As Vancouver's average price hits a new record high and the International Monetary Fund casts it's eyes on Canada (declaring our's the most over-valued real estate in the world), is this cause for concern?
Not according to our new Bank of Canada Governor.
As reported in yesterday's Financial Post, BOC Governor Stephen Poloz says:
"Canada’s housing market is not in a bubble and not likely to suffer a sudden and sharp correction in prices..."
The central banker was testifying before the Senate banking committee on his latest economic outlook and used the testimony to pointedly disagree with a couple of forecasting organizations that weighed in this week on the Canadian situation — the Fitch Rating service that judged Canada’s housing market as 21% overpriced, and an OECD recommendation that he start raising interest rates in a year’s time.
The Fitch Rating service summarized our housing market this way (click on image to enlarge)…
The Fitch Ratings report concluded that in Canada "… a high level of employment and individual net worth tied to the value of the housing stock, a housing downturn could have serious consequences for the overall economy.”
But Poloz says 'poppycock'.
He believes the most likely scenario is a soft landing where home prices stabilize. although he acknowledged that an imbalance in the market and high household debt remain key risks.
“Our judgment is (the housing market) is a situation that is improving, this is not a bubble that exists here that would have to be corrected."
Gotta love someone who oozes confidence.
There wouldn't happen to be a 'caveat' in that analysis, would there?
“If there is a disturbance from outside our country that’s another analysis.”
Ahhh… good thing those economic crisis's never originate from outside our borders. So basically, everything's stable until it isn't?
Got it.
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Problem is, if he says otherwise, then all hell will break loose. Can you just imagine if he came out and said: "yes Canada is in a housing bubble and we are due for an extreme correction". With so much of the economy dependent on R/E this would cause panic and become a self-fulfilling prophecy. Better to obsure the facts just like the R/E industry is doing in the hopes of keeping this gas bag inflated.
ReplyDeleteWill not end well. Hope it will pop soon.
ReplyDeleteDidn't Bernanke say the same thing in 2005?
ReplyDeleteYup!
DeleteI may be an outlier here, but is it possible the US economy is recovering enough such that they will ease up on their bond buying program pretty soon and that in itself will cause the bond market to adjust upwards on rates? Maybe he's just staying pat knowing this is imminent…12 months or less.
ReplyDeleteWell, if Ontario keeps loosing manufacturing jobs, there will be no middle class to buy homes - just a bunch of bankers comfortable paying a million dollars for a home in Toronto. Alas, I am glad that Steven Poloz says there's no bubble - its apparently safe to go buy a home for 8 times my annual income. After all, the banks say that housing is 'affordable'. I trust the banks.
ReplyDelete(my sarcasm is hopefully overt enough....)