What bubble? CMHC dismisses fears of a housing market bust - Macleans.ca

What bubble? CMHC dismisses fears of a housing market bust


The Canada Mortgage and Housing Corporation issued its annual report on Tuesday, dismissing fears of a housing bubble in the country.

Contrary to the opinion of the Finance Minister, Jim Flaherty, the CMHC’s conclusion on the state of the current housing market is that “clear evidence of a bubble is lacking.” The report also showed housing starts— new housing units under construction— rose 14 per cent in April to 244,900, beating market expectations by 10 per cent.

Leaders of some of Canada’s biggest financial institutions gathered for an economic summit hosted by Bloomberg in Toronto seemed to corroborate the findings in the CMHC report.

From Bloomberg:

“When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable,” said Gordon Nixon, chief executive officer of Royal Bank of Canada “Frankly, I’d like to see the rhetoric come down a little bit.”

A residential real-estate boom in the world’s 10th-largest economy has prompted senior policy makers such as Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty to warn that Canadians may be taking on too much debt.

Carney told lawmakers April 24 that high levels of household debt remain the greatest domestic risk to Canada’s economy. In an appearance before a parliamentary committee, he reiterated that a rate increase “may become appropriate,” and warned Canadian families to exercise “caution” with their debt levels.

Carney has kept his key lending rate unchanged at 1 percent since September 2010 in the longest pause since the 1950s.

Housing prices in Canada are probably about 10 percent overvalued, economist Paul Fenton said at the Bloomberg summit.

There doesn’t seem to be a sense that there’s been overbuilding, and housing doesn’t pose a systemic threat to the function of the nation’s financial system, said Fenton, senior vice-president and chief economist at Caisse de Depot et Placement du Quebec.

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What bubble? CMHC dismisses fears of a housing market bust

  1. This is just the same rhetoric as Helicopter Ben in 2006 saying that there is
    NO sign of a housing bubble and that there has never been a nation wide drop in
    the price of housing. He knew exactly what was going to happen and helped to
    inflate that bubble.
    There is going to be Global Hyperinflation brought on by the US Fed, ECB,
    Bank of Japan, Chinese central bank and the Bank of Canada and their ZIRP (Zero
    Interest Rate Policy) and flooding the markets with newly printed TRILLIONS!
    The US Dollar (World Reserve Currency) is now being challenged by the BRICS
    countries who are now openly talking about a Gold Standard. India is now buying
    oil from Iran with Gold.
    The only result of this is a burst of the Commercial and Residential Housing
    markets. Your only escape from this nightmare is to invest in precious metals
    like physical Gold & Silver.

    • If your fear is of hyper-inflation, owning real assets (that includes actual real estate and not condos) is not a bad place to be at all. You do want to make sure your borrowing term is adequately long to provide shelter from the resulting rate increases to combat the inlfation levels. I don’t believe we are headed for hyper-inflation, I’m just pointing out that price levels of all real assets tend to increase when that occurs.
      I am far from a real estate supporter at these levels. In fact, I rent and would considering purchasing on a healthy correction in the Toronto market. I believe the market is overdue for that, but I haven’t figured out the catalyst – rates won’t rise materially in the near term, and the Feds appear unwilling to implement rules specifically geared to throttling down the housing market specifically (let alone dealing with the many tax evasion issues derived from investment and speculation in Canadian real estate).

      • Adam, you say that you haven’t figured out the catalyst, but if you just look in the mirror… When the ever-dwindling pool of potential buyers like yourself stop buying (like you and increasing numbers of others like you and me) at the lower end of the ponzi scheme that is the current system in Canada because of CHMC, the whole house of cards will come crashing down.

        It’s not hyper-inflation of assets that will occur, but serious de-leveraging and hyper-deflation. This can occur simultaneously with price inflation of commodities, so don’t confuse the two. This meeting was conducted to try to talk the market into a “soft” landing. I doubt it will work. You see, the government and regulators need to admit the housing bubble so as to save face when it finally pops, while the commercial players like the banks need to engineer a soft landing. Thus, you can now understand the headlines.


      • You’re right. Owning property is the fundamental reason why people all around the world will do better then those without land. However, you miss one fact. People are putting a down payment of less then 15% in almost EVERY case. Consider the Phoenix market where the land owner is stuck with a $180K mortgage when in reality the house is really worth $80K. What happens when all these folks that do not have their homes paid off realize their property is inflated and not worth the ticketed price? Look at BC, more then half of the home owners are forking out more then 55% of their income into their mortgage (and in some cases 70% of their income is going to their mortgage). With all the fiat currency, printing money, wars, economies crumbling, I don’t see us holding off much longer. Were not immune folks. We do business with the world and they collapse we will suffer as well. Its not a good time to purchase a home now. My best guess is to wait another 2-4 years before realizing what the market is really like. Good luck!