The Canadian housing market is not destined to crash, said Bank of Nova Scotia chief executive officer Rick Waugh yesterday at a Toronto speaking event.
He also said, “The economy is strong enough and diversified enough that the impact will be handled accordingly without the risks of an extreme bubble.”
He predicts a soft landing at the very worst, The Globe and Mail reports. It also says his comments are optimistic when compared to those made other bank execs this past year.
Also in a recent research release, the bank asserts, “The Canadian housing markets are in the early days of cooling off from all-time record highs across virtually every variable in the household sector. This includes the home ownership rate, renovation spending, inflation adjusted consumer spending, house prices, and leverage.”
The release claims Canadians have reached saturation levels for ownership and spending measures as a result.
Additionally, it says due to the faltering global economy, “Lighter capital flows are coming in to regional housing markets from abroad. [This is occurring] primarily in Toronto and Vancouver.”
Regarding mortgage rule tightening, the bank says, “Pro-cyclical regulatory policy is being applied on top of this cooling process and is adding to downside risks. Mortgage finance terms were eased to the greatest degree since the 1950s-1960s with the changes that were pushed through in 2006-07. Then the current Federal government reversed course and sharply tightened housing finance rules.”
It adds the effects of these tightening efforts have slowed the flow of credit in Canadian housing markets much faster than would have occurred through natural forces.