Canada may share a head of state with Australia and New Zealand but the Bank of America Merrill Lynch has a different reason to link the three nations.
Its analysts say that the reliance on commodities and the level of money in the countries’ real estate could lead to an “unwinding” in the medium term. Their report says that the central banks of the three nations only have low interest rates as economic growth stimulants.
The good news for homeowners is that the report also notes the importance of the real estate sector as being a key reason why the governments of all three countries are unlikely to increase interest rates any time soon.
However, it still sees the ultimate conclusion being painful, such as policy changes for mortgages or measures which reduce home values.
The analysts also believe that the taxing of foreign investors is the best tool to help curb rising prices in certain markets, noting that “resale house prices fell by 19 per cent in Vancouver in August, the first month of a new foreign real estate transaction tax.”