Canada bank CEOs warn on housing, not Europe
By Cameron French
TORONTO (Reuters) - Top executives at Canadian banks say they don't expect Europe's troubles to spill over into the North American market in a meaningful way, but caution they are concerned about a downturn in the domestic housing market.
"My personal view is I think Europe will find a way to muddle through," Gordon Nixon, chief executive of Royal Bank of Canada, RY.TO said at a financial services conference hosted by his bank.
Nixon's comments were echoed by Bank of Montreal BMO.TO CEO Bill Downe, who called Europe a "tangled ball" of competing interests for two or three years, but one that will likely not balloon into a global crisis.
Nixon and other CEOs allowed that Europe might fall into recession as it works through it sovereign debt crisis, but they pointed to dangers closer to home - notably the booming condominium market - when asked about areas of concern in the Canadian economy.
"There's no question that if you sort of say which markets are more vulnerable, its going to be condo, and it's probably going to be condo Vancouver and condo Toronto," said Nixon, adding that the risks in the business were higher now than a year ago.
The two cities, Canada's third and first most populous respectively, have experienced a massive surge in condominium building over the past decade, part of a broader housing boom that has been fueled by historically low interest rates.
Government data on Tuesday showed that Canadian housing starts climbed at an annualized rate of 200,200 units in December, higher than expected, helped by soaring condo construction.
While analysts don't see Canada going through the same kind of housing crash that hit the United States during the subprime crisis, many warn of a real estate bubble that could burst at any moment, sending home prices tumbling. Continued...