TD Economics released their annual Special Report on Regional Housing Markets in late December, recapping 2011 and looking ahead to 2012.
Highlighting 2011, the national housing market was described as "turning in a respectable performance despite notable hurdles." Tightened rules surrounding insured mortgages, the HST being rejected in BC and both the Euro Debt Crisis as well as the slower than expected US Economic recovery all posed significant risk to the housing industry. Historically low interest rates are seen as the reason why the housing marketing "over performed" in spite all of the hurdles.
Based on multiple metrics such as price-to-income and price-to-rent, the report states that assuming more normal interest rates, the degree of overvaluation would be in the 10-15% range, although our housing market does not share bubble-like characteristics such as those in the US pre-2007.
Interest rates are forecasted to remain unchanged through 2012, with gradual increases starting early 2013. Similarly to 2011, 2012 will likely be a "wait and see" kind of year.