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Housing distortion: Vancouver, Toronto, Calgary

A wise voice in the BNN newsroom told me there’s no such thing as an average home price in Canada, and of course that voice is right – all real estate is local.

So when you hear stories about hot markets stoking fears of a housing bubble and a major price correction, well it really does depend on where you live.

Finance Minister Joe Oliver says the national housing picture is being distorted by three hot markets – Vancouver, Toronto and Calgary.

For the record, he doesn’t see a housing bubble – and he notes Bank of Canada Governor Stephen Poloz, CMHC president and CEO Evan Siddall, and the OECD all agree with him.

There are those, of course, who disagree – including Edmonton-based investment manager Hilliard MacBeth and Ben Rabidoux of North Cove Advisors, among others who I’ll be talking to in coming weeks.

One-third of all sales activity in the country occurs in those three hot markets. And when it comes to dollar value of those transactions, Vancouver, Calgary and Toronto account for almost half the trade.

So if those three cities are distorting the national picture, what can Ottawa do to cool those markets down?

Oliver admits there’s no easy answer, no special lever that Finance officials can pull to cool down Vancouver, Calgary and Toronto while doing no harm to other markets that are either flat, or falling.

Oliver made the comments as he fielded questions following a conference in Toronto on Wednesday.

That’s also when we got the latest read on the hot Calgary market – sales up 12% in September from a year earlier, single-family home prices up 10.6%, condo prices up 9.5%.

The price of oil may be getting beat up, but Calgary’s housing market is doing just fine, thank you.

September stats for Toronto and Vancouver are imminent.

Of course the big, catch-all lever rests with the Bank of Canada.

Ed Devlin of bond-fund giant PIMCO says it’s time for Governor Poloz to pull that lever, or at least threaten to.

Devlin says the Canadian housing market is 10% to 20% overvalued, and could run up to 30% if the bank doesn’t get hawkish on interest rates.

In short, it’s high-time us Canadians get a stern warning about rates not staying low forever.

Mark Carney and the late Jim Flaherty weren’t shy about hectoring us on that front.

P.S. That wise BNN voice is a deeply intoned one that goes by the initials M.K.


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