OECD Warns Of "Disorderly Housing Market Correction" In Canada
By Tyler Durden
With regulators and local authorities unable or unwilling to crack down on the unprecedented housing bubble in select Canadian cities, increasingly used by Chinese oligarchs to park hot cash offshore, the local banks are starting to take action into their own hands. Case in point, Bank of Nova Scotia has decided to ease off on mortgage lending in Vancouver and Toronto due to soaring prices, Chief Executive Officer Brian Porter said.
“We’re a little concerned about housing prices in the greater Vancouver area and Toronto,” Porter, 58, said Tuesday in an interview on Bloomberg TV Canada. “We just took our foot off the gas the last couple quarters in terms of mortgage growth for the reasons I cited, in terms of Vancouver and Toronto.”
Nationwide home sales in April jumped 10.3 percent from a year earlier, the most activity for that month and the second-highest level ever, according to the Canadian Real Estate Association. In Vancouver, prices rallied 25 percent in the month to an average of C$844,800 ($643,000) and sales climbed 15 percent. Toronto prices jumped 13 percent to C$614,700 and sales rose 7 percent, the association said.
The dramatic rebound in Canadian real estate, driven almost entirely by foreign money is shown below.
Then again, while Porter did tacitly admit that soaring housing prices are a threat, he also added that “generally, Canadians have a strong ability to self regulate and they’ve demonstrated that before.”
That may be in doubt, because none other than the OECD itself rang a alarm bells over the frothy nature of the Toronto and Vancouver housing markets and high levels of consumer debt. “Very low borrowing rates have encouraged household credit growth and underpinned rapidly rising housing prices, particularly in Vancouver and Toronto, which together are a third of the Canadian housing market,” the Organization for Economic Co-operation and Development warned again today in its latest outlook quoted by the Globe and Mail.
“In relation to household incomes, both house prices and household debt are high,” it added, throwing more fuel on the fire for those who are fretting over bubble fears. “Macroprudential measures have strengthened recently but should be tightened further and targeted regionally.”
But the loudest warning was the OECD’s assessment of a “disorderly housing market correction,” notably in Toronto and Vancouver, as the biggest threat to Canada’s economy.“ This would damp residential investment and private consumption, and could threaten financial stability.”
The G&M adds that the group didn’t suggest specific measures, but states that “both Ottawa and British Columbia have acted.”
Which we find odd because also today the same Globe and Mail wrote an article explaining that the top bureaucrat overseeing the real estate sector in B.C., Carolyn Rogers admits she did not realize how wildly speculative Vancouver’s market had become until an explosion of public outrage earlier this year.
Rogers is B.C.’s superintendent of real estate, a job she has held since 2010. Now, she sees houses trading like hot commodities – and it worries her. Ms. Rogers says hearing how buyers …read more
Source: OECD Warns Of "Disorderly Housing Market Correction" In Canada
