FUNDAMENTALS AFFECTING CANADIAN HOUSING MARKET

This paper studies the underlying long-term relationship between economic factors and house prices growth in Canada. Fundamentals used include, monthly real interest rate, mortgage rate, rental vacancy rate, rents and integrated Cost of Housing Capital. Monthly data for a time range of 10 years was used for the fitted regression and standard multi-factor regression model. Analysis that was conducted in this paper serve the purpose of examining the dynamics and correlations between fundamental variables and future growth rate of real estate prices.On top of confirming results from previous studies on the strong responsiveness that house prices have to the movements of general economic conditions and the correlations with economic fundamentals, this paper goes further to compare these indicators with the objectives of finding out their predicting abilities. Results from the model specifically studies the correlation coefficients between growth rate of housing market with several economic fundamentals, such as the price to rent ratio, vacancy rate and the cost of housing capital.