{"id":781,"date":"2020-10-12T20:40:00","date_gmt":"2020-10-12T20:40:00","guid":{"rendered":"https:\/\/www.realestateleads.ca\/blog\/?p=781"},"modified":"2023-09-26T16:20:48","modified_gmt":"2023-09-26T16:20:48","slug":"bank-of-canada-states-intention-to-let-housing-market-regulate-itself","status":"publish","type":"post","link":"https:\/\/www.realestateleads.ca\/blog\/bank-of-canada-states-intention-to-let-housing-market-regulate-itself\/","title":{"rendered":"Bank of Canada States Intention to Let Housing Market Regulate Itself"},"content":{"rendered":"
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Go back 7 months of so and generally speaking people taking an interest in the future of the housing market in Canada were of two camps generally; those that thought it wouldn\u2019t weather the COVID 19 pandemic storm particularly well, and those who expected it would be a lot more resilient than people would give it credit for. Well, here we are spring of 2020 a very distant blip in the rearview mirror and it appears the people in that second camp were right.<\/p>\r\n\r\n\r\n\r\n

That\u2019s because, as we\u2019ve seen, the housing market has actually heated up overall and the many different reasons that people explained would factor into that outcome have proved to be legit. People have talked about the \u2018pent-up demand\u2019 factor, people have talked about the always-relevant supply and demand factors, and then of course there\u2019s ongoing buyer prerogative shifts that have factored into this too.<\/p>\r\n\r\n\r\n\r\n

And before we get into the meat of discussing this, we should say that an increasingly valuable housing market in Canada is overall a good thing for the country. Real estate routinely makes up nearly half of Canada\u2019s GDP (Gross Domestic Product) growth, and so even if you\u2019re one of the people who decries the cost of real estate in Canada you still can\u2019t deny that you and every other Canadian is benefiting from it in a more indirect but very tangible way.<\/p>\r\n\r\n\r\n\r\n

Yes, the way this benefits those with careers in real estate is a part of our way of looking at this. That doesn\u2019t, however, make the business any more of a potentially lucrative one than it ever has been previously. Realtors will know that real estate is a very competitive business, and that\u2019s why our online real estate lead generation service in Canada here at Real Estate Leads is so highly recommended for realtors who are newer to the business.<\/p>\r\n\r\n\r\n\r\n

Just last week the Bank of Canada (BOC) weighed in on all of this, and their belief regarding it is one that\u2019s in line with those who either have equity in real estate or are working to help those people as real estate industry professionals.<\/p>\r\n\r\n\r\n\r\n

Gov\u2019t Free to Intervene, but National Bank Won\u2019t<\/strong><\/h3>\r\n\r\n\r\n\r\n

The BOC knows full well that emergency pandemic policies are inflating house prices, but BOC GovernorTiff Macklem has stated it\u2019s not the central Bank\u2019s place to be interfering in the market, and that\u2019s a prudent understanding for many different reasons.<\/p>\r\n\r\n\r\n\r\n

The BOC has stated that it intends to keep the emergency measures \u2015 rock-bottom interest rates, purchases of Canadian mortgages and government debt \u2015 in place for the foreseeable future, and stated further that soaring house prices won\u2019t change the Bank\u2019s direction. Their commitment to keep interest rates low is unwavering at this time, but Macklem did state that if too many Canadian households move towards becoming dangerously over-leveraged then policy-makers have several tools they can put into place to counter that.<\/p>\r\n\r\n\r\n\r\n

The mortgage-interest stress test is integral to that, and it\u2019s very much of an \u2018ain\u2019t broke don\u2019t fix it\u2019 type of situation at this time. Other of these tools include government regulation measures like mortgage insurance, foreign buyers\u2019 taxes or empty-home taxes.<\/p>\r\n\r\n\r\n\r\n

.<\/p>\r\n\r\n\r\n\r\n

The BOC then stated further that they will keep their administered (interest) rate pinned down for the next few years, even if that policy contributes to increasing vulnerabilities. Should those vulnerabilities come around then the Bank would look to other policymakers to contain any growing risks, given that raising rates prematurely would also stunt the recovery.<\/p>\r\n\r\n\r\n\r\n

W<\/strong>ait<\/strong> & S<\/strong>ee <\/strong>Mode<\/strong><\/h3>\r\n\r\n\r\n\r\n

The average resale price of a home in Canada went up by 18 per cent in August, compared to a year earlier, one of the strongest gains on record despite the ongoing economic crisis. <\/p>\r\n\r\n\r\n\r\n

Economists are crediting the Bank\u2019s lowering of interest rates this year as a foremost reason for this. It\u2019s been estimated that the drop in mortgage rates over the past year has increased buyers\u2019 maximum purchase price by 24%.<\/p>\r\n\r\n\r\n\r\n

This means greater numbers of qualified buyers are able to get into the types of homes they need for themselves and \/ or their families, and there shouldn\u2019t be anything that anyone should disapprove of with that.<\/p>\r\n\r\n\r\n\r\n

It\u2019s also true that to this point the federal government has not taken any steps to cool house price growth, and its FTHBIA plan (First Time Home Buyer Income Assistance) is intended to be a \u2018demand-side\u2019 policy that would increase the amount of money Canadians can spend on a home. It\u2019s unlikely to reduce house price growth, and it was never expected to do so despite what some people had hoped it would do.<\/p>\r\n\r\n\r\n\r\n

Another very integral factor here is that Canadian cities are suffering from a chronic shortage of housing, and this is pushing up prices. This is something that doesn\u2019t look like it will be going away anytime soon, and it\u2019s a reality that people need to address head on rather than wishing it were otherwise.<\/p>\r\n\r\n\r\n\r\n

BOC Leery of Raising Rates – 500 Billion Reasons Why<\/strong><\/h3>\r\n\r\n\r\n\r\n

The pile of reason the BOC will want not to raise interest rates to slow soaring house prices is a mammoth one. For starters it fears that higher borrowing costs will sink the many people and businesses who loaded up on debt before and during the pandemic. Next we have them dropping their key lending rate to near zero and buying hundreds of billions of dollars of debt \u2015 including around $100 billion of federal government debt and billions more in Canadian mortgages.<\/p>\r\n\r\n\r\n\r\n

This was done in an effort to pre-empt what could have been a major financial crisis, something that would be bad for everyone, including those who are displeased with the cost of housing and how it\u2019s a barrier to their getting into the market.<\/p>\r\n\r\n\r\n\r\n

The BOC has also increased its balance sheet by $500 billion since the spring, injecting this much new cash into the economy, in the form of debt owed to the Bank. Central banks have pushed down interest rates, making it more affordable for households, businesses and governments to weather the crisis. This is called \u2018quantitative easing\u2019, and while it\u2019s a good thing in the biggest picture it does always cause asset prices to skyrocket.<\/p>\r\n\r\n\r\n\r\n

This is a more detailed and causation view into why Canada\u2019s average home sales prices are soaring in the middle of a pandemic. Can this change in the future? Absolutely it can, but we need to question whether or not that would be a good thing for ALL of us and not just a select few who\u2019d like to see home values decrease.<\/p>\r\n\r\n\r\n\r\n

For the very<\/em> foreseeable future, that\u2019s not happening.<\/p>\r\n\r\n\r\n\r\n

Sign up for Real Estate Leads here<\/a> and receive a monthly quota of qualified, online generated buyer and \/ or seller leads that are delivered to one realtor, and one realtor only – YOU. These leads will be for the region of any city or town in Canada where you are based and practicing real estate. It makes it possible for you to be fast-tracked to being in touch with individuals or couples who are genuinely considering making a move in the local real estate market. Check out our testimonials<\/a> page to see how realtors just like you are thrilled with what our service has done for them.<\/p>\r\n","protected":false},"excerpt":{"rendered":"

Go back 7 months of so and generally speaking people taking an interest in the future of the housing market in Canada were of two camps generally; those that thought it wouldn\u2019t weather the COVID 19 pandemic storm particularly well, and those who expected it would be a lot more resilient than people would give […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-781","post","type-post","status-publish","format-standard","hentry","category-general-topics"],"yoast_head":"\nBank of Canada States Intention to Let Housing Market Regulate Itself - Real Estate Leads Blog<\/title>\n<meta name=\"description\" content=\"Bank of Canada States Intention to Let Housing Market Regulate Itself - 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