Does the Bank of Canada Think Real Estate Buyers are Suckers?

Some of you are under the impression that Bank of Canada Governor Stephen Poloz does nothing but sit around all day eating Doritos and watching The West Wing on Netflix, but you are sadly mistaken.

He also issues reports that freak out Realtors.

Consumer debt loads and house prices that could be as much as 30 per cent overvalued are the two biggest risks to Canada’s economy, the Bank of Canada warned in its semi-annual Financial System Review on Wednesday.

Yeah, but “up to 30 percent” includes zero percent over-valued too you know? Surely not everyone is overpaying for Canadian real estate.

The bank says it’s about 95 per cent sure that house prices have been overvalued by an average of about 10 per cent since 2007. That’s based on a new forecasting model the bank says it created, which incorporates existing data from private banks and other government institutions.

Huh. 95% Sure? really? I bet it’s all a’cause of those wealthy foreigners right?

And a lot of those inflated house prices are coming at a cost of rising debt loads. About 12 per cent of Canadian households are considered to be extremely indebted — which means they have a debt-to-income ratio of at least 250 per cent. That ratio has doubled since 2000, the report notes.


But that’s ok because younger buyers are building equity right?

Young homeowners, the bank added, have become even more vulnerable to negative shocks to income and to higher interest rates.

Wow. What a buzzkill.

*For those who followed the foreigner link we would like to offer our sincerest apologies.  If you are a glutton for punishment, here’s a video of our prime minister singing Guns n’ Roses “Sweet Child o’ Mine“. If you watch the whole thing you earn a cookie! If you cut it off at 3:33 you have to go to work at a Tim Hortons in Fort Mac. You have been warned.


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@ #39 some of the froth was taken out of market during 08/09 financial crisis, which preceded the olympics. situation is totally different now. too many believe that worst is behind us for good, we survived the worst crisis since the depression etc. imho, practically everyone is now situated on the same side of the boat thinking it can never ever go down or that every hiccup is only a temporary blip/buying opportunity. i’m not suggesting that a full on market rout is imminent or anything like that, but we are most definitely due for another lost decade (ie. 1994-2004) at the very least. i’ll go out on a limb and suggest that many recent buyers of RE would not have stepped into market knowing that they’d have to essentially bail water for years on end before possibly seeing some… Read more »


I got a letter from the BoC the other day, I opened and read it, it said house buyers are all suckers.

Shut It Down Already

Marco, people here said the same thing would happen right after the Olympics closing ceremony. The “rush to the exits” never materialized. They said the same again when bond yields ticked up slightly a year ago – yet now you can lock in a 5yr at about 2.7%.

It’s now reached the point where they don’t even discuss the market data (despite paulb patiently posting it everyday). It’s decended into assertions, hopes, and wishes of morons like Westside Realtor.

Westside Realtor

Marco, great post.

Prices are slipping now but this is being obfuscated by the msm and phony balony numbers.

Listings will spike. Delta houses on 50foot lots will get rocked.


@35 and 36

I won’t deny the fact of foreign investment into Vancouver. I live here.
When interest rates rise and effects the locals there won’t be enough foreign investors to fill the gap. When prices start slipping listings will go up. Panic selling. Supply will out way demand. I feel right now is the calm before the storm. How more blatant can it be that house prices are over valued when the BOC have finally come out and said it. We are in the denial stage, living in a bubble (pardon the pun). I firmly believe our house prices will eventually realign with the States as they have been historically. On average American property is 50% less then Canadian.



The wealthy are not going to use that route. They are going to send their kid here for school…then via Express Entry Visa Immigration, the whole family will be here.

Christy C is doubling international student numbers.


Can you guess what Canada’s most important industry is?

Immigration and Non-permanent Immigration.

Without it, the whole RE ponzi scheme collapses. Banks, Telecom, etc. will stop getting new customers…

This is Agenda #1.

Even GT won’t let anyone post anything negative regarding this on his blog.


@ #33

i’m sure the powers that be are well aware this vote will fail; imho, they are making it easier for the public to paint themselves in a corner (as costs to upgrade transit and pay for botched installations are coming whether we like it or not)


“They want everyone to vote in the spring of 2015.” The referendum will fail, no question. My understanding is they are going to ask which tax hike you support in order to improve transit. No way does a referendum get approved that approves a tax hike, like raising the PST for example. If they did the referendum like they do in the civic elections where they just ask if it is OK for the government to borrow X amount to make X improvements, well those are easily passed. But when you let people know they will actually have to pay for it starting now then the answer will be no. Sound familiar? It reminds me of people buying houses today. $1 million, no problem. I can pay that back later right? If the people actually saved that $1 million and… Read more »


Who to believe?

BOC? Locate Real Estate Mafia?

what’s a young millennial to do with all these different opinions. Just listen to your gut. If you want to impress people, put a downpayment on a house, condo or whatever. If you want to laugh at people because you’ll be wealthier in the medium term, stuff your TFSA and stuff it more when Harper double it in next years budget.

I love that article saying that mainland chinese are buying up the Vancouver market and will continue to do so in 2015. Colleagues i talk to are mad they are being outbid when making offers on a home. Pretty sure people they’re being outbid by are not mainland chinese.

The roots of “owning” are deep my friends. VERY DEEP.

Barb Rennie

The Mayor of Vancouver is proposing a half percent PST hike to pay for improvements to Translink. Translink – where middle management gets paid $400,000.00 + per year with company car to use. I think perhaps they can trim the fat and find that money themselves. They want everyone to vote in the spring of 2015. Already 75% of people interviewed said “ABSOLUTELY NO!!!!” How dare they? It’s so mismanaged that i would think they would stay low and keep taking the outrageous wages instead of asking for more and have the public question their budget. BTW – what happened to the compass card?

long dong

Chart #10 really caught my eye. No one should own mutual funds.

long dong

@17: “our ex-immigration minister Jason Kenney just announced “One Step Closer to Building a Memorial to Victims of Communism in Canada’s Capital””

Well they’ve already built a memorial to Canada’s most famous Communist. I guess whether Communism is good or bad depends on which foreign government you want to toady to and which you want to demonize.


@ inflation?

Oil is not 100% of our economy… your first point is?
To your second point…
Imports have inflated with the low dollar….just try shopping online sites stateside.


New Listings 86
Price Changes 21
Sold Listings 95


“Stuck on the sidelines. House hunter Melissa Hart now finds herself priced out of a market that just keeps climbing”, Toronto Star. “Melissa Hart didn’t have to hear it from the Bank of Canada. She knows first-hand that Toronto’s housing market is overvalued — maybe even as much as 30 per cent — just from scouring MLS listings every single day. Now the couple find themselves facing another grim reality. They may have inadvertently joined the ranks of renters-for-life.” ” Almost three years ago she started up a hugely popular blog, FML Listings, which used MLS Listings to chronicle — and comment on — “Ridiculous Toronto Real Estate” “Every time we saw something in our price range, it went for tens of thousands over asking or needed hundreds of thousands in renovations. By the end, even our agent was… Read more »


On Canada following the Fed:

“Canada’s central bank long has insisted its policy decisions are not directly influenced by the Fed’s actions, but market participants have always been skeptical. Mr. Poloz’s predecessor, Mark Carney, conceded in 2010 that there “are limits to the divergence that there can be between Canada and the United States.” Mr. Poloz acknowledged that while “theoretically” the gap between Canadian and U.S. policy rates “could be anything,” the Bank of Canada “never will be 100 per cent independent” because the Canadian and U.S. economies are so closely intertwined.”


If the loonie was going to tumble with oil, would it not have already tumbled? Forex markets are very efficient. Oil’s down 45% since summer, loonie not even 10% over the same timeframe. I see the loonie’s more likely to rise from here as oil stabilises. Disinflation is still the only concern, not inflation.



Great point, As I stated earlier the BOC may have no choice in raising rates. Oil may continue it’s tumble and takes the dollar down with it. then the US rases it’s rates which will drive the CAD down more. We may have no choice to fight the freefall and stabilize our Economy. I stated this earlier in the week and the only argument was that our dollar was 60 cents back in the 90’s and we managed to make it through. Rates were alot higher back then (5 to 12%), so this argument was what one would call a moot point. Bottom line is it’s scary time to be a homeowner. Not for me personally but if I had a mortgage of 300k or more then it may keep me up at night…


The new Immigrant Investor Venture Capital scheme will be here soon. There’s talk about new scrutiny measures but I guess it’ll just be added cost to bribe an auditor.

What’s also interesting are these quotes:

“approving about 50 applications per year”

“A report in the Wall Street Journal last month said the investment per applicant would be C$1 million to C$2 million, and that the target size of the fund would be C$120million, suggesting 60 to 120 applicants would be accepted.”


Politicians s are thinking of building a “Memorial to Victims of Communism” meanwhile people in Richmond were celebrating Mao’s birthday!

“Mass killings occurred under some Communist regimes during the twentieth century with an estimated death toll numbering between 85 and 100 million.” Wikipedia


: Political advantage? The BoC’s goal isn’t to get reelected. In theory it’s to keep inflation in check.

Already the loonie has lost 10% in 2014. If the Fed raise their rates and oil falls a bit more, we’re looking at another 5-10% drop in the CADUSD. Almost everything we use is imported and/or sold in a USD price. Prepare to pay more for most of the stuff you buy. From deodorant (made in US) to honda civic (made in canada but technically sporting a USD price) to flatscreen tvs (made in china, priced in USD).

Most people are not ready to see 5% inflation, and the BoC especially doesn’t want that. And overnight rates are really the only lever central banks can pull.


i doubt they will raise rates. What is the political advantage of raising rates? Most of the population have their savings in the house. It is not like there are savers being affected by low rates. The rates will stay low forever like in japan.
Its not rising rates that caused the US bubble to pop.


our ex-immigration minister Jason Kenney just announced “One Step Closer to Building a Memorial to Victims of Communism in Canada’s Capital

official complaint or cyber-attack from certain countries in 3…