TORONTO — The news out of Canada’s real estate market isn’t good, but the country will avoid a U.S.-style real estate meltdown, CIBC said Tuesday.

Economist Benjamin Tal said in a report that even recently released data about high levels of Canadian consumer debt aren’t proof that there were be a sudden, big drop in home prices.

“To be sure, house prices in Canada will probably fall in the coming year or two, but any comparison to the American market of 2006 reflects deep misunderstanding of the credit landscapes of the pre-crash environment in the U.S. and today’s Canadian market,” he wrote.

Tal noted that Canada’s debt-to-income ratio has just broken the U.S. record set in 2006, but said other countries have had even higher levels without a crash.’

Statistics Canada, in revising how it estimates household credit market debt, earlier this month reported record household debt of 163% of disposable income in the second quarter.

However, Tal said the U.S. market bubble saw U.S. homeowners with little or no equity value in their homes making them vulnerable when prices fell.

As well, many buyers in the U.S. benefited from low introductory teaser rates on their mortgages only to be caught short when rates increased and they were faced with increased monthly payments.

“The introduction of the teaser rate, a low introductory rate for a period of two or three years that would adjust upward at the end of the initial period, worked to effectively neutralize U.S. monetary policy,” Tal wrote.

“The practical implication of that was that when the teaser period expired, millions of Americans felt the full impact of two years’ worth of monetary tightening virtually overnight.”

Home sales in Canada have been falling amid uncertainty about the economy and Ottawa’s tightened mortgage lending rules.

According to the Canadian Real Estate Association, September home sales fell 15.1% from a year ago, while the national average price was up 1.1% to $355,777 in September from a year earlier.

The association said excluding Vancouver, the country’s most expensive market, the average price was up 3.4% from a year ago.

Tal said home prices in large cities like Vancouver and Toronto are overshooting their fundamentals and will likely slip as sales fall.

“But the Canada of today is very different than a pre-recession U.S., namely as far as borrower profiles are concerned,” he wrote.

“Therefore, when it comes to jitters regarding a U.S.-type meltdown here at home, the only thing we have to fear is fear itself.”

The Canadian Press

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The region will take over the old courthouse when the new one currently under construction is complete next year.

Regional councillors awarded a $786,434 consulting agreement this week to Robertson Simmons Architects Inc. for design and engineering services.

Coun. Jean Haalboom is planning a tour for local heritage advocates to review the building. She said she’d like to see heritage value incorporated into the renovation.

“I think it’s important for us to have, shall I say, a value walk,” she said. “Just to identify what would be of value. Before any work is done (we need) to have a walk there to see what we (might) consider important and how to adapt it from there.”

Gary Sosnoski, commissioner of corporate resources, said the firm working on the project is open to those considerations. “The firm itself has experience (with adaptive reuse) throughout southern Ontario,” he said.

The company worked previously on the Breithaupt Block in Kitchener, he said. “I’m sure we will do everything required to get the building up to our standard.”

Located at 20 Weber St. in Kitchener, the building was constructed in 1963 as the courthouse and county administration building. Its five floors boast about 60,000 square feet and is listed on the City of Kitchener’s municipal heritage register as a non-designated property of cultural heritage value or interest.

Heritage features are expected to be incorporated into the design.

pdesmond@therecord.com