Regulator fearing 40% housing decline…
Economists from TD Canada Trust have been pointing for quite some time now that according to their metrics housing in Canada is overprices by 10-15%. Diana Petramala confirmed that again in the latest report of TD Economics.
Well, that’s manageable. But a comment from the OSFI (Office of Superintendent of Financial Institutions) caught me by surprise.
As noted in this post, OSFI is now appointed to oversee the operation of CMHC (our biggest mortgage insurer). They are working on redrawing the lending rules and in that process some industry players expressed concern about the proposed changes. In a reply to a letter from the broker Rob McLister, who published an article on his website, Vlasios Melessanakis, the manager of policy development for the OSFI, wrote:
Are the banks equipped to handle a 40 percent drop (in property values)? Canada is not immune. Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.
It looks like the government is preparing for a delayed effect of the housing storm in the US on the Canadian market and are trying to minimize the damage by imposing much tougher lending rules.
Housing going down 40%? Do you see that happening?