Canada’s housing market remains in flux. Long a driver of the country’s economy, policymakers tried to rein in the sector—red-hot Toronto and Vancouver, in particular—to avoid a sharp correction.
Canada’s benchmark home price fell 1.5 per cent in July from a month earlier, led by a drop in Toronto. Canada’s booming economy is also spurring expectation among industry observers that Bank of Canada Governor Stephen Poloz will raise rates as early as this week for the second time this year, a move that could dampen housing demand.
Hanging over it all is Finance Minister Bill Morneau’s proposal to force private lenders to share some of the default risk in the event of a downturn.
Morneau launched consultations on risk-sharing last year—but since then, he has been largely silent on when it will move forward.
“This is part of our plan, it’s still very much on the table and we’re going to take the time we need to get it right,” Dan Lauzon, a spokesman for Morneau, wrote in an e-mail to Bloomberg last week.
The industry has pushed back against the measures. The proposals “could disrupt the market and have negative implications on both competition and consumers’ access to financing,” according to a February letter to Morneau from the Trust Companies Association of Canada, representing small and mid-sized trusts and banks. Government should “allow for a reasonable period of time” to let other housing policy changes work through the market.
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