Article content continued

“What concerns me is some buyers seems to have this view that prices can only go up,” says Mr. Madani. “People feel it’s a one-way bet. A lot of younger people seem to think that if they don’t get in now on the home ownership ladder, they’ll miss out. Some of these people will come to regret this decision. In the more expensive markets, it’s almost like a capitulation where they say ‘If I don’t buy now, I’ll never own a home’. This is what happens in a housing bubble.”

Finn Poschmann, vice-president of research at the C.D. Howe Institute, says you can’t deny there is a sense of “getting in while the getting is good” but adds there is a big difference between prices tapering off and declining.

He does says debt levels are manageable for now but there’s not much room for them to increase which would help fuel price growth. “The growth rate [in prices] we have seen simply will not be sustained forever simply because it can’t be, whichever the major market you are looking at,” said Mr. Poschmann.

Still, there is evidence in the market that Canada’s debt problem — at least as far as mortgage debt — is not as bad as might be feared. Benjamin Tal, deputy chief economist with CIBC, says 30% to 40% of Canadian households are now accelerating their mortgage payments which means 40% to 50% of Canadian households have an amortization period of less than 20 years.

“I think there is still some temptation [to take on more debt],” said Mr. Tal. “If there is an increase in prices it will come because of demand [driven by cheap mortgages]. But mostly I do think this is a market that is getting tired. If you want to flip, you have no reason to be in this market. If you want to live in a place, interest rates are still low.”