“That calls for, clearly, very, very specific policies,” IMF managing director Christine Lagarde stated last week after meeting with Prime Minister Justin Trudeau, as quoted by The Globe and Mail.
“I would suggest that macroprudential measures by the banks under the authority of the central bank is certainly one good avenue to explore in order to keep control over the housing markets and avoid excesses,” Lagarde added.
On September 13, Trudeau confirmed that federal, provincial, and municipal officials are working on possible solutions to the seemingly non-stop housing price growth in Canada’s most overheated markets.
“One of the challenges people are facing in markets like Vancouver and Toronto is increasing home prices, and what we are looking at – in partnership with the provinces and the municipalities – are ways to ensure that Canadians are able to afford their homes,” Trudeau said.
The Prime Minister confirmed that he has granted an extra $444 million for the Canada Revenue Agency’s use in this year’s budget to ensure the “continued enforcement of the tax code” in order to “[crack] down on people who are avoiding paying their fair share of taxes.”
Observers have welcomed the statements, which came in the wake of Vancouver and Toronto prices reaching record heights over the past few years.
“[The IMF] is recognizing openly that traditional measures to cool housing – i.e. interest rate hikes – are really not an option at this point,” Bank of Montreal chief economist Doug Porter said. “It sounds very much like [Lagarde] is suggesting that lending standards could be tightened, under the broad guidance of the central bank.”
Earlier this month, Finance Minister Bill Morneau said that officials are considering all possible options in moderating Canada’s hottest real estate markets without stifling activity in other regions.
Any government interventions in cooling down the Canadian housing market must be tailored to the specific needs of each market rather than being all-encompassing measures such as national interest rate hikes, according to the head of the International Monetary Fund.