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Rick Waugh, president and CEO of Bank of Nova Scotia.BRENDAN MCDERMID/Reuters

Bank of Nova Scotia's chief executive officer Rick Waugh said the Bank of Canada should raise its rates if the central lender is concerned that housing prices are rising too quickly.

Mr. Waugh stressed that higher rates would be the most effective way to tame housing prices now that regulators have reined in mortgage amortization periods and taken other steps to prevent a property market bubble. Scotiabank's leader added that he doesn't see a hard landing for real estate.

"I do not think there is a bubble," he said after delivering a speech at the Empire Club in Toronto, pointing out that mortgage delinquencies and losses are falling.

"It's not an underwriting or credit problem, it's the fact that (low) interest rates do cause bubbles," Mr. Waugh told reporters following his speech. "I do not think there is a bubble, but if you're really concerned, and you're a policy maker, you know what the right thing to do is? Raise interest rates."

New data show sales of existing homes in Canada rebounding, with a number of major cities posting double-digit increases in the number of homes that changed hands in August compared to a year ago.

The Toronto area saw a 21-per-cent rise in sales over the Multiple Listing Service last month. Vancouver's local real estate board reported a 52.5 per cent year-over-year jump in sales, and Calgary posted a 27.5-per-cent increase.

As recently as June, the Bank of Canada warned that an "abrupt correction" to Toronto's overheated condo market would hurt the national housing market and threaten the broader economy.

"If the upcoming supply of units is not absorbed by demand as they are completed over the next 12 to 30 months, the supply-demand discrepancy would become more apparent, increasing the risk of an abrupt correction in prices and residential construction activity," the bank said.

In its most recent comments on Wednesday, the Bank's commentary was more measured. "While the housing sector has been slightly stronger than anticipated, household credit growth has continued to slow and mortgage interest rates are higher, pointing to a continued constructive evolution of household imbalances," the Bank said.

Mr. Waugh, who steps down as CEO in November after a decade at the helm of Canada's third-largest bank, said the Toronto-based bank will continue to focus on organic growth but is well-positioned to take advantage of opportunities for acquisitions if they come up.

"The most important thing that we have is $3- to $4-billion in retained earnings after dividends to our shareholders, because we made a 17-per-cent return on our capital, and we grow, we increased, the dividend, and we can look for opportunities to hopefully lend, but also to maybe acquire," said Mr. Waugh, who is due to be replaced by Scotiabank president Brian Porter.

"Priority No. 1 is organic growth. Acquisitions are not in our game plan. But we have the wherewithal and the experience to be opportunistic if that is required."

With a file from Reuters

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