View of apartment buildings in Vancouver, Canada.
Canadian Prime Minister Justin Trudeau said soaring home prices in Toronto and Vancouver could be partly blamed on the influx of capital from Asia, reported AFP.
“We know that there is an awful lot of capital that left Asia in the past few years,” he said.
“Obviously, overseas money coming in is playing a role” in the housing affordability crisis in Canada.
Economists are concerned that property prices in the two cities have risen to record levels beyond the reach of most Canadians.
Both cities have registered double-digit increases in home prices over most of the last 10 years.
Prices in Vancouver soared by 30 percent in the 12 months ending 31 May, while Toronto’s prices rose by 16 percent, according to their respective real estate boards.
While there is a widespread perception that overseas speculators and investors are to blame for the price hikes, no concrete data supports this link.
In fact, even Trudeau had no supporting data to back up his statement. Nonetheless, his government set aside funds to look into the issue during the previous budget released in March.
Since 2008, the Canadian government has been trying to tighten mortgage lending rules to cool the red-hot property market, but the measures have failed.
“We are all hoping to stabilise the market,” said Trudeau, adding that any federal move requires delicate balancing, curbing property price hikes while not devaluing the home’s existing equity, particularly in markets that are not overheated.
Trudeau’s statement follows the Toronto Dominion Bank’s warning that a property bubble is forming in Vancouver and Toronto and may burst soon.
Vancouver and Toronto saw continued increases in resale and new construction activity, while Alberta and other resources-producing regions witnessed sales and price declines. Other markets, on the other hand, registered little or no price growth.
“There is little debate that Canada’s hottest housing markets are ripe for a correction; the difficulty is predicting its timing,” said Toronto Dominion Bank.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
