Home Economics Canada home prices not coming down yet thanks to low rates: Reuters poll

Canada home prices not coming down yet thanks to low rates: Reuters poll

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(Reuters) – Efforts to rein in Toronto’s hot housing market and recent problems at mortgage lender Home Capital are unlikely to hurt Canada’s national real estate market as low borrowing costs continue to stoke demand, according to a Reuters poll of analysts.

Matching British Columbia’s move last year for Vancouver, Ontario’s provincial government introduced a 15 percent tax on property purchases by foreign buyers in Toronto in April as part of 16 measures to cool the property market.

Prices in the two markets have increased at double-digit rates, driven by cheap credit and speculation, and sparking concerns of a housing bubble.

Analysts polled said that although Ontario’s measures will cool activity in Toronto and its surrounding areas, the effect will be modest and temporary.

“Low interest rates are going to be oxygen … that keeps the fire going in the Toronto and BC housing markets – and that fire has spread to southern Ontario as well,” said Sal Guatieri, senior economist at BMO Capital Markets.

“Clearly, without such low interest rates, we probably would not be seeing house prices rising as dramatically as they are.”

A weaker Canadian dollar, which has dropped 24 percent since the 2014 drop in oil prices, is also offsetting policy changes both in Vancouver and Toronto by making prices look relatively cheap to some foreign investors, Guatieri said.

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