Hey there, time traveller!
This article was published 8/1/2013 (1388 days ago), so information in it may no longer be current.
CANADA'S real estate market remains "relatively solid" and should experience a "soft landing" despite the current slowdown and fears of overbuilding in the condominium segment, the country's top bankers said Tuesday.
Speaking to an RBC banking conference in Toronto, the country's top bankers said they don't expect a dramatic downturn like in the United States about five years ago.
The bursting of the U.S. housing bubble is considered a major cause of the credit crunch that swept Wall Street and then the global economy in the fall of 2008, after interest rates on subprime mortgages rose and defaults soared.
By contrast, subprime mortgages have been less common in Canada and real estate prices have trended upward for the most part -- except for a few months during the 2008-09 recession and in some economically disadvantaged areas.
"Our expectation is that the overall real estate market in Canada is still relatively solid," Royal Bank CEO Gord Nixon said Tuesday.
Despite reports that suggest Canadian housing is in crisis, he said the pullback is limited to a couple of markets, notably Vancouver.
"We have seen a slowdown in sales and we've certainly seen a slowdown in mortgage demand, but price levels are relatively stable," he said, adding other than debt to disposable income, most indicators are in line with historic standards.
"So our expectation is we've got this sort of soft-landing scenario on the real estate side."
The head of Canada's largest bank said he expects RBC's consumer lending growth will slow to mid-single digits, but it should see a nearly double-digit increase in commercial loans.
Other banks are also seeing softening demand for consumer lending, with National Bank forecasting a 15 per cent reduction in the growth of retail lending this year in Quebec and a 30 per cent drop in Ontario.
Bank of Montreal CEO Bill Downe told the conference BMO deliberately limited its exposure to the Canadian condo construction market at $700 million after watching some of the problems surface in the United States in 2007 and 2008.
The bank is active in the U.S. mortgage lending market in the Midwest through its Harris Bank subsidiary.
He doesn't expect Canadian homeowner debt to keep growing at previous levels, which will avoid an "outright collapse in the market."
-- The Canadian Press