Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Townhouses in Toronto's Parkdale neighbourhood on Dec. 14, 2015.

Ian Willms/The Globe and Mail

Fresh warnings are being issued about the Vancouver and Toronto real estate markets as a growing chorus urges further action from Ottawa amid a continual rise in housing prices.

Bank of Nova Scotia's chief executive officer raised concerns about the two urban markets, calling them "frothy" and asking the federal government to introduce specific measures to rein in prices.

"The government has lots of levers to deal with this," Brian Porter said during an interview.

Story continues below advertisement

"So the question is not about the banks, it's about the government doing something about it."

He suggested three potential solutions: raising down payments, increasing the qualifying rate for five-year fixed mortgages and imposing a temporary luxury tax on foreign buyers.

"We've been encouraging the government to do some things here, and we've been consistent for years," Mr. Porter added.

"We have a new government in Ottawa, so it takes time. We understand that. But this is important stuff."

Lenders are reluctant to take steps to cool mortgage lending – a key driver of profits – on their own and would prefer government regulations be put in place that would create a level playing field across the board.

While banks are free to impose their own lending restrictions, moving unilaterally would introduce competitive disadvantages if rivals fail to follow.

Mr. Porter's comments come as housing price increases in Canada's two hottest real estate markets show no signs of slowing down. The Canadian Real Estate Association reported that the benchmark price for a house in Vancouver in April surged more than 25 per cent at an annualized rate.

Story continues below advertisement

On Wednesday, the Organization for Economic Co-operation and Development once again raised its own concerns. In its economic outlook report, it warned of the risk of a disorderly housing market correction as low borrowing rates have "underpinned rapidly rising housing prices, particularly in Vancouver and Toronto, which together are a third of the Canadian housing market."

"Macroprudential measures have strengthened recently but should be tightened further and targeted regionally," the OECD said.

Canadian authorities have introduced limited measures recently that are designed to curb housing market excesses – for example, capping amortization periods at 25 years and imposing a minimum down payment of 20 per cent on investment properties.

In December, the Department of Finance doubled the minimum down payment to 10 per cent for a portion of some large mortgages. Louis Vachon, CEO of National Bank of Canada, told Bloomberg on Wednesday that minimum down payments should rise to 10 per cent for all mortgages over time.

Also in December, the Office of the Superintendent of Financial Institutions proposed that banks should hold more capital against riskier mortgages and Canada Mortgage and Housing Corp. (CMHC) said it would increase the fees it charges lenders that use its mortgage-backed securities program.

But the measures appear to have done little to hold back housing price increases in key markets, or curtail views that authorities should be doing more to cool things down.

Story continues below advertisement

A recent report from economists at Royal Bank of Canada said valuations for single-detached properties in Vancouver and Toronto are "sky-high" and defying local fundamentals.

Benjamin Tal, an economist at CIBC World Markets, believes the situation could grow worse over the next few years, with more foreign money likely entering Canadian real estate markets amid regulatory and monetary changes in China, putting pressure on Canada to react.

"Applying a flipping tax on foreign investors might be a step in the right direction," Mr. Tal said in a recent research note. "It won't solve the problem, but it might be an effective way to remove the most problematic element of foreign investment in Canadian real estate."

Victor Dodig, CEO of Canadian Imperial Bank of Commerce, added his voice to the conversation about surging housing prices, remarking at the bank's shareholder meeting in April that B.C. Premier Christy Clark and Prime Minister Justin Trudeau have identified housing affordability as an issue.

"We will be an active participant with government in working on a solution," Mr. Dodig said, although he didn't add details on what the solution might look like.

In an interview with The Globe and Mail in February, Evan Siddall, CEO of CMHC, said government cannot fine-tune the market.

Story continues below advertisement

However, he proposed a risk-sharing arrangement that would see the banks shouldering some of the mortgage risks now held by the government with its mortgage insurance programs.

"It's a better system if the people who are managing the risk day to day, banks, lenders, have some exposure to that risk. If they don't, then we have to rely on regulation," Mr. Siddall said. "I suspect we'll start talking more about it actively later this year as to what makes sense."

A spokesman for the federal Finance Department said, thanks to "prudent and responsible mortgage lending practices," the government believes Canada's housing market is stable on the whole. He said steps have been taken to address the pockets of risk in markets like Vancouver and Toronto and the government will continue to monitor the situation.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the authors of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies