Category Archives: opinion

Poloz: HCG problems ‘idiosyncratic’ and contained

Bullwhip29 pointed out this article in the financial post where Bank of Canada governor Stephen Poloz says that the troubles at Home Capital are ‘idiosyncratic‘ and contained:

Poloz said the central bank saw no signs that Home Capital’s deterioration had triggered contagion, according to an interview with the newspaper on the sidelines of the Group of Seven meeting of finance ministers and central bankers in Italy.

“We’d be looking for signs that there are problems with the (financial) system as opposed to preoccupying ourselves with individual institutions,” Poloz said.

He also has some stuff to say about the housing market in general:

Poloz also reiterated in the interview the central bank’s view that recent house price increases were not sustainable, and echoed previous statements that some speculation appeared to be at play in the market. He added that did not mean a major price correction was in store.

“Often, when you have a truly unsustainable housing market, you will see very rapid price increases (and) very rapid credit growth,” Poloz said. “But we don’t see that in the credit side, so I do think a significant amount of this that is fundamental, but layered on top, is a speculative element.”

Read the full article here.

We’re all super-high on housing

From southseacompany, confidence in the Canadian housing market has reached a record high:

“The experts are getting louder in their warnings that a housing bubble has formed in some parts of Canada, but Canadians don’t seem worried.”

“In fact, confidence in the housing market hit a record high in the latest weekly Bloomberg-Nanos index — even as respondents turned negative on their own personal finances.”

“The survey found 48.5 per cent of Canadians expect house prices to rise in the next six months, the highest level recorded in the survey since 2008. Fewer than 11 per cent expect to see house prices decrease.”

Read the full article over at Huffington Post.

The correlation between interest rates and speculation

Bank of Canada Governor Stephen Poloz has said he doesn’t think there’s a strong correlation between interest rates and speculation, claiming even a 5% increase in rates wouldn’t have an impact on real estate speculation in Canada.

Over at BetterDwelling.com they disagree with this thought:

It was almost stupid to not buy property at these rates, since it was almost free money. This didn’t just give speculators more capital, it created speculators out of people that would normally not be able to play the game. These aren’t Bay Street suits with wads of cash. Everyone from your barber to grocery store clerks are turning into real estate speculators. Cheap rates, a larger qualified buyer pool, and the expectation that you can always make money, turned shelter into lottery tickets.

Read the full article here.

Blame Mark Carney for Canada’s Housing Bubble?

The Financial Post has an article that lays the blame for the enormous Canadian housing bubble on former Bank of Canada Governor Mark Carney:

Carney, perhaps even more than former Fed Chairman Ben Bernanke, was an excellent crisis central banker. Unfortunately, he did not nail the dismount.

After it became clear in 2010 that the developed world had exited the financial crisis, Carney raised rates just a little, to 1 per cent, and then left them there until 2013, when he joined the Bank of England.

Seems like joining the Bank of England should count as nailing the dismount.

If Canada has a hard landing, accompanied by a severe recession or a depression, Carney’s (and to a lesser extent, Poloz’s) mistake will have been unforgivable.

Read the full article over at the financial post.