Canadian Housing Market
Real Estate, Mortgage Markets, and Monetary Policy
The Canadian housing market does not appear to be characterized by excess supply at this time. The proportion of unoccupied, newly built dwellings in most cities remains below historical averages, suggesting that a major widespread reversal in house prices is unlikely in the near term. The recent downward trend in building permits suggests that supply is adjusting to softening demand. And importantly, the Canadian mortgage market is in reasonably good shape. The Canadian "subprime" mortgage market accounts for less than 5 per cent of the residential mortgage market, and might be better characterized as a "near-prime" market, with quite different lending standards than appear to have been applied in the United States.
Conclusion
The housing market plays an important role in the national economy. And changes in housing activity and prices can have far-reaching effects. The turbulence of the past 12 months emanating from the U.S. housing market has posed risks and challenges for many people – and for the conduct of monetary policy. Although the Canadian economy has not escaped the effects of financial market dislocations or the weakening U.S. economy, the Canadian financial system and the housing market have shown considerable resilience, in part reflecting prudent practices.
From:
Remarks by Sheryl Kennedy
Deputy Governor of the Bank of Canada
to the Investment Industry Association of Canada
Banff, Alberta
23 June 2008