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House prices perpared to plummet as household debt climbs: report

July 1st, 2011

House prices could plummet by as much as 25 per cent, according to a recent report by one of the country’s top economic research consultants.

Capital Economics said commodity prices will be retreating and household debt will be at a record high, driving down housing prices, in their most recent Canada Economic Outlook, issued this week.

The report predicts a fall in house prices by as much as 25 per cent over the next three years.

A domestic housing boom coupled with high commodity prices worldwide have spared the economy the severe recession felt by other developed countries.

The report forecasts falling house prices and smaller residential investment. Real estate currently makes up 6.8 per cent of Canada’s GDP.

Lower prices would mean a hit to household net worth as property now accounts for one third of a family’s total assets, the report found.

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