Carney: some Canadian property likely overvalued

‘We’re watching closely,’ central banker says

Some properties in Canada are “probably overvalued,” according to Bank of Canada Governor Mark Carney. The country’s chief central banker made the statement in an interview with CTV’s Question Period, which was broadcast on Sunday, adding his voice to worries that a housing bubble could be forming in the country. “There are risks out there. We’re watching it closely,” he said, quoted by the Reuters news agency. Carney added that the central bank is working with financial institutions and the federal government to keep the situation under control. Ottawa has already ramped up mortgage regulations. On Jan. 17, Finance Minister Jim Flaherty said the federal government is ready to step in and intervene in the housing market if necessary.

Reuters




Browse

Carney: some Canadian property likely overvalued

  1. Some properties in Canada are “probably overvalued,” according to Bank of Canada Governor Mark Carney.

     - Gee, you think?!?!?!

    • They certainly aren’t considered overvalued by the present owners!

      • The buyers are the ones who decide what is overvalued, not the owners.

  2. AKA VANCOUVER

    • Hopefully they’ll take some action so the Vancouver problem doesn’t infect the rest of the country.

    • As a Vancouverite, one thing you have to take into consideration is. Yes it is inflated and overpriced here but that is due to the high demand coming from East and South Asia. Metro-Vancouver is the #1 choice for immigrants and that demand has kept the market some what stable.

      • Didn’t they say the exact same thing in Florida and Arizona about wealthy retirees?  Look how that turned out.

  3. wow, a few ???? really—most are but you haven’t the backbone to say so

  4. It is a Harper government made bubble, which will burst all over us the average home owner. 
    Why?
     CMHC approves just about everyone who can show %5 down,  then CMHC charges 2.5% for their insurance and adds that to the mortgage (which allows banks in Canada not to care about being paid back because the Harper Government has guaranteed it … IE. YOU AND ME).  The Canadian Government is the largest backer of “sub prime” mortgages today (all the other lenders are bankrupt)  CHMC has 500,000,000 in risky sub-prime mortgages as we speak with assets of 10,000,000!    Easy money with low rates means competition for houses, which unrealistically raises the average house value.   Most mortgages approved today are CMHC backed.my opinion… This is all a big economic prosperity diversion to keep the economy going and cow the west while Harper and his disciples figure out how to strip mine Canada. it’s true

    • Actually, the housing bubble was created over the past decade before the Harper administration.  Primarly, through the increase in long term mortgages followed by low interest rates.  The only reason why the current government has been faced with keeping the low interest rates is due to the global economy.  Mark Carney has clearly stated that he is going to look to increase interest rates as soon as the global economy recovers.  Since increasing interest rates would shock the CDN economy too much, they have choosen to shrink the terms and increase the requirements to obtain a loan. 

      • in 2006 to 2007 Harper’s government changed the lending rules to allow “0″ down and forty year mortgages.  Then after the US housing crash ti was changed to %5 and 35 year mortgages.  ”harpers Government”

    • Harper created CMHC? Are you really that ignorant? CMHC was created in 1946. Here’s a skill testing question who was the Prime Minister in 1946? Answer: Liberal – Louis St. Laurant. Who was his predecessor? Liberal – William Lyon Mackenzie King. Are you okay with CMHC now that it was a Liberal’s idea?  Get an education!

      • I did not say anywhere in my post that Harper Created CMHC.?   …!

        the facts I listed are all true

        • “then CMHC charges 2.5% for their insurance and adds that to the mortgage (which allows banks in Canada not to care about being paid back because the Harper Government has guaranteed it … IE. YOU AND ME)”

          You basically said the Harper Government was the one that allowed the CMHC to function as an insurance agency for the banks (so they don’t have to worry about being paid back). The facts you listed are all true eh?

    • Your facts are a little bit off. We’ve had almost no bankruptcies of Canadian (not US) mortgage lenders. Certainly not any of the “a” lenders (some of the “b” lenders maybe questionable).
       
      The new standard for mortgage qualification is a 5 year fixed rate on a 30 year amortization. Further the income requirements have been  tightened in the last year.
      If anything, it’s the Harper gov who’s moved to tighten the rules and limit the more risky mortgages. It was the previous Libs who opened the doors to the 40 year, 0-down scenarios we saw in the mid-2000’s

      • Actually I wasn’t tring to imply that canada had mortgage lender bankruptcies.  I’m sure we would have had they not all been backed by CMHC however.

        between 2006 – 2007 “Harper’s Government ” changed the lending rules to allow “0″ down and “40″ year terms.  After the US housing market crashed he changed it to 5% and 35 years.

        that information Iincluded is all correct sir

        • Nonsense. A lie is a deliberate falsehood. This person simply stated their knowledge of the matter which they believe to be true. Did you expect that we wouldn’t read the actual budget? Nowhere in your document link to the 2006 budget are zero down scenarios addressed. That is because a lender may lend to anyone using any formula they like. The only caveat is that the CMHC (a Crown corporation, not strictly the government) may not insure the lender for such a mortgage.
          As usual, folk such as you who are easily persuaded by simplistic babble rely on the Globe to do their thinking, rather than making an attempt at independent thought. Try to be a little less zealous when you strike out at others, especially when you are on unstable ground.

          • Are you serious, or being sarcastic?  Because defending someone who is “stating their knowledge which they believe to be true” is not a lie, but I’m on unstable ground when providing facts and figures, or in this case, actual documentation.

            First of all, someone stating their knowledge (and in fairness, I did go harder on guest than I should have) because they’ve been fed that “knowledge” by Conservatives, who believe a lie said often enough becomes the truth, is perpetuating that revision of history.  So how about you lecture them on attempting some independent thought.  I don’t have time to find the many, many, many examples of this tactic right now, although I would normally love you to ask me for them.  I think my friend might have a list . . .

            The budget, it is very true, didn’t say “zero down 40 year mortgages” it just allowed U.S. mortgage brokers (who weren’t subject to our good banking practices) to come in and provide them.  If you don’t like the Globe and Mail, I can probably find a couple of dozen other references, but again my time is limited at the moment. 

  5. My Previous comment had a miss print
    Opps  500,000,000,000 in CHMC not 500,000,000, loans, 10,000,000,000 assets.   Im not used to that manny zeros

    • I thought that from the liberal side of things Zeros should be the thing that you are most familiar with

      • I’m not a Library supporter frankly.  We need a new political system that doesn’t allow Governments with only a “minority” of Canadian Support  to have a “majority” in the house of commons.  If our system of “First past the post” electoral system isn’t changed Canada will be at the whim of more ideologs in the future.

  6. It is a Harper government made bubble, which will burst all over us the average home owner. 
    Why?
     CMHC approves just about everyone who can show %5 down,  then CMHC charges 2.5% for their insurance and adds that to the mortgage (which allows banks in Canada not to care about being paid back because the Harper Government has guaranteed it … IE. YOU AND ME).  The Canadian Government is the largest backer of “sub prime” mortgages today (all the other lenders are bankrupt)  CHMC has 500,000,000,000 in risky sub-prime mortgages as we speak with assets of 10,000,000,000!    Easy money with low rates means competition for houses, which unrealistically raises the average house value.   Most mortgages approved today are CMHCbacked. 
    my opinion… This is all a big economic prosperity diversion to keep the economy going and cow the west while Harper and his disciples figure out how to strip mine Canada. it’s true

    reprint because of earlier typo

    • House were already well on their way to becoming over-valued a while before Harper became PM so you can’t reasonably blame him or the Conservatives.

      Then again, I guess your kind still would. 

      • Well I disagree  since he was responsible for changing the lending rules to “0″ down and “40″ between 2006 – 2007. and Combined with these historically low rates, and the Harper Governments Clandestine support of CMHC backed mortgages,  no other government before us had been as responsible for the “pump” side of this coming ”dump” of real-estate

        • Since the Harper government was a minority, it stands to logic that the “other” buffons where on board with this as well.  In a minority gov its all parties hands on.. so your mighty liberals failed as well ??

          • so you are saying by not stopping Harper the liberals failed?

          • He’s not a liberal, and your assumption that questioning Harper’s record or policies must be based in fan boy partisan politics is what makes democracy difficult. Please debate the issue on it’s merits. Sub-prime mortgages seem risky, let’s not have the taxpayer holding the bag, and I don’t care which party gets it done…

  7. It’s always helpful when the government “steps in and intervenes”.  Thank goodness they know more about this than anyone else.

  8. Just because the average person can’t afford a home in Vancouver doesn’t meant that home prices are “over valued.” Value is a matter of perception. At the moment people around the world perceive Canada as a great and stable country and a great place to park their money. 

    The increase in home prices is driven by foreign cash coming into the country. This is because Canada is a great place to live, a safe country and will deliver a safe and above average rate of return for foreign investors in the long run.  This means that even if a few people perceive that prices are too high (for them) and if interest rates rise and there is a correction, it will likely be temporary… 12-24 months a few people will get screwed and a few people will get lucky and that will be that.Canada is the best country in the world. There is a lot of opportunity here. There is security associated with being Canadian and that’s why people come here and that’s why home prices are high.

    • oh, shut up!

    • by  foreign cash you are trying to say “mafia money and the profit from the war”. Who will park their money in Vancouver? Certainly someone interested in autoteft,  drugs and prostitution, because that’s all what is left right now

    • You said: Just because the average person can’t afford a home in Vancouver doesn’t meant that home prices are “over valued.”  

      Actually this is one of the definitions of “overvalued” – a price of an asset that is not supported by market fundamentals (local wages, employment stats etc.). Typically this results from an emotional buying spurt (think of what it means to people to be “home owners”) or change in the regulatory environment (CMHC insurace for low down-payment, low interest rates and increased amortization period).

    • let me guess jaytee… you work in real estate?

  9. If they’re telling us, it’s already too late… and you can change that to “most properties in Canada are over valued”

    • this a very good news. If big cities go lower, imagine the small towns. It will be the greatest opportunity for my generation. Can’t wait for it.

  10. Middle of Chinese New Years here in Vancouver and I am not seeing a lot of sold signs on west side houses this year.     Perhaps we are seeing some changes….   We will see over the next few weeks.

  11. Canadians are now long into the financing of properties that are supposedly over valued. To initiate any change articficially is an example of legal theft. Canadians are obligated TO FINANCING THE ASSETS THEY PURCHASED AND TO CHANGE THE VALUES MIDSTREAM IS UNFAIR. The only Canadian thing overvalued is the self worth Mr. Carney sees in himself. If property values must be changed to initiate a new financial arrangement that more adequately reflect the capabilities of Canadians to pay then existing values must be red circled to guarentee no  miracle disappearances of capital as appears daily in ponsie schemes and right downs on the stock exchanges.. 

  12. We need foreign ownership laws. Nothing wrong with new immigrants/residents buying homes but these offshore speculators should not be allowed to own Canadian real estate.
     It’s a simple fix, require all residential property owner (all names on title) to file Canadian income taxes. That will keep the offshore Chinese (who undoubtedly would not want to open their books to Canadian tax regulators) out of our market.

    • Why cant they buy real-estate ?  .. heck let them, they are putting money into our economy.  Frankly if it wasn’t for foreign investment we would not be profiting to at economic level we are.   WE NEED MORE FOREIGN INVESTMENT, NOT LESS.

      Since I’m ranting,  …we need about 100,000,000 in Population to properly develop, and protect our country in the coming future in order to pay for our military (ie.  The big Arctic war for oil rights, shipping lanes etc… IS COMING  )  China has been building ice breaker fleets & Aircraft carriers and Russia now has 9000 men stationed in the Arctic with 30,000 on the way.    Don’t think the US will Protect our rights, their army protects and advances “Their” rights.

      This is no longer a world about what you own,  it’s about what you can protect.

  13. Gotta say that after moving from the East to the West, I now feel Vancouver area property is undervalued.  For those that can afford it, the quality of life is incredible.  … when you come to the realization that you won’t live forever, the premium seems small.

  14. don’t you love our politicians…….always years behind whats going on.

  15. What fools we Canadians are!!!  We take out huge mortgages, using after tax dollars,  with only five year terms!!  Who knows what the rates will be after five years, Canadians don’t seem to care, quite amazing!  One must realize that the realestate value of a home is dependent on the going interest rate and the willingness of banks to make a profit (leaving the customer and CHMC holding the bag).  Pigs eventually get slaughtered!!   

  16. Market value as a metric never works out in the end as in mathematics it is never a real number it is an educated guess ? No education required, Please apply at your local MLS agent

  17. An ex Goldman Sachs rumbling fool that spurs up the ugly American melt down and now wants to inject “fear” in the Canadian markets.  Now after 4 years he “thinks” housing is overvalued..  Well maybe his salary is overvalued based on this idiotic brainless comment from this minion 

  18. What fools we Canadians are!   Purchasing homes with huge mortgages at low rates with only five year terms, and interest not tax deductible. No one seems to care what their rates will be in five years!  That is financial suicide! The present value of a home is dependent on  present mortgage interest rates and the willingness of banks to lend money. If interest rates rise, if unemployment increases, and banks tighten their lending policies, realestate values will crash.  The consumer and CMHC will take a hit, but the banks will continue to rape huge profits.  Remember, pigs get slaughtered!!  Don’t be a pig!!

  19. it is over valued a lot or people buy houses which they cannot afford , then they loose there house sell it the bank then resells it money is made by the bank and real estate agents and the government this cycle keep on and on because all imigrants to canada wants to own a house  the government wins all the time so they dont care how many time a house is resold because they make mony

  20. Wondered when they were going to admit this.  Any idiot that owns a house knows that they are overvalued by 50%.  I used to live in Penticton BC where you had to pay 300 thousand for a 1000 sq ft shack.  Funny how the powers that be didn’t see this coming?  Give me a break!

  21. Big money in Asia is looking to diversify – Vancouver is one of the most beautiful cities in the world – they buy a high end place that they can spend their holidays at and in doing so push the prices up.  This Asian demand will not go away for many years.  Still I wouldn’t buy there or Toronto.  

  22. i always thought the value of my home was controled by the local municipal government who intern reap the benifits of property value tax.

  23.   ” Some Canadian properties likely overvalued”, an understatement I would say. For many of our young mom’s and dad’s to-day , paying a mortgage is probably like going off to war with both hands tied behind their back. I would say life for many people to-day , is about one step up from living in the Amazon River, with caimon and piranha.

  24. Nobody is investigating shoddy building practises in Alberta. The Government is too tied up
     with PHOTO-OPS and ELECTION. Its shameful. There are now 3 large CONDO UNITS in Alberta where the buildings are now falling apart and the poor CONDO OWNERS have bben served with huge bills into THOUSANDS to fix what SHODDY BUILDERS DID. Recent example is Palisades Villas on 140th Avenue  where every condo owner was given a bill for $24,000.00 to pay immediately as the SIDING IS FALLING OFF. Some CONDO OWNERS are emotional wrecks and cant afford another line of credit  and may WALK AWAY from this mess and lose THOUSANDS. Nobody cares. Government hangs up on questions.
    Builders made their MILLIONS and now dont care as the law in Alberta protects them.
    Worst consumer mess in Canada but itys Alberta. Government only protects the RICH.
    We have a better warranty on our washing machine.

  25. It’s not the mortgage regulations they need to look at! It’s the FOREIGN buyers that are driving the prices up in Vancouver (read China). Locals already cannot afford anything here and these geniuses are going to tighten down lending rules? This will solve nothing. Restrict foreign ownership!

  26. The location appreciates and the house depreciates. It is important to maintain your house. The cost to build a house comparable to your existing house is likely considerably more. If people are paying full new prices for a used house with only average maintenance, they are likely buying an overinflated house. Take the property out of the equation and then figure what your house is worth. New materials and labour are expensive. Now compare the older house to a new house in a new subdivision with immature trees and shrubs. Ask yourself, what house is worth more? It can go either way. Location can be the most expensive part.

  27. Properties in Canada are over valued? No duh!

  28. Maybe some of Carney’s pals at Goldman Sachs can help out.

  29. Of course there is a problem here.  Regina and Saskatoon are prime examples of housing prices being over-inflated.  Currently, these two centres have some of those most expensive housing prices in the country.  To be honest, i can not even understand why…?  My theory is that politics at both the municipal and provincial levels have been boasting to the country, and the rest of the world that Saskatchewan is ‘Resource Rich’ and is booming because of it.  This is illusionary statement…  Yes, Saskatchewan does have a great amount of resources that are in great demand.. However, the jobs that are created are not the jobs that can afford or sustain the average house price of $300,000-$500,000… These are prices that are more appropriate for larger centres like Calgary, Edmonton, Toronto.  These centres have the Admendies to justify those prices.  I am sorry to say, at this time, Regina/Saskatoon do not have the amenditites that these centres have.  Therefore, there are no way a real estate agent can justify these prices.

  30. Here’s a few thoughts that should quit this quibbling about the GVMT and who’s running and therefore responsible.
    Is there crime in/on our street? Does crime create victims?
    Is a 4yr sentence worth being called “life”?
    How many arrests and how many convictions?
    Do you believe crime is going down?
    Who wants dangerious and repeat criminals released?
    Is mental health or drug related an excuse?
    How many of you have jobs and pay tax?
    How many don’t have jobs and don’t pay tax?
    Should prisoners be released without a job offer?
    Who pays the defence lawyers?
    Who pays the police?
    Who pays the judges?
    Who pays the prosecution?
    I have many more questions but answer these first as the system we have is unexceptable and I don’t think I’m alone in this.
    Of course criminals and their lawyers don’t want the changes I would like to see.
     

  31. Just to clarify, 5% is not the minimum downpayment.
    Most, if not all banks will lend you the 5% downpayment as long as you can afford the closing costs.

    That would essentially allow someone with 1% down, to purchase a home.

  32. Does Carney live in the same country? I make well over the national average and I can’t afford to buy a one bedroom condo in an old building in the GTA….probably overvalued?

  33. And you just figured that out?????

Sign in to comment.