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Even though home prices have jumped to new highs during the COVID-19 pandemic, Canadians think real estate still has room to run.
A new Yahoo/Maru poll found 68 per cent of respondents expect home prices to keep rising steadily over the next year or two.
The expectation is strongest in Québec (75 per cent), followed by those living in British Columbia (72 per cent), Ontario (68 per cent), Atlantic Canada (62 per cent), Manitoba/Saskatchewan (58 per cent), and Alberta (57 per cent).
The majority surveyed (84 per cent) say prices have gone up in their community. Of this group, 49 per cent say they have risen steeply while 35 per cent say prices have risen steadily.
A small group (15 per cent) say prices have stayed relatively the same while one per cent believe they have dropped.
Bank of Canada Governor Tiff Macklem has repeatedly said extrapolative expectations, when people expect home prices to keep going up, are a worrying signal about the housing market. He says he's seeing early signs and it isn't a major worry but has expressed concern about Canadians taking on too much mortgage debt.
"What's striking about these findings is that Canadians believe there is still a lot of horsepower to the escalating home prices and a potential bubble burst for the majority is not on the horizon any time soon," said Maru's executive vice-president John Wright.
Housing market bubble
The poll found 32 per cent believe home prices are a bubble that will burst and that when it does, prices will drop significantly.
The view is most strongly held in Alberta (43 per cent) and Manitoba/Saskatchewan (42 per cent), followed by those living in Atlantic Canada (38 per cent), Ontario (32 per cent), British Columbia (28 per cent), and Québec (25 per cent).
Of those in the bubble camp, 67 per cent think it will burst sometime in 2022.
Rising interest rates can negatively affect home prices. Fixed mortgage rates have been on the rise. The Bank of Canada has signalled a sooner-than-expected hike to its overnight rate, which will mean higher variable mortgage rates.
"The real question is whether the Bank of Canada decides to start raising lending rates in the spring. If that's signalled, there may be a real rush by homebuyers to borrow cheap money and buy properties that will likely fuel demand and push prices higher," said Wright.
"It may also flush out homeowners who want to sell at a peak demand time, cash out and live somewhere else."
The survey of 1,509 Canadian adults was conducted on November 2, 2021 and has an estimated margin of error of +/- 2.5 per cent, 19 times out of 20.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.