Ottawa ready to clamp down on housing market to prevent bubble - Macleans.ca
 

Ottawa ready to clamp down on housing market to prevent bubble


 

OTTAWA – Federal Finance Minister Jim Flaherty says he’s prepared to clamp down on mortgage rules once again if Canada’s housing market continues to heat up.

The finance minister named consumer debt, which is at near record high levels, and a resurgent housing market as the number one domestic threat to the economy in his fall economic update released Tuesday in Edmonton.

In a a question-and-answer session on the update, Flaherty noted that he had acted in the past on an overheated housing market and would do so again if he felt it were necessary.

“We have to watch out for bubbles, always, in markets around the world, including our own Canadian residential real estate market, which we keep a sharp eye on,” he said.

“I’ve intervened four times in the last several years and I’ll intervene again if I have to.”

The update noted that while the pace of household credit growth has continued to slow, “the recent pick-up in housing market activity, if it reflects stronger underlying momentum, could translate into further debt accumulation.”

Flaherty last tightened mortgage rules in July 2012. Although that produced a sharp pull-back in home sales and starts, recent months have seen sales revive and prices continue to climb, although at a more moderate pace than previously.

Many analysts believe the pick-up in the market is a temporary phenomenon caused by prospective homebuyers moving up purchases to get ahead of coming higher interest rates.

But two weeks ago Flaherty called that analysis a theory that could prove wrong. At the time, the finance minister said he was not yet ready to intervene but that he was monitoring the situation closely.


 

Ottawa ready to clamp down on housing market to prevent bubble

  1. They should have done this before they started screwing with loosening the rules and expanding amorts in the first place (0 & 40 anyone?). The thing they need to do now is bump down payment requirements up to 10% for everyone, including first time buyers. Other than low interest rates, which don’t seem to be going anywhere, the ONLY thing that will keep more people out of the market is a higher down payment requirement.

    • Nah.. there’s another thing that’d keep people out of the market. Just telling the banks that CMHC will no longer provide insurance for any losses above 100k on a single product.

      ‘course.. that’d probably crash it as well.

      Just looked up their limits.. it’s currently set at a million. So cut that in half. 500k.. that’d take the wind out of most of the bubble pretty quick.

      • Definitely cutting it to half a mill would be a good start.

  2. uhhhh Mr Flaherty i think u need to sit down………its already a bubble. Interest rates cant stay low like that forever, lets just hope it doesn’t end in catastrophic insolvency.