Soaring Canadian real estate prices worry bankers
Canada‘s housing prices continued to surge in December, according to the latest figures released Wednesday, after warnings by bankers of an overheated real estate market and record-high debts.
The Canadian Real Estate Association announced in its monthly report that the national average sale price of a home rose 10.4 percent year-over-year in December.
Two of Canada’s biggest cities, Toronto and Vancouver, saw the largest price gains, it said.
Sales volumes meanwhile continued to fall in December for a third consecutive month, but overall figures for 2013 showed a slight rise in activity (0.8 percent) from the previous year.
The association’s chief economist, Gregory Klump, in a statement forecast even higher prices and sales volumes this year.
“Absent further mortgage rule changes, sales in 2014 may surpass the annual total for 2013 if demand holds steady near current levels as strengthening economic and better job growth offset the impact of further expected marginal mortgage interest rate increases,” he said.
Ed Clark, the outspoken chief executive of Toronto-Dominion Bank, meanwhile told a conference on Tuesday that banks should be cautious when it comes to mortgage lending.
He downplayed the risk of a pending bubble burst in the Canadian real estate market, but pointed to the sudden run-up in real estate prices as a warning sign.
“If you run a bank, you should be worried about it,” he was quoted as saying by local media.
Gordon Nixon, the outgoing head of Canada’s largest bank, the Royal Bank of Canada, forecast mid-single digit growth in consumer lending this year followed by an easing in consumer debt growth as interest rates begin to rise from near-record lows.
Their comments follow a warning by the International Monetary Fund that Canadian household debt-to-income ratio had reached a new high in mid-2013.
Households are gradually reducing their debt burden, it said then, but added, “elevated levels of household debt and high valuations in a number of housing markets remain a potential vulnerability.”