CMHC looks to fill research gaps on housing market

Wednesday, June 18th, 2014

Tara Perkins

Canada Mortgage and Housing Corp. is going to be releasing more data about the state of the country’s housing market, amid complaints from economists that there is too much we don’t know.

CMHC CEO Evan Siddall says that the Crown corporation is looking to fill some of the research gaps that exist, that it will also be releasing more information about its own portfolio, and that it is considering publishing its own analysis of how healthy Canada’s housing market is.

“We’ve been a little bit internally focused, we’ve been a little bit confined about the information we’ve shared with people,” he says.

Canadian Imperial Bank of Commerce economist Benjamin Tal wrote a highly-publicized report in April called Flying Blind that called the lack of publicly available information about Canada’s housing market “mind-boggling” given how important the market is to the economy.

In recent years economists have been debating just how overvalued Canadian home prices are and whether the market might crash or will achieve a so-called “soft landing” in which price growth gradually peters out. Policy makers have taken dramatic steps to cool the market, including changes to the mortgage insurance rules. But Mr. Tal and others have argued that we do not have all the data we need to properly assess the market, including the share of foreign investors in the condominium market, the distribution of mortgages by credit score, and the average down-payment.

“We are looking at our research offerings and trying to find the biggest gaps and the highest priority areas to focus on,” Mr. Siddall says.

He cited the amount of foreign money in the market as one example, but noted that it’s challenging because foreigners are buying real estate through nominees or Canadian incorporations. CMHC is looking to see whether it could get information through surveys or with the help of banks.

That particular gap is one that has been troubling economists for some time. They fret that foreign investors might have played a larger role than assumed in the market’s escalation, and are more likely to bail in the event of a downturn. In April 2012, former Finance Minister Jim Flaherty acknowledged to The Globe and Mail’s editorial board that he didn’t have a good grasp on the amount of foreign money in the market. “It’s mainly anecdotal, so I don’t have a statistical grasp of it, no,” he said at the time, adding that he had been hearing that a large number of people in emerging economies were paying cash for condos in Toronto and Vancouver.

In addition to the potential research gaps, CMHC might begin publishing its own analysis of just how worried, if at all, we should be about high house prices. The tool it uses internally is called the House Pricing Analysis and Assessment Framework (HPAA). Mr. Siddall says he would ultimately like to see that made public on a regular basis.

The HPAA looks at the factors that appear to have presaged housing crises in the past, including the rate of acceleration in house prices.

At the moment he says “it is not glowing red, we’re not concerned about a bubble.”

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