In what may be viewed as a bit of good news for brokers, the Governor of the Bank of Canada, Stephen Poloz, announced Thursday that fears of a housing bubble are unfounded and that the market is expected to achieve a soft landing.
“Our judgment is (the Canadian housing market) is a situation that is improving; this is not a bubble that exists here that would have to be corrected,” Poloz said.
The sentiments echo that of other industry forecasters including Fitch Ratings who released a statement on Wednesday to the same effect. However, Poloz also warned that another major world-wide financial recession could negatively impact the housing market in Canada.
“If there is a disturbance from outside our country, that’s another analysis,” he added.
And although he acknowledges housing prices in Canada – which are believed to be overvalued by over 20 per cent – are very high, Poloz justifies that the most expensive markets have always been so.
“(The average price of home prices in Canada) looks expensive,” he said. “But which markets are expensive? Well those markets have been expensive my whole life.”
Earlier this week, the Organization for Economic Co-operation and Development (OECD) advised the Bank of Canada to work on hiking the overnight rate, which has been held pat one per cent for more than two years, to 2.25 per cent by the end of 2015. The Governor, however, does not agree with OECD’s analysis.
“Those things together give us the judgments we reach and obviously they differ in a material way from what the OECD is saying. It’s our job to reach that final conclusion.”