Give Bank of Canada Governor Mark Carney full points for showmanship - his decision to use Vancouver as a backdrop for a speech on the country's housing market is a total showstopper.
The press release from the central bank saying Mr. Carney would address a sold-out Board of Trade meeting on Wednesday elicited squeals of glee from many market watchers, especially those who spend a lot of time warning others that Vancouver's housing market is bound to crash in a spectacular manner (any day now).
While the warnings used to come from contrarians yelling from the fringes, there has been a sudden surge in bubble-related cautions from the country's banks and economists. Even smug Torontonians take time away from gossiping about neighbourhood bidding wars to wag their fingers at the West Coast.
There are plenty of reasons to be concerned - chief among them the fact that the average family needs to spend 11.5-times their annual income to afford a house in the city. That's double the rest of the country.
The average sale price has increased 21 per cent in the past year (and 188 per cent in the past decade) to $815,000 - a bewildering 70-per-cent more than the same property in Toronto.
The Bank of Canada said two years ago it is interested in the housing market for two reasons.
The first is that the housing sector "typically plays a disproportionate role" in market cycles, and household wealth provides collateral for borrowing and spending. It's also extremely sensitive to interest rate changes. Secondly, major recessions have been triggered when housing markets get away from themselves and then crash.
Both points are likely to be made again. Emphatically, even. But short of lowering his eyebrows menacingly as he warns Canadians to lower their household debt, there's not much else he can do.
Well, he could raise interest rates to discourage borrowing. But with thousands of Canadians overextended and relying on low rates to stay in their homes, Mr. Carney must strike a balance between cooling demand and setting off a wave of foreclosures.
It'll be an interesting speech, to say the least. Too bad it sold out in minutes.
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