Canadian Finance Minister Bill Morneau hinted policy makers may soon be taking additional steps to rein in housing prices in Toronto and Vancouver, the country’s two most expensive markets.
The Canadian government is setting up a working group that will include officials from the two cities, and the provincial governments of Ontario and British Columbia, Morneau said Thursday in a speech in Toronto. The group will study the matter in coming months and make proposals.
“People are concerned, and understandably so,” Morneau said. The issue “is top of mind for many Vancouverites and Torontonians who are struggling with the high cost of living and seeing their dream of home ownership seem to get further and further out of reach.”
Years of surging prices, a condo construction boom and low borrowing costs have drawn warnings that Toronto and Vancouver housing markets are overinflated and may have become a risk to the nation’s financial system, with policy makers rushing in recent months to slow gains.
Vancouver price gains accelerated to a 30 percent year-over-year pace, while prices are increasing at a 15 percent pace in Toronto.
Earlier this month, Bank of Canada Governor Stephen Poloz offered one of his strongest warnings to date on housing, saying gains in Vancouver and Toronto are moving beyond what economic conditions justify and may not continue.
Morneau said Thursday he has two main priorities when it comes to the market: affordability and ensuring the market is stable enough to withstand shocks.
Last year, the finance department along with two federal regulators -- the Canada Mortgage & Housing Corp. and the Official of the Superintendent of Financial Institutions -- announced tightening measures to stem gains. Those measures will take time to take effect, and eventually help stabilize the market, he said.
“If warranted, further steps can be taken to protect borrowers and lenders, which would help to maintain a stable and secure housing market and economy long-term,” Morneau said.
Morneau cautioned the federal government doesn’t have all the levers to control the market and the responsibility is shared with the provinces and municipalities.
“By collaborating even more closely with our provincial and municipal partners, we will ensure a coordinated approach, and make use of the best available evidence to arrive at the right conclusions,” Morneau said in a separate statement that was distributed during the speech.
The working group will study factors impacting supply and demand for housing, affordability, and the stability of the market, he said.
(Updates with Morneau comment, announcement details from 3rd paragraph.)