Canadian Housing Market Heading For Correction?

Found this interesting article over at Bloomberg today that I thought I’d share.

The article is basically suggesting that the Canadian housing market is heading for a correction in the near future based on the historical relationship between housing investment as a percentage of GDP and housing prices.

According to professor George Athanassakos from the Richard Ivey School of Business housing prices tend to decline shortly after housing investment reaches 7% of GDP. Apparently as of Q3 2011 we have hit that 7% threshold, alluding that a housing market downturn is just around the corner.

The article provides an interesting chart of the relationship between housing investment as a percentage of GDP and y/y growth in home prices.

Do you think we are in for a correction in housing prices?

Read the full article.