“Often, when you have a truly unsustainable housing market, you will see very rapid price increases (and) very rapid credit growth,” governor Stepehn Poloz said, as quoted by Reuters.
“But we don’t see that in the credit side, so I do think a significant amount of this that is fundamental, but layered on top, is a speculative element.”
The assertion mirrored that of statements by Realosophy Realty Inc. president John Pasalis, who earlier this year called for more decisive federal action via a harsher speculation tax.
“I think we need a big stick right now,” Pasalis said. “This is generally what policies should discourage – they should discourage speculation in single-family homes. It’s not good, it messes up our entire market and it makes housing less affordable for buyers.”
Poloz’s comments came amid the Bank’s observation that the Home Capital Group situation has somewhat stabilized at the moment, as there are still no signs of a fiscal “contagion” spreading from the troubled lender.
"We’d be looking for signs that there are problems with the (financial) system as opposed to preoccupying ourselves with individual institutions,” Poloz said over the weekend. “The question would be: What caused this? Is it something unique to the institution itself, or is it something in the system? … I think this situation (Home Capital) is pretty clear on that; it’s idiosyncratic.”
According to its top official, Bank of Canada is currently taking an eagle-eyed look at the elevated pace of price growth in the national housing market—a phenomenon mainly fuelled by the impact of widespread speculation.