BoC says housing market at risk of “froth” but debt is less risky
Canada’s housing market strengthening
Steve Randall
REP
Canada’s housing market is showing renewed strength as economic conditions and population growth drive demand. BC, Ontario, and Quebec are seeing the largest shares of immigration.
But the governor of the Bank of Canada says that this demand is not being met by supply and there are risks in certain markets of “froth” – conditions that can precede a housing market bubble.
Speaking at the Greater Vancouver Board of Trade, Stephen Poloz said that the central bank will be watching markets closely for signs of risk.
“The fact is, the fundamental demand for housing appears to be outpacing our ability to build new homes, which can put renewed upward pressure on prices,” Mr Poloz said. “It can be very unhealthy when the situation becomes speculative because it can lead to a sudden downdraft in house prices later, with wider implications for the economy.”
The governor said that the stronger housing market activity will mean greater levels of household debt, which continues to be the biggest financial system vulnerability. But he noted that the B-20 mortgage guideline is reducing the riskiest borrowing and concluded that the BoC is “confident that the stock of household debt is becoming less of a threat over time.”
Economy, labour market
Mr Poloz said that the jobs market is positive, despite a recent slow down in new jobs. He said wage growth has continued to strengthen.
Global trade policy remains a key concern for the Bank of Canada with uncertainty surrounding protectionism and future policies holding back exports and investment.
Overall, the governor talked of the resilience of the economy and the ability of business to adapt. But he said the BoC will continue to monitor the situation closely.
Copyright © 2020 Key Media Pty Ltd