“There are three urban centres, Calgary, Toronto and Vancouver, where the prices continue to go up and there are affordability issues,” the finance minister said following a conference in Toronto hosted by the Investment Funds Institute of Canada. “I don’t see a housing bubble, neither does the governor of the Bank of Canada or the CMHC or the OECD.”
September housing results could be more of the same for those cities. The Calgary Real Estate Board said Wednesday sales were up 12% in September from a year ago while the price of single family home in the city rose 10.6% from a year ago to $512,800 in September. Condo prices were up 9.5% from a year ago to $330,200. Toronto and Vancouver results are due out this week.
His comments reflect what others have suggested about those cities driving overall housing comments. Some economists have suggested the housing market is mediocre at best in a majority of Canadian cities outside of the big three. Those cities are responsible for a third of all sales this year while contributing to almost 50% of the dollar value.
Mr. Oliver said it would be difficult for him as finance minister to cool off just three Canadian cities and leave the rest of the country unscathed if he was to further tighten the lending environment. “That’s one of the challenges. There are some markets flat and some are experiencing some decline,” said Mr. Oliver. “We are examining all the issues and we are keeping it very much in mind.”
He reiterated that while he is not ready do anything immediately, the long-term goal is to reduce the government’s involvement in the mortgage market.
The finance minister wouldn’t directly address a published report Wednesday quoting the Canadian managing director of Pacific Investment Management Co. who stated the market here may be 10% to 20% overvalued and could get to 30% if the Bank of Canada doesn’t start talking up rising rates.
Mr. Oliver did say he was in New York the last couple of days talking to money managers and hedge fund managers and real estate came up in those conversation.
“Our situation was totally different from the U.S. situation before the recession and it’s quite a bit different now. For one thing, their mortgages are non-recourse and ours are not, with the exception of Alberta. They also have mortgage deductibility. There are some differences,” he said.
He said Americans are “sophisticated” but they come from an U.S. perspective. “Something happened to them so it will happen to someone else,” said Mr. Oliver, adding any talk of the Bank of Canada raising rates is outside of his mandate.
The finance minister did say people understand that interest rates cannot stay this low forever but it might be difficult for them to act on that knowledge. “People can know intellectually what the history of interest rates have been, psychologically they aren’t perhaps prepared. I think it’s important for people to understand.”
Source: Garry Marr, Financial Post