The Canadian housing market is in well-balanced territory
Ephraim Vecina
Mortgage Broker News
A new analysis by Bloomberg Economics has determined that Canada and New Zealand are the economies most vulnerable to housing price corrections.
This primarily stems from the fact that in both nations, the price-income and price-rent ratios far exceed their respective long-term averages.
In an interview with Bloomberg, Royal Bank of Canada CEO David McKay assured that these findings do not spell total doom, however.
“We continue to monitor all supply-and-demand signals coming out of the housing market,” McKay stated.
Contrary to rumblings of fear in the industry, McKay asserted that he “would actually characterize the market as something in well-balanced territory.”
“We do expect housing stock investment to slow over the coming year, and there will be a little less creation in the condo and single-family home markets, responding to potentially slower demand,” the executive admitted, but quickly added that “the housing price and resale market corrections are generally healthy.”
These trends would in no way indicate a downturn. “We’re going to see some markets cool a lot more than they have, but we needed to slow this down through policy.”
The federal government has received ample criticism of the B-20 rules instituted at the beginning of 2018. Nevertheless, the results have shown that it was, on the whole, a good step to take.
“Vetting consumers for a higher-interest-rate environment was prudent. It’s taken a number of buyers out of the market – temporarily, as they build a greater down payment for that mortgage,” McKay explained.
As the regulations arose from a very specific market context, they will have to adapt to shifting conditions accordingly.
“At the time, with the heated markets and the growth and the amount of foreign capital coming in, competing with domestic capital for residential housing stock, it was prudent,” McKay said. “As things slow down, we may have to take a second look at some parts and tweak them, but from a structural perspective, it was prudent policy.”
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