The influx of foreign capital is greatly distorting Canada’s already pressured housing market and aren’t the kind of investment the country needs, the chief of Canada’s largest mortgage lender argued.
“We do not need foreign capital using Canadian real estate as a piggy bank,” Royal Bank of Canada CEO David McKay said at a March 6 bank conference, as quoted by Bloomberg. “If capital is coming in to sit in a home, unproductively, and is distorting your marketplace and the livelihood of your residents – no, thank you.”
McKay expressed strong support for government taxes and other measures targeting foreign buyers, as well as other regulatory efforts to cool the country’s housing market. He said that he is seeing some impacts from these rule changes, with “a little bit more healthy dynamics.”
“Demand is down and house prices have been stable,” McKay explained. “There’s still intensive bidding, but to a lesser degree.”
Read more: Montreal cleaning up amid Toronto and Vancouver foreign buyer taxes
Toronto, Canada’s biggest housing market, has been correcting over the past few months amid a slew of regulations put in place to steady booming prices and increasing debt. Toronto home sales fell 35% in February from a year earlier, marking the weakest month of sales in 9 years, though benchmark prices were up 3.2% on the year, according to latest data from Toronto Real Estate Board.
Canada’s housing market has been on edge this year as mortgage guidelines came into effect, making it harder for prospective buyers to qualify for loans.
A surge of foreign money into Canadian housing had been adding “gasoline” to markets in Vancouver and Toronto, McKay noted. He identified a “cocktail of factors” that has led to unconstrained growth of Toronto and Vancouver home prices, including a growing population, land constraints, lack of supply, and highly stimulative interest rates that caused people to funnel more disposable income into their homes in addition to foreign money.