Poloz: higher rates for housing a bad idea

Bank of Canada Governor Stephen Poloz says it’s a ‘bad idea‘ to raise interest rates to combat imbalances in housing and consumer debt as that would only hurt manufacturers and the general economy.

“Housing activity is showing renewed momentum and consumer debt levels are high, so household imbalances appear to be edging higher,” he said. “But it is our judgment that our policy of aiming to close the output gap and ensuring inflation remains on target will be consistent with an eventual easing in those household imbalances.”

Changes in Canada’s population justify growth in the housing market, and Toronto, Vancouver and Calgary are the only three cities showing signs of overbuilding, Poloz said at a press conference.

Canada’s dollar extended declines after the speech and as crude oil, one of the nation’s main exports, fell below $80 a barrel. The currency fell 0.9 percent to C$1.1357 against the U.S. dollar at 3:15 p.m. in Toronto.

It may be just a crazy idea, but if the government actually wanted to do something about house prices and consumer debt, wouldn’t eliminating mortgage insurance do that without any change in rates?

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@ #26 if the economy goes into the toilet Poloz, the Harper administration and the banks will be more accommodating; no if ands or buts about it. it remains to be seen if all those vacant properties owned by monied offshore investors would hit market or not (esp if source of funds was questionable in the first place); the lower the loonie drops, the more attractive prices appear in the eyes of intl buyers over leveraged homeowners will not hit bids and consolidate “just like that” for three reasons: (1) humans have tendency to bury the truth, delay the inevitable in an effort to save face; i’m sure you all know stories of folks doing the ridiculous and absurd in order to maintain appearances (2) other than cherry picking bargain hunters with stink bids in place, there will be no… Read more »


> only three cities showing signs of overbuilding

This obsession with overbuilding as the sole measure of trouble is narrow minded. Household growth CAN go negative, easily. People lose a few jobs and they can consolidate just like that. Boom, even more extra houses.


We have been defeated. Vancouver the resort city. Fly in, check your real estate investments, see the doctor, check your bank balance but make sure your don’t pay ANY taxes. Then fly off and leave the local mice to run back and forth trying to live in this godforsaken place and pay taxes so the roads are clean and police protect your real estate investment.

Thank you Christy and Harper, and Robertson this is a very sustainable society you have helped build.

And we have a complete money whore for central bank governor, who says kids should work for free !!

Meanwhile these guys are printing money like toilet paper to screw us even more.



The RE slowdown is catching up with us NATION WIDE now.

This should continue to get more and more interesting.

Look out below.


New Listings 146
Price Changes 75
Sold Listings 139



@bullwhip29 I agree that movement in gold and oil isn’t any indication of a deflationary direction for assets in the broader sense. I was highlighting the fact that these bastions of speculative investment are not safe, including real estate. If anything prolonged depression to gold and oil prices are upward pressure to speculation in real estate. Now that I think about it though, the part that should be the most alarming to observers is that oil, for example, has only been in a bull market for about 6 years. For any speckers that went back into oil in the run up to $100+/barrel the 2008 crash was fresh in their mind, and I’m sure that was a big factor in their decision making process on how much of their investment they felt comfortable allocating to oil. For Vancouver real estate,… Read more »


I SAY, ol’ chum…bring on the “incentives”!

“The Windsor”, a new high rise near Coquitlam Centre, is offering a $9500.00 incentive on its 2 bedroom units (which start at $324K) to would-be buyers.

Things must be a little slow…


Oops! I glossed over some of your details. Your write:

“one year term at a 15% increase over the last tenants. That’s an extra $2K in my pockets…”

I’m assuming that’s and additional $2K annually! If that’s the case, then you’re receiving $2000/12, or $166.67 extra rental income monthly. If that is a 15% increase over the previous tenants (as you claim), then the previous monthly rent was $1111.11, while the current tenants’ monthly rent is $1277.78.

A one-year fixed mortgage (on $300K) from TD would put you at a monthly payment of $1183.35, which would give you probably enough to cover property taxes, but nothing for condo fees ($300K is not buying you a house) or maintenance. Assuming you put down the minimum of 5%, that is a price/rent ratio of about 240, which is not insane.


I rent a 1,000,000 house for $2000/month in fraserview. I’ll admit I am getting a great deal, the owners dad built the house and is wealthy so I don’t think he cares to get the maximum rent, just wants to have good tenants. I have my CASH/TFSA/RRSP invested with a broker who charges 1.6% and has earned me 15% on average last three years. Also get a tax break on divdends etc compared to rental income (which is taxes as income, so 50%). This gives me peace of mind not have to worry about my diversified investments and not have to pay property taxes, go to home depot for repairs, etc. I will NEVER buy in this market, even if it drops 30%. I have plans to retire in 20 years and not have property. Why would I?? Expensive to… Read more »

Westside Realtor

All I can say about garth turner’s post tonight is



…and Bob’s your uncle, bob! Good on you!

I’m curious and was hoping that you’d fill in the blanks. I’m asking because I’ve done the math and it makes no sense to buy a place for rental income these days.

So, please help a brother out:
When did you buy the place?
How much did you pay?
What is your current monthly carrying cost–mortgage/taxes/reparis, etc.
What is the monthly rental income?

Thanks, and once again, good for you!


Just secured new tenants for my suite next month. Took one night of showings with three pre-checked prospects and a post-meeting credit check and now have a nice couple locked down to a one year term at a 15% increase over the last tenants. That’s an extra $2K in my pockets next year with interest rates locked at 2.5%. Not sure if I agree with bear bloggers who have been decrying home ownership for the last 8-10 years.

Westside Realtor

Enjoyed your posts Bullwhip, hope you continue to share your thoughts – we live in interesting times and I agree in general with the thrust of your logic/views.

SFH sales in the upper end continue to suck

That said, if sellers keep dropping prices to hit the bid, avg sales price could tick higher.

Higher avg prices with valuations dropping, how can it be you say?

Sales mix. A $10000000 place droppong.its price to $7.5mm still increase avg prices.

All in all, the clouds on Van RE continue to darken, imho.


#10 “Mastercard showing that consumer is comfortable running up the tab again (vs putting some of the savings in the bank and earning zero%). predicting a huge xmas/black friday for retailers this year. of course, all this defies logic and common sense but no one cares about doing the right thing anymore. so, go buy a new car, a house, or better yet, get one of each” Yes, interesting, no one cares about doing the right thing anymore. How is this going to turn out? What is with people and their debt? Has it become ok to be in debt? No one cares? I would love to hear from somebody in debt if they care about it. But I guess that is not going to happen as seemingly more seem to be more about image (need to look cool -total… Read more »


“In Canada’s crazy housing market, ‘the hot get hotter’” Global News.


“Guatieri and other housing market watchers suggest good job markets, an influx of immigrants and millennials and other “fundamentals” are supporting the heated conditions and booming prices in Vancouver, Calgary and Toronto.

So are record low interest rates.

“Strong support from immigrants and millennials are definitely a factor, but it’s doubtful prices would climb this fast without a big push from low, low interest rates,” the economist said.”


Crash is coming? haha…….sure it is. Interest rates will remain low. Good luck with that idea kids. Go back to school now before your parents take away your computer.


sorry comment #8 should be directed at #5



not an “unexpected” stimulus. imho this was planned. recent news from Visa and Mastercard showing that consumer is comfortable running up the tab again (vs putting some of the savings in the bank and earning zero%). predicting a huge xmas/black friday for retailers this year. of course, all this defies logic and common sense but no one cares about doing the right thing anymore. so, go buy a new car, a house, or better yet, get one of each


Cheaper crude is a boon for the U.S. economy, with U.S. drivers saving about $250 million a day on gasoline compared with mid-June, according to AAA. This leaves consumers with money to spend on other items, especially as the holiday shopping season starts, The Wall Street Journal said on Tuesday, the same day that the Associated Press declared that the price break “will likely give the world economy an unexpected stimulus.”

Source: http://blogs.reuters.com/data-dive/2014/11/06/why-little-susie-can-expect-shale-in-her-stocking/


@ #6 There is no doubt in my mind that the precipitous slide in gold and crude prices has been “helped along” by the powers that be, so I wouldn’t be putting much stock in this as any sort of true indicator that we entering a deadly deflationary death spiral imminently. Speculators in pretty much every other asset class have come out on top 9 times out of 10 in the last few years. The Fed et al have done a masterful job at keeping the markets propped up as they completed the “taper” (or at least created the illusion they did). Now they can sit and watch as the BOJ, ECB or whoever else runs with the ball for the time being. Don’t get me wrong, the crap will hit the fan as you say, but I believe it… Read more »


Canada don’t issue a lot of foreign currency debt and our central banker is on record saying lower currency helps our exports and economy. So don’t be surprised if he ends up pulling a BoJ move and basically buys up every single Federal government bonds and cut the 10 year rate to 0.5%.

Sure the currency might get destroyed but hey, exports and jobs! Also, lower interest payments on debts so all is good!

Until the unintended consequences struck….


It’s not over yet. Don’t underestimate the supply of morons to chase real estate prices higher and higher. The mania is so bad it’s probably going to take an external shock to pop the bubble at this point.


The bubble has been running so long in Vancouver I think you’re looking at one of the biggest real estate bubbles in the modern world. If you’re a property owner in Vancouver I’d recommend you cash out or strap in for massive asset deflation. Speculators in oil and gold are getting punished on a daily basis. The reckoning for real estate speculators in Canada is coming.

Bull! Bull! Bull!

crash is coming guys! any day now! mainstream media, policy makers, talking heads have all been right for 10 years, and we’ve been wrong BUT THEIR TIME IS OVER! PREPARE TO GLOAT!