Bank of Canada Governor Stephen Poloz said he’s confident the nation’s housing sector will return to growth later this year, as markets like Toronto and Vancouver stabilize and the impact of new regulations is absorbed.
For example, he blamed the cooling of markets in Toronto and Vancouver to a build-up of froth in recent years that had been driven by “extrapolative expectations” for price gains. These expectations had fuelled speculative demand and prompted other buyers to rush in for fear of missing out in those markets.
Weak markets in Alberta and Saskatchewan, meanwhile, are primarily due to the ongoing weakness in the oil sector. Poloz also continued to champion tougher mortgage qualification rules that have recently come under attack by the real estate industry. He said that to the extent these new measures have curbed demand, they’ve also made the financial system more resilient and helped reduce speculative behaviour.Imaginative ApproachThe mortgage system was working well but could benefit from an imaginative approach, Poloz suggested, such as encouraging more people to take out longer fixed-rate mortgages.
“I can see how longer-term mortgages can contribute to a safer financial system and more stable economy,” he said.
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