The Bank of Canada says it is closely monitoring the country’s red-hot housing market amid signs that a speculative bubble might be forming.
Bank of Canada Governor Tiff Macklem says the central bank is seeing early signs that people are purchasing homes solely because they believe prices will go up. Macklem added that rising prices, in particular for single-family homes, are still a long way from the heated market seen five years ago.
Fueling the current housing boom has been a combination of demand for more space as millions of workers do their jobs remotely, constrained supply and rock-bottom interest rates.
The Bank of Canada’s benchmark interest rate has been at 0.25% for 11 months now, and the central bank’s quantitative easing program is trying to reduce the rates paid on things such as mortgages in order to spur more consumer spending.
Macklem says the Bank of Canada is surprised by the current strength of the housing market, noting that there are early signs of "excess exuberance" with home buyers expecting recent price increases to go on indefinitely.
