The finance minister says the real estate price increases seen in Toronto and Vancouver were “unsustainable.”
The federal finance minister says steps taken to tame Canada’s hottest housing markets have already helped slow down a sector he believes was moving at an unsustainable clip.
Bill Morneau’s comments Tuesday follow this week’s release of data showing Canada’s home sales for June posted their biggest monthly plunge in seven years. The national figure was led by a drop in the Greater Toronto market.
The new data provided the latest evidence that steps taken at federal, provincial and municipal levels have begun to temper the country’s real estate sector, particularly in the Vancouver and Toronto regions.
“We thought that the price increases in Vancouver and Toronto, specifically, were unsustainable.”
Morneau told a news conference that changes in the housing sector were playing out “largely the way we thought it might.” He also noted, however, that it was “too early” in the emerging situation to draw conclusions.
On a national basis, last month’s housing transactions were down 6.7 per cent compared with May, the Canadian Real Estate Association said Monday. It was the third-straight monthly decrease and the Greater Toronto Area registered a 15.1-per-cent drop.
Compared to May, sales fell last month in 70 per cent of all local markets measured by the association, including the Lower Mainland in B.C., Montreal and Quebec City.
Earlier this year, the Ontario government put in place more than a dozen measures to curb the Toronto market, including a 15-per-cent-tax on foreign buyers. Since then, sales in Canada’s largest city have slowed.
A number of federal measures have also been introduced in recent years to address housing market concerns during the extended period of low interest rates. They’ve included higher minimum down-payment requirements, reduced amortization periods and stress tests on insured mortgages.
Separately, mortgage interest rates have started to rise following last week’s hike in the Bank of Canada’s benchmark interest rate.
The federal banking regulator recently proposed to expand stress tests to include uninsured mortgages as part of the effort to tighten lending rules.
Asked about the recommendation by the Office of the Superintendent of Financial Institutions, Morneau said the measures under consideration are slightly different because they’re clearly aimed at the higher-end part of the market.
In the months ahead, Morneau said the federal government will remain vigilant.
“We’re going to be careful as we do this every step along the way,” he said.
“We need to continue to focus on this market. We’re not going to assume that the measures that we’ve put in place so far have necessarily given us comfort that the market’s exactly where we want it to be.”