Home Value Increases Sustainable

According to a story from Property Wire Canada, fear of a housing bubble appear to be unfounded.

 

Amidst calls for continued controls over borrowing- and possibly more government intervention in the mortgage arena, Jim Flaherty suggests that things, largely, are fine the way they are.

 

There have been a number of warnings lately about the possibility of a real estate asset bubble being created, with home prices steadily increasing, and household debt getting further stretched.

Speaking at a news conference, Flaherty was quick to point out that, although the market is humming along nicely, there have already been effects taking root in the market, from changes made earlier this year. There has been a slowdown in many regions of the country. In short, he feels they have a handle on it.

"We have seen in the past year some softening in the Canadian housing market, in part due to the tightening of the insured mortgage market rules that we did earlier this year … That's an appropriate result from that tightening. It will take clear evidence of a bubble in the housing market in Canada, which we have not seen."

So what would constitute a housing bubble in Canada? Flaherty says, “If we saw dramatic surges in prices in some part of the country. There's some demand in Vancouver in particular, particularly from the Asian people coming to Canada who are investing in real estate. So there's some demand there that is unusual in terms of the entire country, but overall across the country there's been some moderation, which is good."

Of particular concern were markets like Vancouver and Toronto that had experienced meteoric increases in property prices, mostly due to an influx of foreign property investors- but as Flaherty suggests, this is generally limited to a few small pockets of the country, and would be inaccurate to characterize the national picture as such.

Prices in these markets continue to appreciate, but are very much on the radar for these policy makers- although they feel that there is not cause for concern there either.