The CEO of Scotia
bank says he’s concerned about the possibility of a housing market correction in Toronto and Vancouver.
Brian Porter, who was asked about his outlook for the Canadian mortgage market during a conference call to discuss the bank’s first-quarter results, said he’s supportive of recent government changes introduced to reel in house price growth.
“Trees don’t grow to the sky and markets will correct at some stage here,” Porter told analysts Tuesday after the bank reported net income of $1.49bn during the first quarter of the year.
A few days earlier, the head of Canada’s largest bank said it was time to consider bringing measures that cooled Vancouver’s sizzling housing market to Toronto.
Dave McKay, the chief executive of Royal Bank
of Canada, cited a “somewhat dangerous mix of catalysts” in Canada’s largest city, such as ultra-low rates, lack of supply of single family homes, speculation, and foreign money coming in at an increasing rate since Vancouver instituted measures to dampen its market, including a foreign buyers’ tax.
“You’re seeing 20 per cent house price growth in a market where you shouldn’t see that much,” McKay said in an interview. “That’s concerning. That’s not sustainable. Therefore, I do believe we are now at a point where we need to consider similar types of measures that we saw in Vancouver.”
Ottawa introduced a series of changes to mortgage rules last October, including one that requires all insured mortgages undergo a stress test to make sure that borrowers would still be able to repay their loans if interest rates rise or their circumstances change.
Previously, stress tests were not necessary for fixed-rate mortgages longer than five years.
“I think we’re going to need some time to see those take hold, and we will see that through the spring mortgage season,” Porter said.
Porter highlighted the bank’s “very conservative mortgage book,” saying more than half of its portfolio of mortgage loans is insured.
“So really the message is we’re governing ourselves accordingly,” he added.
bank chief financial officer Sean McGuckin said that if prices continue to grow, more government intervention may be useful.
“I wish I had a crystal ball. I just don’t have one in terms of where prices will go,” McGuckin said in an interview.
Home price correction risk elevated in trend-setting markets - poll
Big banks are freaking out about Toronto real estate