One currency analyst says that a drop in housing prices will hurt the Canadian dollar.
Adam Button, chief currency analyst at ForexLive, told BNN in an interview that there’s a clear link between the future of the loonie and home prices in Canada, particularly in hot markets like the Greater Toronto Area.
“There will be losses,” he said, predicting a drop in home prices. “And I think the trade is on the Canadian dollar – the first trade anyway – because you don’t know where the losses are going to be. But they will be in Canada, and it will be brutal once it finally happens.”
“The two things that are certain in a housing bubble: When it starts to bust, it’s denial,” he added. “There will be denial. And there’ll be denial in prices and in the market. And the other thing that is certain is that it will end in tears. And where the losses are, and the shape of it, and the timing of it, is extremely difficult to predict.”
The Ontario government introduced 16 new housing measures last week in attempt to cool the GTA’s hot housing market. Toronto saw a 33 per-cent-increase in average homes prices last month, sparking concern among leaders in the province.
“It’s just madness,” Button said of the soaring prices. “It’s at the Dutch tulip bulb phase here. And it will end.”