Bank of Canada governor Mark Carney expects Canada’s strengthened housing market to moderate as the forces that drive demand weaken.
“While measures of housing affordability remain favourable, this is largely because interest rates are unusually low,” said Carney. “Rates will not remain at their current levels.”
Carney was in Vancouver, the country’s hottest real estate market, where he made a speech Wednesday to the Vancouver Board of Trade on Canada’s housing market.
He said residential investment has reached levels that “previously proved to be peaks in Canada and … the United States,” but that the market is expected to moderate as demand rebalances across the country.
Carney also said the possibility of greater momentum in household borrowing and spending could present an upside risk to inflation.
“With monetary policy continuing to be set to achieve the inflation target, our institutions should not be lulled into a false sense of security by current low rates,” Carney said.
“Similarly, households will need to be prudent in their borrowing, recognizing that over the life of a mortgage, interest rates will often be much higher.”
Carney’s comments came just hours after the Canadian Real Estate Association reported that high-price home sales in Vancouver continue to push national average prices upward (see “Vancouver continues to skew national housing figures” – BIV Business Today, June 14).
Joel McKay