CMT – Ottawa May Get What it Wants…and More
November 5, 2012 Leave a comment
Back in the spring, the feds were wishing that housing wasn’t so hot. They wished that mortgage growth wasn’t so robust. And now, CIBC chief economist Avery Shenfeld is telling us: “Ottawa has to be careful what it wishes for.”
Shenfeld issued that warning in this report released last week. He was, of course, referencing federal mortgage policies aimed at slowing residential real estate.
Some believe the extent of those policy changes (new high-ratio mortgage rules, new OSFI restrictions, new securitization and insurance limits, BASEL III, IFRS and so on) reflect a federal government playing with fire in the housing market. Others feel the measures are necessary to put out the fire, and prevent future ones.
Either way, stricter mortgage lending will take a bite out of economic growth. The country has just seen GDP fallfor the first time since February (not a trend yet), in addition to posting a 15% drop in YoY home sales. There is certainly no reason to panic, but at the same time, no one knows where the housing slowdown, or its economic ramifications, will end.