Canada’s finance minister sees signs of cooling in Canada’s housing market, and that’s fine by him.
Economists and market watchers have been arguing for two years about whether the Canadian housing market, which has been among the hottest in the world coming out of the recession. But spring data shows sales in most centres have slowed considerably from the same time last year, and price gains appear to be moderating.
“I’m actually encouraged that the market itself is showing some correction,” Finance Minister Jim Flaherty said while visiting Alberta Thursday. “We’re not seeing so much of that in Toronto, but in Vancouver, yes. And overall we’ve seen some moderations, some softening in the residential market and I think that is a good thing.”
There was some speculation that the federal government would step in to further cool the market with its budget, but it resisted calls to make it more difficult for Canadians to qualify for mortgages.
It wouldn’t have been the first time – Mr. Flaherty previously intervened by ending 35-year amortizations on mortgages and forcing Canadians who choose variable mortgages to qualify using a higher interest rate than they’d actually be paying.
Record low interest rates have made it less expensive for Canadians to borrow a lot of money, which has led some to worry that they won’t be able to afford their homes when interest rates move higher in response to an improving economy.
Mr. Flaherty has opted to issue warnings to Canadians rather than enact new policy, mirroring the approach taken by the Bank of Canada. In January, he said “we have been cautioning Canadians for some time that they need to be prepared to have higher interest rates in the future and be aware of the affordability issue that that may create for some Canadians, not to assume that mortgage interest rates will remain low for a long period of time. So we all have to be cautious in our financial planning.”
Canadians will have a better idea of how homes have been selling when the Canadian real estate association releases its data for March early next week.