OTTAWA (Reuters) - The Canadian government has no plans for now to clamp down on the housing market even though prices are rising again, Finance Minister Jim Flaherty said on Monday, but he pledged to investigate whether the price uptick looks to be more than temporary.
Flaherty said that it would be his department’s responsibility to act on housing prices since the Bank of Canada has “basically no room to move,” but added: “I have no intention of interfering in the market for the time being.”
In its latest report last week, the central bank removed any reference to raising interest rates, saying the economy has too much slack and inflation is too low.
Flaherty, addressing reporters after meeting private-sector economists to get their views, also repeated his pledge to balance the 2015/16 fiscal-year budget, and said he would deliver “not a tiny surplus”.
The minister has intervened in the mortgage market four times since 2008 to cool the housing sector, and had expressed some satisfaction that his moves had worked.
Some of the economists he met on Monday suggested that he have some more conversations with people in the building industry, Flaherty said, “because of what we’re seeing in certain parts of the country, a reacceleration of housing prices.”
“I do speak to people regularly in the business and I‘m going to do more of it now because I want to ensure that this isn’t just a temporary bubble,” he said.
One theory put forward for the recent rise in housing prices is that people who perhaps should have been waiting to buy a house have been rushing to purchase to lock in low interest rates.
“But this is speculation and we’re going to have to look into it more, but I have no intention of interfering in the market for the time being,” Flaherty said.
He said the projections of economists he spoke to on Monday were close to those released by his department in July, forecasting modest but real economic growth over the next few years.
Flaherty said he sees some pressure on government revenues, but added this will be offset by the government’s plans to freeze its operating budget.
Canada’s independent parliamentary budget office said on Monday that by its calculations the government will meet its target of eliminating the deficit in 2015, but subsequent surpluses will likely be smaller than it projected in April.
Flaherty said the parliamentary budget officer did not take into account the government’s planned operating budget freeze.
He has ruled out balancing the budget earlier than 2015, and some economists told reporters that such a move would be unwarranted, given the substantial fiscal drag it would impose.
“It could happen be earlier if the minister really wanted it,” said Carlos Leitao, chief economist at Laurentian Bank.
“I don’t think that is desirable, nor do I think it is the government’s plan. So 2015/16 the budget will be balanced, and as the minister said, not only balanced but in surplus territory.”
Additional reporting by David Ljunggren; Writing by Randall Palmer; Editing by Janet Guttsman, Chizu Nomiyama and Peter Galloway