Ottawa meddling is main threat to housing market: report

Tweaks to mortgage rules are more of a threat than high prices, says a new report on the Canadian hot housing market

OTTAWA – A new report into Canada’s hot housing market is trying to calm fears of a coming collapse in prices, saying the biggest threat to home valuations may be government meddling with mortgage rules.

The paper by economist Will Dunning, who runs a real estate market research firm in Toronto, says Canadians have been mostly prudent investors in housing and that the market can absorb either higher prices or a one-per-cent hike in interest rates.

Rather than being over-valued, house prices in Canada are fairly valued and may even be undervalued, he says.

The paper was released on the same day a new Teranet-National Bank composite price index rose to a new all-time high, showing home prices rose 0.3 per cent in February.

The Bank of Canada and the federal government have warned about an over-heated housing market for several years, arguing that once interest rates start rising, the roof will cave in for some home buyers.

The Organization for Economic Co-operation and Development (OECD) has also pointed to Canada as having the world’s most over-valued housing market.

But Dunning says the OECD has been using flawed comparison between cost of owning and the cost of renting homes.

Dunning says the federal government, which has intervened four times in recent years to suppress higher-risk home buyers by changing mortgage rules, poses a real threat to the market.

The latest effort in July 2012 to slow the market had an impact equivalent to a one per cent increase in mortgage rates, he says, and has succeeded in reducing demand.

That, rather than over-valuations, is the main reason house prices could fall, he says.




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Ottawa meddling is main threat to housing market: report

  1. This comment has been removed.

    • Comment removed? I’m very curious. WSISYW is pretty tame compared to some posters here.

  2. Funny, I don’t recall this guy complaining when the federal government was busy making it easier and easier to qualify for a CMHC-insured mortgage. But now that they’ve come to their senses and furiously backed away from their own former easy-mortgage policies, he’s complaining about “meddling”.

  3. Will Dunning, an economist who runs a real estate reasearch firm that frequently consults for the mortgage industry, has something to say that many Canadians would like to hear.

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