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Federal NDP leader Thomas Mulcair says he’s seeing serious dangers in housing markets where prices have climbed too high and warns Canadians could be in for a “terrible surprise.”
In an interview with BNN, Mulcair said historically low mortgage rates are fuelling mortgage growth, but stopped short of saying whether a New Democrat government would further tighten the market.
“Right now there is a serious danger. I think that (in) some cities the prices are too high,” Mulcair said when asked about hot housing markets like Vancouver and Toronto.
“There could be a bubble created there, and we could be in for a terrible surprise.”
Average home prices rose 8.9 percent in July on a national basis, according to numbers released Friday by the Canadian Real Estate Association. But when you strip out Vancouver and Toronto, the national gains were more muted – 4.1 percent year over year.
That’s because the average selling price in Vancouver was up 11 percent in July, while Toronto saw gains of 9.4 percent.
Toronto home price acceleration prompted Canada’s housing agency -- the Canada Mortgage and Housing Corp. -- to move its risk profile for Canada’s most populous city from moderate to high this week.
Former federal finance minister Jim Flaherty moved several times to tighten mortgage lending in Canada, and went as far as to call up Bay Street bankers when he felt mortgage rates were too low.
While Mulcair wouldn’t commit to taking any further tightening action, he said the government needs to educate people that rates won’t stay low forever.
The late Flaherty also mused about privatizing the CMHC – a move Mulcair said he doesn’t support.
“When something works, why get rid of it?” said Mulcair, who added he thinks the housing agency is doing a “fine job.”
The CMHC has been paring taxpayer exposure to the housing market by reducing its insurance-in-force. And its president, Evan Siddall, has suggested the banks should be taking on more risk when it comes to insured mortgages – essentially putting more skin in the game.
When asked if he agreed that banks should share more of the risk exposure, Mulcair said it’s an issue that needs to be looked at and analyzed.