• 

  James M. Flaherty, Canada Finance Minister

  Resale prices projected to rise 5.4% in 2010.
• Average home price expected to hit $337,500.
• Sales predicted to rise 13% to all-time high of 527,300.
• Housing starts jump 5.8% to 186,300 units in January.
• New Winter Olympics housing in Vancouver fuels starts.
• Six largest banks ask Ottawa to tighten rules on mortgages.
• Banks want buyers to put down 10% of sale price.
• Finance Minister James M. Flaherty sees no crisis looming.

(OTTAWA, CANADA) -- Is the red-hot Canadian housing market headed for a U.S.-like crisis?

The country's six largest banks fear it is.  But the country's top finance official thinks not.

"Right now, there is no compelling evidence of a housing bubble in Canada," Finance Minister James M. Flaherty said at a recent press conference.

"We've been watching and monitoring carefully and we continue to do that," the Toronto Globe and Mail quoted Flaherty, who is also a governor at the World Bank.

"There are certain tools available to the (Canadian) government if we choose to use some or all of them (to avoid a housing bubble)."

(Please see related Real Estate Channel postings:

Record Land Sales in China Keep Real Estate Bubble from Bursting, Feb. 5, 2010

Japan's Housing Starts Lowest Since 1964 Olympics, Feb. 1, 2010

Bubble Bursts for India's Once-Booming Real Estate Market, Jan. 26, 2010 )

 
Flaherty added, "As you know, we did so in 2008 ..."  He acknowledged, however, "There are some signals in the market that are concerning."

Mark Carney

Among those signals are too-easy credit on obtaining mortgages. The country's six largest banks have asked Bank of Canada governor Mark Carney to mandate tighter rules on mortgages so that buyers will need a larger down payment, possibly 10 Percent.

But Carney says 'the central bank has no immediate worry about a housing bubble," according to The Globe and Mail.

Carney told the newspaper that he and his colleagues have been "alerted to this issue...the broader issue of household debt."

Carney added, "We want to ensure that people manage their affairs...recognizing that the current situation with interest rates is extraordinary...and won't persist."

Independent analysts monitoring the housing market appear to side Flaherty and Carney.

Millan Mulrain

"It appears that the new homes market is slowly coming back to life and may finally be benefiting from the resurgence in overall Canadian housing activity," Millan Mulrain, an economics strategist at TD Securities in Toronto, told The Globe and Mail.

Mulrain adds, "However, with part of the uptick in starts likely to be coming as a result of temporary factors, namely the surge in Olympics-related housing in British Columbia, we believe that this report (from Canada Mortgage and Housing Corp.) overstates the true strength of the recovery in residential construction and expect to see a modest pullback next month."

Another analyst, Robert Kavcic of BMO Nesbitt Burns in Toronto, says new home sales "should taper off in July as buyers are jumping the housing starts gun in British Columbia and Ontario.

"... Those same buyers are also likely pulling forward some purchases, given well-ingrained expectations of rate hikes in the second half of the year."
 

Robert Kavcic

Kavcic adds, Given that supply still has some catching up to do, housing starts should hold up around current levels through the remainder of 2010."

Multi-family and single-family housing starts jumped 5.8 percent to 186,300 units in January, according to Canada Mortgage and Housing Corp.

For all of 2009, starts totaled 149,081.  In April 2009, starts had dropped to 118,500.  Before the Great Recession began in 2007, they were running as high as 220,000.
 
The Globe and Mail reports economics estimate Canadian housing starts should average around 175,000 units per year to keep pace with population growth.

Canada's population is about 34 million, according to the World Bank and Canadian government statistics. The U.S. population is estimated at 307 million.

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