, Myers says.
“You can’t compare a condo in downtown Toronto to a 7,000 square-foot house in Squamish, B.C.,” he says, adding that rental figures, too, are flawed since they usually only consider purpose-built units, not private condo rentals, which now make up a big part of the market.
The danger in these reports, Myers adds, is that some people who don’t have a full understanding of statistics will likely misinterpret the value of the data.
“I do think that people with limited understanding of statistics are going to read it and say, ‘Oh my God, I can’t get into the market’,” he says. “But I asked analysts if they thought these studies could predict future housing prices and 94 per cent said no.”
Myers says his recently released Market Manuscript, which polled more than 15 analysts and economists, was an effort to draw attention to the varied reports available – even quoting an RBC study that found the market to be undervalued by four per cent.
“I wanted to put together a report that brought together a lot of different forecasts,” he says. “I want to encourage people to look at it and draw their own conclusions.”
At least one economist is backing up the advice so many agents offer clients paralyzed by the kind of overvaluation fears stirred by an IMF report this week.