BMO CEO Darryl White Darryl says it's too soon to determine whether renewed lockdown measures 'actually might have a dampening effect' on the housing market.Dario Ayala/For The Globe and Mail
The chief executive of Bank of Montreal says policy makers and regulators should “plan urgently” in case they need to step in to help cool overheating housing markets – but adds that they should wait and see what happens in the coming weeks.
Markets in some parts of Canada are “literally evolving weekly,” Darryl White said in an interview Wednesday after BMO’s annual shareholders meeting. Some of the activity comes from demand that has been pulled forward amid the pandemic, adding fuel to the typically busy spring season, he said. And while there is “a reasonable supply” of new listings, too few new homes are being built, he said, leaving “an imbalance” with rising demand.
But Mr. White also said it is too soon to determine whether renewed lockdown measures in provinces such as Ontario, where some school boards have moved entirely to online learning and a new stay-at-home order is set to take effect Thursday, “actually might have a dampening effect” on the housing market.
“I think you have to plan urgently, and then I think you have to make decisions on policy intervention – not today, but maybe in a few weeks, when we see the effect of the next few weeks on the housing market, because a lot of things are going on,” Mr. White said. “If I were in the policy making business, I would understand my range of options through this time.”
Last week, a report by BMO economists urged policy makers to “douse the fire” of soaring housing prices. The report outlined 10 potential cooling measures, including various taxes, raising interest rates, adding transparency to the blind-bidding process and increasing the supply of homes in all regions. “It’s a good list,” Mr. White said, though he stopped short of endorsing any particular measure.
Yet growing angst about housing prices and restrictive public-health measures haven’t dampened Mr. White’s optimism about an economic rebound later this year. He said pent-up demand to spend, combined with a bulge in savings sitting in bank accounts, has kept many personal and commercial banking clients feeling buoyant about the back half of the year. At the same time, advance travel bookings are picking up, and corporate treasurers are getting ready to make investments.
“I think we’re going to see a very robust recovery,” he said, saying the bank predicts gross domestic product will rise 6.5 per cent in Canada and the U.S. this year. “No question, we may have a bit of a bump in the road here for the next month or two. But that doesn’t actually change, at all, the outlook for the back half of the year – or for the full year for that matter.”
He also said there should be enough supports from governments and banks to sustain most businesses and households through the difficult months ahead. “I worry, of course, about how uneven it all is. And there are certain sectors … affected more than others,” he said. “The bridge has gotten, probably, a little longer.”
But he expects that, as the pace of vaccinations picks up over the summer, economic activity will start to take off, even without new assistance from governments. “I think the recovery will accelerate all by itself,” he said.
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James Bradshaw