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Mark Carney is now shrugging off concerns about Canada’s housing market.
As he steps up his battle to contain Britain’s rapidly growing house prices, Mr. Carney’s track record in Canada is coming under more scrutiny. And he’s fighting back by suggesting that Canada’s problems are peanuts next to those in the U.K.
In an interview with Sky News this weekend, Mr. Carney, the former Bank of Canada chief and current Bank of England governor, told his interviewer Dermot Murnaghan that “we could do more” to keep a lid on the British housing market, including limiting certain types of mortgages and ensuring individuals could afford loans at much higher interest rates.
In response, Mr. Murnaghan pointed out that Canada adopted some such measures when Mr. Carney was here, and suggested they haven’t worked. “Are you in danger of having been the governor in two countries that left behind them a housing boom?” Mr. Murnaghan asked.
Mr. Carney said that he left Canada at a time when inflation was on target and the economy was the best performing among the G7 nations.
Moreover, he said that “the housing market in Canada, in terms of valuation, is about 50 per cent less in terms of valuation metrics than the housing market in the United Kingdom. So let’s focus on the United Kingdom.
“The issues around the housing market in the United Kingdom, the longer-term structural issues I think you know, there are not sufficient houses built in the U.K.,” he added. “To go back to Canada, there are half as many people in Canada as in the U.K…twice as many houses are built every year in Canada as in the U.K., which just gives you a sense of the orders of magnitude of the supply problems.”
Presumably the happy balance in terms of housing construction lies somewhere between Canada and the U.K. – while Mr. Carney is prodding the U.K. to step up housing starts, during his tenure here the Bank of Canada warned that too many houses were likely being built. For instance, in the spring of 2013, when he was still Canada’s central bank governor, the bank said “despite the recent moderation in the rate of new housing construction, there are still signs of overbuilding, particularly in some urban areas.”
His comments about Canada are also interesting because, when he was here, he implied that house price valuations were worth worrying about.
“There are issues particularly in some parts of the country, in the condo market, without question, where activity has been particularly strong…and in some of our major cities, without question, evaluations are extremely firm,” Mr. Carney told the CBC in April 2012. Canadian home prices generally have risen to new highs even since then, although prices in some markets, such as newly-constructed condos in Toronto, have softened.
To be fair, Mr. Carney himself suggested in that interview with the CBC that his repeated warnings about the housing market and debt levels here were, in large part, meant to prevent a potential problem from turning into a real problem by convincing Canadians to slow down their debt binge.
“We’re warning of an issue at a time that we can still do something about it,” Mr. Carney said in 2012.