Stephen Poloz is “not really” worried about Canadian real estate markets

When it comes to the national real estate markets with their growing prices and sales, a former Bank of Canada governor Stephen Poloz is “not really” worried.

On Tuesday, he pointed to a “K-shaped” economic recovery amid the COVID-19 pandemic.

“The top part of the K has shown a good recovery. It accounts for about 95% or a little more of the economy,” – Poloz noted.

“The bottom part with the strongest damage received is almost 5% or less of the economy,” – he said, adding that retail, hospitality, and the airline segment have faced the worst hits.

According to Poloz, although there’s a possibility of long-term unemployment in those areas, the other 95% will determine further economic behavior.

“And as interest rates are historically low now, it’s quite logical that the housing market is heating up”, – he noted. “We’ll see strong demand over the coming months, and there are already consequences of it combined with low rates.”

Housing prices kept growing in Canada’s hottest housing markets during the pandemic. Last month, the average prices in the Greater Vancouver Area were up by 5.8% annually to $1,041,300. In case of Toronto, home prices reached a new record for the month, with the average cost rising by 14% annually to $960,772.

Meanwhile, recently Tiff Macklem, the central bank’s current governor, said the BoC is monitoring the housing market closely amid the current low interest rates.

He said if too many households become “dangerously over-leveraged,” policymakers will have to use certain macroprudential tools.

According to Poloz, although Canadians are coping with the influences of an economic downturn, income has been supported with the help of government programs.

“We’re supporting income so that it’s not like people are doing it on a wing and a prayer,” – Poloz noted.

“The main question is whether it’s reasonable in terms of debts situation. I’ve always argued that it probably was. However, that doesn’t mean the prudential policies should be stopped.”