There has been a surprising number of comments from lenders and bank economist lately about the idea of an overpriced Canadian real estate market and the risk to irrational buyers. I thought it might be interesting to round up some of the comments Canadian Bankers and Economists have made in the media recently regarding the housing market and the possibility that some Canadian markets are in a housing bubble.
TD Bank Financial Group economist Pascal Gauthier
..the current momentum is not expected to last beyond the next six to 10 months. Were it to continue into 2011, there would be more credence to the view that a bubble has formed. But the brakes are currently being applied in the background, which should prevent a bubble from forming between now and then.
BMO Capital Markets deputy chief economist Doug Porter
“Housing has definitely been at the forefront of any kind of a recovery we’ve seen … I don’t think you can find a single segment of the economy, other than maybe bankruptcy lawyers, who’ve thrived more in the last six months or staged a more impressive turnaround.”
“The rapid-fire rebound in Canadian housing is showing no signs of letting up,” Mr. Porter said in a note to clients. “While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country.”
CIBC senior economist Benjamin Tal
“I challenge the [mortgage lending] industry to come up with research to make sure we know what types of mortgages are in the pipeline. We need to know how many people taking variable rate mortgages at 2.5%, who cannot afford financing a mortgage at 4.0 or 4.5%. If it’s a marginal number, then we’re not creating a bubble — we’re basically seeing monetary policy that is working.
We have to make sure if you take a mortgage now, you have to be able to finance it 200 basis points higher after 2010. If you can’t, then you should probably buy a smaller house or don’t buy a house at all — that the prudent thing to do.”
ING Canada President and CEO Peter Aceto
“You have situations in some markets such as Toronto where people are making multiple offers for homes, they are paying thousands more and waiving conditions. It gives me concern they may not be thinking rationally, and this could lead to problems. Canadians are also paying their homes off slower and slower, and the concern for me is that they are buying more house than they can really afford.”
“Canadians have been proud internally that we’re very different than the Americans in the way we behave in terms of our spending habits and the way we deal with credit. But over time we have become a lot closer than we think.”
Scotia Capital economists Derek Holt and Karen Cordes
“Is Canada in a housing bubble? Probably, but low rates, mortgage innovation and a relative shortage of new supply are likely too keep it going for a while yet.”
“The Canadian Real Estate Association has reported October sales and prices. The results are a bright spot in the Canadian economy, but with prices up 20 per cent over year-ago levels and at all-time highs by virtually every measure, this is becoming an over-valued asset class in our opinion.”
HSBC Securities Economist Stewart Hall
“… it certainly bears watching. The real estate market is definitely showing very, very robust levels of activity, particularly at this stage of the business cycle, where we have an economy that really hasn’t launched into recovery mode yet. Beyond 2009 and getting into 2010, if we are continuing to throw off these heightened levels of activity, then I will become quite concerned that we are on the cusp of an asset bubble here…”
“And when they pop, it’s rather painful to all and sundry.”
Have I missed any? If you spot any interesting quotes from lenders or economists share them in the comments section.
