Wednesday 10 December 2014

Canada's housing market overvalued by as much as 30%: BoC

Canada's housing market overvalued by as much as 30%: BoC


The Bank of Canada has acknowledged that the country’s housing market may be overvalued by as much as 30 per cent as a long-awaited soft landing remains elusive.


The bank said Canadian house prices have been overvalued by at least 10 per cent since 2007, and may now have overshot by anywhere from 10 to 30 per cent.
The range is significantly higher than estimates by the International Monetary Fund (10 per cent) and Canada Mortgage and Housing Corp., which judges there is a “moderate degree of overvaluation.”
Bank Governor Stephen Poloz acknowledged Wednesday that “some financial vulnerabilities appear to be edging higher.”
These include a growing appetite in Canada for subprime mortgages and risky auto loans, triggered by sustained low interest rates.
About 35 per cent of new, uninsured mortgages by smaller federally regulated banks since the end of 2012 could be considered non-prime, according to the report.

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