Carney warns on housing markets
As long as rates are so low, Canadian authorities will “need to remain as vigilant’’ and watch for financial imbalances, he said.
JEREMY TOROBIN, DAVID EBNER
OTTAWA, VANCOUVER— From Thursday's Globe and Mail
Published Wednesday, Jun. 15, 2011 3:42PM EDT
Last updated Thursday, Jun. 16, 2011 6:15AM EDT
Mr. Carney strongly suggested that the central bank continues to see narrow financial regulation, like steps taken by the Finance Department to make it harder for some Canadians to get a mortgage, as a more appropriate tool than rate hikes for taming the domestic side of the equation.
Repeating warnings he has sounded for more than 18 months as Canadian borrowers binged on cheap credit, Mr. Carney said the share of households “highly vulnerable to an adverse economic shock” has risen to its highest level in nine years and urged borrowers and banks to be careful.
Indeed, while the mortgage market in Canada is more conservative than in the United States, where the subprime lending collapse triggered the 2008 financial crisis and Great Recession, Mr. Carney said real estate loans now make up more than 40 per cent of Canadian banks’ assets, compared with 30 per cent a decade ago, a situation he called “unprecedented exposure.”
“The central position of housing assets and liabilities on the balance sheets of both households and financial institutions means that any housing excesses could generate important vulnerabilities in the financial system,’’ Mr. Carney said. “Historically low policy rates, even if appropriate to achieve the inflation target, create their own risks.”
As long as rates are so low, Canadian authorities will “need to remain as vigilant’’ and watch for financial imbalances, he said.
Vancouver is Ground Zero, with prices up an astounding 25.7 per cent to $831,555 – more than 11 times the city’s average family income – from $661,745.
Realtors point to immigrants from China as a major factor in neighbourhoods on the city’s west side. Although this has never been quantified with hard numbers that are publicly available, the anecdotes colour all talk of real estate in the city. When Mr. Carney was asked how policy makers know that Asian wealth is helping to fuel the biggest price gains, he responded that the central bank has access to all data on insured mortgages across the country.
“The buyers who are making the market move, their appetite isn’t necessarily controlled by Mark Carney,” said broker Mike Stewart of Century 21 in Vancouver. “And he’s kind of got his hands tied, with the dollar so high.”
In any case, while prices are soaring, Mr. Stewart said there isn’t the “exuberance” he remembers from the 2003 to 2006 period when the market was white hot. The number of homes sold in B.C. in May actually slipped slightly from a year ago.
“Everyone realizes it can’t go up forever, but like any market there’s bears and bulls,” he said.
Mr. Carney strongly suggested that the central bank continues to see narrow financial regulation, like steps taken by the Finance Department to make it harder for some Canadians to get a mortgage, as a more appropriate tool than rate hikes for taming the domestic side of the equation.
Repeating warnings he has sounded for more than 18 months as Canadian borrowers binged on cheap credit, Mr. Carney said the share of households “highly vulnerable to an adverse economic shock” has risen to its highest level in nine years and urged borrowers and banks to be careful.
Indeed, while the mortgage market in Canada is more conservative than in the United States, where the subprime lending collapse triggered the 2008 financial crisis and Great Recession, Mr. Carney said real estate loans now make up more than 40 per cent of Canadian banks’ assets, compared with 30 per cent a decade ago, a situation he called “unprecedented exposure.”
“The central position of housing assets and liabilities on the balance sheets of both households and financial institutions means that any housing excesses could generate important vulnerabilities in the financial system,’’ Mr. Carney said. “Historically low policy rates, even if appropriate to achieve the inflation target, create their own risks.”
As long as rates are so low, Canadian authorities will “need to remain as vigilant’’ and watch for financial imbalances, he said.
Vancouver is Ground Zero, with prices up an astounding 25.7 per cent to $831,555 – more than 11 times the city’s average family income – from $661,745.
Realtors point to immigrants from China as a major factor in neighbourhoods on the city’s west side. Although this has never been quantified with hard numbers that are publicly available, the anecdotes colour all talk of real estate in the city. When Mr. Carney was asked how policy makers know that Asian wealth is helping to fuel the biggest price gains, he responded that the central bank has access to all data on insured mortgages across the country.
“The buyers who are making the market move, their appetite isn’t necessarily controlled by Mark Carney,” said broker Mike Stewart of Century 21 in Vancouver. “And he’s kind of got his hands tied, with the dollar so high.”
In any case, while prices are soaring, Mr. Stewart said there isn’t the “exuberance” he remembers from the 2003 to 2006 period when the market was white hot. The number of homes sold in B.C. in May actually slipped slightly from a year ago.
“Everyone realizes it can’t go up forever, but like any market there’s bears and bulls,” he said.