⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

Canada's housing price surge increasing vulnerabilities: BoC

Published 04/09/2021, 02:36 PM
Updated 04/09/2021, 02:40 PM
© Reuters. FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa

By Julie Gordon

OTTAWA (Reuters) - Canada's red-hot housing market has bolstered the economic recovery from the COVID-19 pandemic, but the market imbalances are escalating and driving up already-high household debt, the Bank of Canada said on Friday.

Housing prices in Canada have surged over the last year, with the Bank of Canada becoming increasingly concerned in recent months that gains are being driven by excessive exuberance, investor activity and a fear-of-missing-out.

"Strength in the housing market is contributing to Canada's economic recovery from the pandemic. But it may also be intensifying housing market imbalances and household indebtedness," the Bank of Canada analytical note said.

"The evidence presented here generally suggests these vulnerabilities have increased in recent months."

The report, released Friday morning, shows that since the onset of the pandemic, outstanding household debt has risen by close to 3.5%, reflecting a surge in mortgage debt.

New mortgages to highly-indebted households are also rising sharply, the report shows.

Home price growth, meanwhile, has accelerated and is nearing the last peak in April 2017. The Bank also said some measures show rising exuberance in Toronto's housing market.

Canada's financial regulator said on Thursday it plans to tighten its mortgage stress test amid concerns about surging home prices, and to gird against risks when interest rates rise from record-low levels.

The average selling price of a Canadian home jumped 25% in February, hitting a record C$678,091 ($540,096), according to the Canadian Real Estate Association.

Governor Tiff Macklem said late last month that the central bank was seeing signs of household indebtedness worsening as housing prices soared.

© Reuters. FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa

($1 = 1.2555 Canadian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.