OTTAWA (Reuters) - Canada’s housing market, which once caused concern about possible overheating, has evolved in a satisfactory way, Finance Minister Jim Flaherty said on Monday.
Canada did not suffer a U.S.-style housing crash during the world economic downturn. Though its housing market slowed in 2012 after new rules were put in place, the market has since built up steam, prompting a debate as to whether it has managed a soft landing or is due for a crash.
The government and regulators tightened mortgage insurance rules and underwriting guidelines several times between the financial crisis and 2012. Flaherty told a news conference he was comfortable with the way things had turned out.
Flaherty also said his health had improved significantly since earlier this year. The minister has a rare skin disease, which can lead to other complications.
Bank of Nova Scotia Chief Executive Rick Waugh said last week that authorities should raise interest rates rather than impose more regulations if it fears a bubble, since any exuberance was a reaction to low rates.
Asked to react to that, Flaherty said: “I‘m comfortable with the way the housing situation has evolved. I tightened the rules on mortgage insurance four times in the past several years, and OSFI has also taken some action, the superintendent of financial institutions, and I‘m comfortable with what I’ve seen.”
He noted that while the Bank of Canada’s overnight rate had not risen, mortgage interest rates have gone up.
Building permits in Canada jumped 20.5 percent in July, but mainly due to plans for commercial buildings. The value of housing permits rose by a relatively tame 4.1 percent after a 12.8 percent fall in June, and were 3.4 percent below levels of a year earlier.
Flaherty flew to Moscow in July for a meeting of Group of 20 leading economies’ finance ministers but was unable to attend any of the sessions due to illness. He did, however, attend the G20 summit in Russia last week.
“I did have some significant problems, as you know, earlier this year. I spoke about them publicly, but things have improved significantly and I‘m continuing to get better, thank you for asking,” Flaherty, 63, told a reporter.
Writing by Randall Palmer; Editing by Chizu Nomiyama, Janet Guttsman and Andrew Hay