BMO also believes new measures on cooling Canada’s housing market may be coming

It turns out BMO Economics also believes there’s a possibility of new measures aimed at cooling down the national housing market.

According to BMO Senior Economist Robert Kavcic, it may be too difficult for policymakers not to interfere, as real estate prices show double-digit increases not only in Canada’s biggest markets, but in many other areas as well.

“We can see Canadians in some markets purchasing homes, rural properties and cottages the way they were buying toilet paper just a year ago. In case of certain areas, the prices are up by a third, not from pre-pandemic levels, but from the end of 2020. Many believe nothing will stop the current pace, as they were repeatedly told that interest rates will not change,” – Kavcic noted.

“Assuming that interest rates will remain unchanged, one may wonder, if and when Ottawa is going to start acting”.

During the pandemic, average prices in Toronto and Vancouver have exceeded $1 million level supported by growing demand and historically low interest rates.

This activity has also spread into bedroom communities, as remote work rules during the pandemic have allowed employees to move further. As a result, home prices in Durham Region rose by almost 30% over the previous year, increasing the gap between residential housing market and economic fundamentals.

Kavcic has joined other experts predicting a possible measures implementation. On Wednesday, RBC Senior Economist Robert Hogue said policymakers should consider all variants of curbing sharp home prices growth, including even a capital gains tax on the sale of a principal residence.

If the government doesn’t act, the Bank of Canada will hardly reduce the stimulus in attempt to cool down the real estate market. The BoC has promised to keep its key lending rate unchanged until at least 2023, as it wants to provide the necessary support for an economic recovery with the help of low borrowing costs.