Chart 1 Statistics Canada,Bank of Canada and Teranet-National Bank housing price indices
At the July 2014 Monetary Policy Report (MPR) press conference, Bank of Canada Governor Stephen Poloz announced the Bank would be keeping its policy rate in “neutral” for the foreseeable future. While introducing a new catchphrase – “serial disappointment” – the MPR report and the Bank governor’s comments gave short shrift to the over-heated Canadian housing market, which continues to be fuelled by historically low interest rates. Despite conceding “particularly strong” price growth over the past year and “near record-high house prices and debt levels,” the Bank insists housing is in for a “soft landing”.
While the lack of housing market information has been a popular topic of late, a closer look at the little available info on housing prices may shed some light on why the Bank has downplayed rising home prices, and why if or when the housing bust happens the Bank will say it didn’t see it coming.