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AFP
An influx of capital from Asia is partly to blame for soaring housing prices in Vancouver and Toronto, Canadian Prime Minister Justin Trudeau said.
“We know that there is an awful lot of capital that left Asia in the past few years,” Trudeau told Canada’s public broadcaster CBC.
“Obviously overseas money coming in is playing a role” in Canada’s housing affordability crisis, he said.
Economists are worried that real estate prices in the two metropolises have soared to record levels beyond what most Canadians can afford.
Both have recorded double-digit housing price increases year after year over most of the past decade.
According to their respective real estate boards, Vancouver prices climbed 30 percent in the 12 months ending May 31, while Toronto prices rose 16 percent.
There is a widespread perception that overseas investors and speculators are to blame, but there is no firm data supporting a link.
Trudeau provided no supporting data Friday to back up his remarks, although his government set aside funds to study the matter in the last budget released in March.
Canada’s central bank governor and the Organization for Economic Cooperation and Development (OECD) both expressed concerns this month about the housing situation.
Previous administrations have on five occasions since 2008 tried to tighten mortgage lending rules in order to cool heady real estate activity, but those measures failed.
“We are all hoping to stabilize the market,” Trudeau said, noting that any federal move requires delicate balancing — curbing price increases while not devaluing existing equity in people’s homes, especially in markets that are not overheated.
The prime minister’s comments come as Toronto Dominion Bank warned that a real estate bubble was forming in Toronto and Vancouver and could pop soon.
New construction and resale activity continue to grow strongly in Vancouver and Toronto, while Alberta and other resources-producing regions are seeing price and sales declines. Other markets have seen little or no price growth.
“There is little debate that Canada’s hottest housing markets are ripe for a correction; the difficulty is predicting its timing,” said the Toronto Dominion Bank report.