NEW YORK (Reuters) - The Canadian government aims to reduce its involvement in the country’s hot housing market and agrees with the Bank of Canada’s expectation that the market is headed for a soft landing, its finance minister said on Wednesday.
Foreign investors have helped drive up Canadian real estate prices by parking their money in relatively cheap and plentiful properties, causing fears that a sudden withdrawal of investors could leave a glut of condos and falling prices.
Finance Minister Joe Oliver said the government is not looking to intervene in the market at this point.
“We want to move gradually to reduce the government involvement in the mortgage market,” he said in an interview on the sidelines of an energy conference hosted by Goldman Sachs.
“There have been a number of important steps which are designed to gradually cool the market and we share the view that it’s likely to be a softer landing,” Oliver added. “I don’t think (intervention) is necessary in this environment so we’re not looking to do that.”
Canada’s housing market has risen unsteadily for the last five years and appears to be settling down, with housing starts slowing from red-hot 2012 levels in 2013 and maintaining the slower pace so far in 2014, on average.
Foreign observers, including the International Monetary Fund and the Organisation for Economic Co-operation and Development, have warned that Canada’s housing market is among the most overvalued in the world. On Wednesday the OECD recommended that Canadian authorities tighten mortgage insurance further to promote financial stability.
Canada’s major banks, meanwhile, have been more sanguine on housing, saying there are structural reasons why the high prices are more sustainable than they may appear.
One factor the Bank of Canada has in the past mentioned as keeping it from cutting rates is concern over a hot housing market and high levels of household debt. Despite concluding that household debt remained high, the bank this month said there are “continued signs of a soft landing in the housing market and a constructive evolution of household imbalances.”
Reporting by Jonathan Spicer; Editing by Lisa Shumaker