TORONTO (Reuters) - With home prices booming and fears of a bubble, Canada's finance minister on Thursday announced a working group of federal, provincial and municipal officials to recommend policy changes.
The panel, to be formed within days, will meet throughout the summer to review supply and demand, affordability and the stability of the market, Finance Minister Bill Morneau said in Toronto.
The move suggests a new round of regulation changes to tighten mortgage rules is not imminent, but could come as early as the fall amid fears the market is overheated and consumer indebtedness too high.
The government will evaluate whether further steps are needed to protect borrowers and lenders to help maintain a stable market, Morneau added.
He and Prime Minister Justin Trudeau have both commented in recent weeks about high prices in Toronto and Vancouver, Canada's hottest markets, echoing concerns by some analysts who fear a housing bubble.
House prices have climbed since 2009 as low interest rates fueled demand. While the energy slump has cooled sales in oil country, the run-up in prices in Ontario and British Columbia have pushed consumer debt to record levels and increased worries that both consumers and housing are in precarious positions.
Some have called for a flipping tax to curb speculators from buying and selling houses. Some want limits imposed on foreign investment to prevent wealthy Chinese buyers, among others, from driving up prices, particularly in Vancouver.
Morneau said increasing foreign ownership does make up "some element" of the high prices.
He did not offer details on potential methods or the group's deadline.
Canada has tightened mortgage regulations five times since 2008 in a bid to cool the market, shortening the length of loans and increasing the minimum down payment.
Benjamin Tal, deputy chief economist of the Canadian Imperial Bank of Commerce (CM.TO), said the inclusion of municipal officials means the government seems to favor adjusting municipal property taxes over tweaking mortgage rules.
"Clearly they have indicated that we're talking about two cities, in particular, Toronto and Vancouver, and therefore you have to deal with the municipality-specific issues," he said.
Comments by policymakers should also help to cool things off, said Tom Davidoff, a University of British Columbia economics professor.
"Expectation setting is quite important to the extent the market is being driven by 'fear of missing out,'" he said. "People hearing 'We don't intend to let prices explode forever' can be important."
Additional reporting by Andrea Hopkins in Toronto and Julie Gordon in Vancouver; Editing by Jeffrey Benkoe and Dan Grebler