Canadian Real Estate Markets - Timing the Bubble

Over the last couple of years there has been great concern Canadian real estate is in a bubble and therefore due for a bust. Views on this issue can differ but there seems to be agreement that house prices have gone up too far. I know in my own case my house has almost doubled over the last 7 years. That is a compounding rate of almost 10%. This is far above the GDP growth rate of 2.5%. It stands to reason that there should be a correction at some time. When is the correction coming is the real question?

I have experienced 2 major real estate asset bubbles in my lifetime. The first was in the late 80's and early 90's in Canada. The 2nd bubble was the more recent US subprime bubble in 2007/2008. Both bubbles do have one common economic feature. Both of them took place at a business cycle peak while the yield curve was flat or inverted. In other words money was tight according to central bank policy. My guess is that this time will not be different.

The current Canadian Government bond yield curve is positive. See here for more info. For the time being we are probably OK. For more research go to CREA here or the CMHC here.