Low rates and high temperatures conspired to increase Canadian home prices in the first quarter of 2012, according to new numbers from one of the largest real estate organizations, but few sales likely involved investors.

The Royal LePage House Price Survey showed the average price of a home in Canada increased between 2.2 and five per cent in the first quarter of 2012, compared to the previous year.

In the first quarter, standard two-storey homes rose five per cent year-over-year to $398,282, while detached bungalows increased 4.4 per cent to $356,306. Average prices for standard condominiums increased 2.2 per cent to $243,153.

Market activity in the first quarter of 2012 was unusually high resulting in tight inventories and strong price appreciation in most major cities, said the survey.

Investors, grappling with new tighter lending guidelines at the banks, didn’t significantly contribute to that climate, whereas homebuyers, with greater access to lending options, drove the market, using historically low mortgage rates. For their part, sellers brought listing inventory to market earlier than normal, encouraged by unseasonably warm weather.

“Our housing market is being pulled in opposite directions by opposing economic forces,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “On one hand, there is the rapidly strengthening U.S. economy, increasing Canadian consumer confidence and what can only be called a national mortgage sale encouraging activity and bidding up home prices. On the other, we have signs of over-shooting values and strained affordability in our largest cities. We are likely to see much more modest price appreciation as the year unfolds.”

Soper commented that the effect of low mortgage rates, which fell below three per cent for a five-year fixed-mortgage, is more pronounced in cities that are affordable such as Winnipeg, Ottawa and St. John’s.

“In Vancouver, the average price of a standard two-storey home is now $1,182,250,” he said. “Although the city posted strong year-over-year price gains in the first quarter, we expect to see Vancouver’s housing market to reach a level of price resistance. Although desirability is high, many potential buyers have simply been pushed out of the market and cannot take advantage of low mortgage rates, which will ease demand and should bring price relief.”

In comparison, Soper commented that he did not expect price resistance to affect Toronto’s housing market where a standard two-storey home would sell for $645,467.

Another notable exception was Calgary whose flat year-over-year house price appreciation masked a very active housing market that witnessed double digit growth in unit sales compared to the same period in 2011.

Source: Canadian Real Estate Magazine

Much of Canadians’ rising household indebtedness is being fuelled by cheap foreign capital, Mark Carney, governor of the Bank of Canada, said yesterday.

Mr. Carney has repeatedly warned over the past year about excessive consumer borrowing – particularly around mortgages – but Monday fleshed out his concerns, noting that the phenomenon is being enabled partly by buyers from “abroad” and that the trend is “unsustainable.”

Speaking to a business group in Waterloo, Ont., Mr. Carney said the growth in domestic demand and household spending has helped boost Canada’s economy, but “the limits to this growth model are becoming clear.”

Ballooning household debt levels represent the biggest single risk facing the Canadian economy, according to the Bank of Canada.

In the financial crisis that began in 2008, the central bank lowered interest rates to encourage borrowing and revive the economy. But much of the lending that followed was not to businesses but to consumers focused on buying homes.

Even after the economy revived, the low interest rates remained in place, continuing to spur the spending spree.

Canada’s banks mostly emerged from the crisis unscathed, which helped burnish their international reputation. It’s also why foreign investors – especially in the United States – are so keen to buy bonds issued by Canadian banks.

A primary reason for the strong demand is that many of the bonds are backed by mortgages that are guaranteed by the Canada Mortgage and Housing Corp.

In 2011 the big six Canadian banks issued a total of $74-billion of term bonds, of which 64% was sold to foreigners, according to George Lazarevski, an analyst at BMO Capital Markets. They raised “a lot of term funding outside of Canada,” said Mr. Lazarevski. He said buyers were mostly in the United States, Australia and Switzerland.

A significant chunk of that funding, or about $25-billion – was in the form of bonds backed by mortgages insured by the CMHC, a Crown corporation.

“The Canadian dollar is consistently strong, our fiscal situation is still attractive relative to much of the developed world, and even at the provincial level – there’s still plenty of fiscal capacity to raise deficits if backs are against the wall,” said BMO economist Robert Kavcic.

Mr. Carney’s comments on household indebtedness were within the context of the main theme of his speech: the need for Canadian companies to “refocus, retool and retrain” if the country is to compete in emerging markets.

Mr. Carney said the growth in domestic demand and housing-driven spending has helped boost Canada’s economy, but “the limits to this growth model are becoming clear.”

Mr. Carney also pointed to ongoing uncertainty over Europe’s debt crisis – despite some recent signs of improvement – and a modest recovery in the United States, both regions where Canada is dependent for the bulk of its exports.

“Emerging markets represent the greater opportunity for Canadian exporters. Since the recession, these economies have accounted for roughly two-thirds of global economic growth and one-half of the growth in global imports.”

Business must develop new markets but also and new products, Carney said. As well, companies should “further exploit the tremendous opportunities in mobile computing and customer-focused applications. In addition, they need to invest in new plants and equipment.

“Innovation is critical to our success and Canada’s record is only average,” Mr. Carney said.

Source: John Greenwood, Financial Post

Telus has sold out the first condo development it has ever built, before a planned formal launch in mid-April, making it the second large Vancouver project to sell out almost instantly in the past month.

But industry experts say that doesn’t necessarily mean that condo or general real-estate boom times are back.

Instead, they say, it is projects that are close to transit that are winning out.

“Transportation is the new green,” said Tracie McTavish, president of Rennie Marketing, which sold the PCI Marine Gateway project’s 415 units in a public launch mid-March.

That’s why projects like Marine Gateway, a tower that will be part of an office and entertainment complex at the foot of Cambie next to a Canada Line station, and Telus Garden, with 428 units in a 53-storey tower a block from Vancouver’s key downtown intersection, are being gobbled up at a rate not matched elsewhere in the region.

“Some of the more outlying developments aren’t seeing that kind of interest,” said Don Forsgren, president of the Urban Development Institute, which represents large builders in the region. “The single-family suburban house market is pretty flat.”

Also flat are sales in Surrey and the northeast Tri-Cities area and lower-rise wood-frame buildings, said development consultant Bob Ransford.

“It’s all geographic who’s doing well.”

Recent figures from the Real Estate Board of Greater Vancouver compiled by various real-estate analysts indicate higher numbers for unsold inventory than past years at the same time.

Local sellers all say that it’s not foreign investors driving the market for the successful projects, but local investors and people planning to live in the condos themselves.

Ms. Goertz said Telus offered its employees priority in sales at Telus Gardens and 150 of them bought, even though the price discount was a modest one per cent.

The project’s developers, Telus and Westbank Projects, also didn’t allow anyone to buy more than two units.

Mr. Forsgren, whose company Intracorp sold out a tower instantly at Metrotown in May of last year, said the company has to track buyers closely because of requirements from FINTRAC, the agency that monitors money laundering and criminal organizations.

The personal information that had to be submitted for those units showed there were only four offshore buyers.

He said he expects Intracorp’s newest tower, Silver, to get about 50 to 60 per cent investors among the 3,000 buyers lined up for it. That’s similar to what Mr. McTavish said was the ratio for Marine Gateway.

But those investors tend to be local investors, people who are buying something for their children to move into some day and renting it in the meantime, or people who are looking for an investment that’s more stable than the stock market appears to be right now.

Affordability doesn’t seem to be necessarily at the top of the list for buyers, either. Mr. McTavish said that half of the 40 high-end units in Canada House West, at the former Olympic village in Vancouver, have already sold in the first two and a half weeks at “very attractive rates” of more than $1,000 a square foot.

That may push the city of Vancouver, which took over the project from the private developer in late 2010, into putting the other 20 units in Canada House East onto the market.

Source: Frances Bula, Globe and Mail

Just less than half of BC households could comfortably afford their homes if interest rates were to climb by just two percentage points, a new survey has found.

The BMO Bank of Montreal survey found that while most Canadian households could survive a stress-test against the possibility of rising interest rates, one in five said a two-percentage-point rise in rates would hamper their ability to afford their home and a further 20 per cent said they didn’t know.

In BC, where Vancouver is home to the priciest houses in the country, 48 per cent said they could still afford their home if rates went up by two percentage points. 32 per cent said they could not afford their mortgage if rates went up two percentage points, while 20 per cent of respondents were not sure.

Although the survey is based only on borrowers’ perceptions, it’s still very alarming, said John Andrew, real estate professor at Queen’s University. “It’s alarming because we’re only talking about a two-per-cent increase here, and it shows how borrowers have become acclimatized to low interest rates.

“We have no experience with this because mortgage rates have never been this low. We’re in virgin territory for everybody.”

In Vancouver, new mortgages average from $500,000 to $600,000, said Carolyn Heaney, BMO’s area manager specialized sales and mortgages for Vancouver.

The report coincides with the end of BMO offering two low-rate mortgage options — a 2.99 per cent five-year rate and a 3.99 per cent 10-year rate, both of which are limited to 25-year amortization and have limited prepayment options. Using the 2.99 rate as a baseline, the monthly payment on a $500,000 mortgage would be $2,364 for 25 years, Heaney said. If the rate went up to 4.99, the payment would jump $541 a month to $2,905.

“As a consumer, while there is no guarantee where rates are going, I think most of us can speculate that rates will be going up in the next couple of years,” Heaney said. “Let’s say in three years you’re going to be asked to pay $2,900, what kind of impact will that have on your cash flow?”

According to BMO Economics, interest rates are expected to increase beginning next year.

Andrew said he wouldn’t be at all surprised to see a much larger rate increase — of six or seven percentage points — in five years’ time.

“I think that’s entirely within the scope of possibilities,” said Andrew, who is also director of the Queen’s Real Estate Roundtable. “We know it’s highly competitive for banks right now. Are they going to turn you down if you couldn’t keep up the payments at four or five per cent? I’d be surprised if that’s the case.”

Andrew said the survey results are even more concerning when total household debt is considered.

“Mortgages are a big part of the problem, but they’re not the whole problem,” Andrew said.

Many other lenders followed BMO’s lead, offering low-rate mortgages, sometimes with more flexibility; several other lenders have already pulled their low-rate offerings.

Alberta had the strongest responses to the survey with 73 per cent of households saying they could handle an increase in rates, with just 13 per cent saying it would cause a problem.

The Leger Marketing survey was completed online from Feb. 21 to 23 using Leger Marketing’s online panel, LegerWeb. A sample of 1,500 Canadians over age 18 were surveyed. A probability sample of the same size would yield a margin of error of plus or minus 2.5 per cent, 19 times out of 20.

Source: Tracy Sherlock, Vancouver Sun

This Reuters report shows that house prices across Canada are still rising with some notable exceptions, such as Vancouver, where much is being made of the fact that prices dropped in January for the fourth month in a row. Read on, and you’ll see that even with these declines, Vancouver’s prices are still up 7 per cent compared to a year ago.

Here is the article in full:

Canadian home resale prices edged up in January from December after two months of declines as the big Toronto market showed strength but Vancouver continued to falter, the Teranet-National Bank Composite House Price Index showed on yesterday.

The index, which measures price changes for repeat sales of single-family homes, showed overall prices rose just 0.1 per cent in January from December but were up 6.5 per cent from a year earlier. It does not provide actual prices.

Prices increased in seven of 11 metropolitan markets surveyed. Halifax, Nova Scotia, led gains, climbing 0.7 per cent, followed closely by the heavily-weighted Toronto market, which rose 0.6 per cent. Victoria shrugged off three straight monthly declines to edge up 0.4 per cent. Winnipeg, Manitoba, nudged up 0.2 per cent – its 11th monthly gain in the past year.

Western markets accounted for most of the declines, with January prices falling 1.1 per cent in Edmonton. More cooling was seen in the once red-hot Vancouver market, which fell 0.3 per cent to log its fourth consecutive monthly decrease. Calgary slid 0.3 per cent.

The Teranet data was in line with recent Statistics Canada data that showed new home prices edged up 0.1 per cent in January from December, the 10th consecutive monthly increase.

A majority of forecasters surveyed by Reuters in February expected home prices to stall with a mere 0.1 per cent climb this year. They forecast the same increase in 2013.

Canadian policymakers and economists have fretted about rising housing prices as household debt levels have soared. The ratio of debt to personal disposable income hit a record 151.9 per cent last year.

Ten of the 11 markets surveyed by Teranet showed price increases from 12 months earlier. Leading the way was Toronto, up 9.9 per cent, Winnipeg at 9 per cent, Hamilton at 7.9 per cent, and Vancouver, which jumped 7 per cent. Victoria was the only market where prices dropped, falling 0.1 per cent.

Teranet said the latest February data from the Canadian Real Estate Association showed “generally balanced” conditions in major urban markets, although there was increased tightening in Vancouver, Victoria, Toronto, Hamilton, Winnipeg and Halifax.

The index tracks home prices over time for repeat sales, so properties with at least two sales are required in the calculations.

The market has been sustained by ultra-low interest rates since the financial crisis began in 2008, and the Bank of Canada is widely expected to keep its main policy rate at its current 1 per cent target until the third quarter of 2013 as global economic growth remains subdued.

Source: Reuters

Check out this cool Infographic from our friends at RateHub. It outlines Canada’s risk factors – high housing prices, ultra-low interest rates, record levels of household debt and low income growth – but also outlines the regulatory differences that shield Canada from the magnitude of the housing bubble and crash that occurred in the American market.

mortgage rates infographic by

Recent conversation around the Kitsilano dinner table turned to – as it almost always seems to do – real estate and the role of foreign buyers in Vancouver.

The older guests decried the runup in prices that makes it almost impossible for their children to buy on the West Side, while the kids (also at the table), looked to their parents as the lender of first resort to help them get into the market.

But what to do about the oft-discussed “foreign buyer” typically tagged as a leading contributor to the pressures that make housing unaffordable? Charge a special tax on offshore buyers, asked one person? Charge a surtax on properties above a certain value, asked another? Or, as this writer chimed in, erhaps we want to introduce the equivalent of a head-tax on foreign investors simply because they’re coming to invest in properties. (Dirty looks all ‘round ensued.)

Or just suck it up?

Land ownership angst Tsur Somerville, associate professor with the UBC Centre for Urban Economics and Real Estate, noted that upward pressure on the price of local properties is a standard problem in desirable places to live – especially places that attract short-term residents, such as vacationers. Just ask the folks in Whistler, the Gulf Islands and other areas. “This is historically our biggest issue in places that are resorts: vacation homes drive up prices,” Somerville said.

The truth is, Canada is a nation of immigrants and each wave of newcomers has raised anxieties and concerns about land ownership. First Nations land claims are one example; restrictions the Islands Trust enforces on land uses in the sensitive Gulf Islands are another. Indeed, the fight for domestic control of land is as fundamental to Canada’s history as the story of settlement. Opposition to absentee landlords drove Prince Edward Island to join Canada in 1873, and provincial law still prevents non-residents from owning “in excess of five acres or having a shore frontage in excess of 165 feet unless he/she first receives permission to do so from the Lieutenant Governor in Council.”

Most of the Prairie provinces, where rights to real property are rooted in homesteading and distrust of bankers, also have restrictions on non-resident ownership of land. Canada isn’t alone in restricting foreign ownership: Iceland, Denmark and Australia, all members of the Organization for Economic Cooperation and Development, limit ownership of real estate to those resident in the country and prohibit renting by foreign owners.

Switzerland, a traditional haven for foreign capital, limits transactions by foreign buyers to a set
amount per year, and cities such as Zurich and Geneva are off-limits.

Poland and Greece have restrictions on land purchases; in Mexico – a popular vacation destination – a local bank holds property in trust for foreign owners. The foreigner has all the privileges and obligations of ownership, but not ownership itself. But globalization, and the international flow of capital that’s followed, has put the issue of foreign ownership on the front burner in many countries. The tide of capital seeking a safe haven following the September 11, 2001, terrorist attacks on New York and Washington, D.C., made countries take a hard look at how much cash they wanted in their jurisdictions and how much ownership they were willing to give away. Concern accelerated only after the real estate boom – and bust – that followed. Iceland has linked control of local assets to national sovereignty.

And even Prime Minister Stephen Harper has begged comparisons by moving to block foreign ownership of strategic assets. Australia recognized the challenges following a loosening of foreign ownership restrictions in late 2008. The following year saw a wave of foreign investment 30% above historical norms. The dramatic shift in a country where first-time homebuyers were already finding some cities unaffordable called for action. A six-month consultation period culminated in changes to Australia’s investment regulations in April 2010. All purchases by temporary residents and foreign non-residents became subject to approval by Australia’s Foreign Investment Review Board; temporary residents are limited to properties for their own use or development sites that would increase the housing stock.

Vacant land must be developed within two years, and foreign owners of residential properties must sell the properties when they leave the country or the government will confiscate and sell them instead. Australia’s introduction of tougher criteria for foreign real estate investment had an immediate effect. Approvals for purchases of residential real estate, typically the primary target of foreign investment applications, dropped from 2,450 to 647 – a 75% decline. Foreign restriction complications.

But could similar measures succeed in Vancouver?

During last fall’s civic election, independent council candidate Sandy Garossino called for restrictions on foreign ownership to address affordability. Affordability was being eroded by the foreign buyers. RBC Economics reported that a standard two-storey home in Vancouver required approximately 95.5% of the average household’s monthly income, while a detached bungalow required 92.5%. (A residence is considered affordable when it requires just 32% of household income.)

Modest declines in recent months have done little to bring home prices within the reach of locals. The bank’s most recent analysis declared, “unaffordability has long been a fact of life in the Vancouver housing market and this will continue to drive local buyers away.” Vancouver is a seller’s market relative to the rest of the country; RBC all but confirms that it’s a nonresident’s buyer’s market.

Garossino – who didn’t respond to a request to comment for this article – suggested that Vancouver address the situation by adopting a model similar to Singapore, where investors are limited to select areas of the city, leaving the rest of town to locals. But other observers are less confident such restrictions would work; they point out that, with no way of determining the extent of foreign investment in the local market, it’s difficult to impose restrictions.

Nicola Way, owner of upscale listings site BestHomesBC.com, said the lack of clear evidence for a foreign buying binge makes it hard to argue for investment restrictions. (See “Seeking paper trails in Asian property buying spree” – BIV issue 1168; March 13-19.)

“Until Canada can produce figures that definitively state the volume of properties bought by non-residents, I can’t see any restrictions placed on foreign ownership,” said Way.

Moreover, housing affordability is more than a function of who is buying properties. Basic land economics are at play, as well as financing regimes. “There are other factors at play when it comes to Canada’s rising house prices, namely consistently low interest rates that have served to underpin housing demand,” she said. “For the City of Vancouver itself, there is also the question of land supply. We are hemmed in by geography, so when supply becomes limited, demand – and therefore prices – increase.”

Somerville goes even further. He noted that without consensus on what a foreign buyer is, it’s tough to target the restrictions. And if the flow of cash can’t be tracked, what gets taxed? “How many people are we actually talking about who are truly non-resident, non-immigrant buyers? How many people are not renting their units out but keeping them vacant?” Somerville asked. “Before we have policies to address a problem, it’d be really good to know how big a problem it actually is.”

Unfortunately, there’s no way of knowing. The statistics being thrown around are nice, but none of them have conclusively answered the question. “We don’t have the mechanisms to be really accurate,” he said. “Realtors telling me that their buyers are from China doesn’t answer it. And certainly where the appraisal chits are sent doesn’t answer it.” While non-resident purchasers could be subject to a different property tax rate, as happens in Florida, Somerville said it would have to be a province-wide measure rather than targeted to a specific city such as Vancouver or a specific part of the city. “You could always do it,” he said, “but if you put in a sub-area then you just spread the issue to other areas.”

And, hinting at his own skepticism, Somerville said developing a different tax structure or other restriction might not even be worth it relative to the scope of the problem. “Fundamentally, I don’t want to restrict the market and develop policies to address a critical problem without knowing what the problem is.”

See the original article here: BIV – Combating uncontrolled offshore ownership.

Source: Peter Mitham, Business in Vancouver

The Canadian housing market is off to a strong start this year, with gains in sales and prices in most major markets, according to a report released Thursday from real-estate company Re/Max.

It said sales for January and February were up in 12 of the 15 markets it assessed compared to a year earlier, most by 10 per cent or more. It credited low mortgage rates, strong consumer confidence and even some mild weather, which it said helped usher in an early spring buying season.

“Given the current economic climate, the strength of the country’s housing market clearly reflects the value Canadians place on home ownership,” Michael Polzler, an executive vice-president with Re/Max, said in a statement.

“One driving factor has been the overall performance of the market over the past decade. Existing homeowners have realized substantial equity gains, especially in recent years, and many are taking advantage of the combination of historically low interest rates and equity to upgrade.”

Prices were up in 14 of the 15 markets analyzed, but just three — the Greater Toronto Area, Winnipeg and St. John’s — broke the double-digit mark, each with gains of 10 per cent, Re/Max said.

Vancouver-area sales were down 16 per cent in the early part of the year, joining Winnipeg and Kitcherner-Wateloo, Ont., as the only spots where sales were down from one year earlier, Re/Max said. Still, Vancouver had the highest average sales price of any market, at $786,695, up 0.1 per cent from last year.

The average price in the Toronto area was $487,254, and Re/Max said about half the detached homes there in the price range of $600,000 to $900,000 have sold for more than their listed price.

Source: Derek Abma, Financial Post

Concerns about the sustainability of the high-flying Canadian housing market are “legitimate,” especially in the largest cities, the head of one of the country’s biggest banks said Tuesday as a price war rages across the financial sector over mortgage rates.

Bank of Montreal chief executive officer Bill Downe told the bank’s annual meeting in Halifax that soaring household debt levels are highlighting the need for a soft landing in the residential real-estate market. As a way of tightening lending, Mr. Downe said he supports a move toward shorter amortizations on mortgages in Canada to reduce consumer exposure to debt.

“We took a long, hard look at the Canadian housing market and concluded there was a legitimate concern that house prices – particularly in the largest cities – had been rising at a rate that was simply unsustainable,” Mr. Downe said.

“With growing concerns over household debt, a soft landing in housing is in the best interests of our customers and the national economy.”

His comments come as the banking sector battles to win market share for home loans by offering historically low interest rates. BMO in particular has come under fire from rivals for undercutting the market, offering five-year fixed rates at historically low rates of 2.99 per cent, and 10-year fixed rates at 3.99 per cent, forcing other lenders to match with similar offers.

Toronto and Vancouver are often singled out as overheating housing markets. Toronto’s average home price in February jumped 10.6 per cent from a year earlier to $454,470, as bidding wars for properties in sought-after areas often go well above the asking price. Despite a pullback in sales in Vancouver, prices there remain double the national average at $806,094.

Mr. Downe said BMO’s decision to focus on offering 25-year amortizations, as opposed to 30-year terms, is to direct consumers into loans that have lower costs over the long term. But RBC argues that BMO’s mortgage campaign involves terms that are less flexible and could prove costlier for borrowers if they run into financial trouble or need to refinance.

RBC argues that BMO’s cut-rate mortgages, which have shaken up the market, lack flexibility measures such as the ability to skip payments if needed, without penalty. The bank argues many people end up using such payment holidays at some point during the term of the loan.

BMO counters that such features add costs to the loan in the long term, because interest keeps accumulating. Both banks have taken out national advertising campaigns trying to poke holes in each ‘other’s offers in recent weeks.

Mr. Downe suggested he believes regulations may soon lean toward shorter amortizations. A year ago, the federal government announced it would no longer backstop mortgages with 35-year amortizations, making the maximum 30 years, as a way to tighten the lending market amid fears over rising consumer debt.

U.S. 10-year Treasury bond rates have increased 60 basis points since September, Mr. Downe said, a sign of upward pressure on interest rates in the future.

Source: Rob Carrick, Globe and Mail

Canadian housing is 10 to 15 percent over-valued, Canada’s second largest bank warned on Friday, as it called for more action to constrain lending growth.

Toronto-Dominion Bank chief economist Craig Alexander said in an analysis that if the overvaluation were unwound rapidly, the market correction would be three times the magnitude of the housing market correction of the early 1990s.

Alexander said it is more likely that there will be a gradual decline in sales and prices over the next several years unless there is a sharp rise in joblessness or interest rates. He warned against complacency, however.

“We need to acknowledge that a significant imbalance has developed and it poses a clear and present danger to Canada’s medium-term economic outlook,” he wrote. “It also suggests that further actions to constrain lending growth may be prudent.”

At greatest risk is Vancouver’s real estate market, a magnet for foreign buyers, along with the Toronto condo market, and the broad housing markets in Quebec City and Montreal, he said.

“Nevertheless, beyond selected cities, it is natural to assume that it will be a shock to all real estate markets when interest rates eventually rise from their prevailing exceedingly low levels,” he said.

Parallel with the real estate valuations is elevated household indebtedness. The ratio of debt to personal disposable income declined in the fourth quarter of 2011 to 150.6 percent from 151.9 percent in the third, but Alexander said this was due to a spike in unincorporated business and farm income that will probably prove to be temporary.

In fact, he forecast that by late 2013 the ratio will reach the 160 percent peak seen in the United States and Britain before their real estate corrections.

Alexander said the Bank of Canada, which has repeatedly voiced concern over housing prices and household debt, is in a bind because if it raises rates while the U.S. Federal Reserve holds rates steady, that would boost the Canadian dollar further and slow growth.

A majority of forecasters polled by Reuters last month predicted that the federal government would tighten mortgage rules this year. Alexander urged authorities to take a gradualist approach in any tightening.

Source: Reuters