OTTAWA – Finance Minister Joe Oliver says the federal government could take “moderate steps” to address Canada’s strong housing market as he began two days of meetings on Sunday with his provincial counterparts.
The two-day gathering is also expected to reveal the latest figures on federal transfer payments to the provinces as well as explore the effect of plunging oil prices.
On his way to the first meeting, Oliver was also asked about Canada’s rising household debt and the country’s potentially overvalued housing market — two risks repeatedly raised by the Bank of Canada.
“In terms of household debt and the real-estate market, this is a subject, of course, we’re monitoring very carefully,” said Oliver, who reiterated his position that there is no housing bubble.
“So, we’re not going to take any dramatic steps in that regard, but we may take some moderate steps.”
Oliver did not elaborate and added his department had yet to make a decision on this subject.
“But our longer-term objective is to reduce the government’s exposure to the mortgage market and we keep that objective in mind going forward,” he said.
Oliver has said he intends to further reduce Canada Mortgage and Housing Corp.’s share of the mortgage insurance sector.
The Finance Department has tightened mortgage regulations on several occasions in recent years in an attempt to limit excessive speculation in the housing market and diminish the number of marginal buyers.
Last week, Bank of Canada governor Stephen Poloz warned the country’s real estate market could be overvalued by as much as 30 per cent, though he also reiterated his prediction that a soft landing was still likely for Canada.
The bank used a new model to crunch numbers on the potential overvaluation of the housing market, a calculation that suggested it may be running between 10 to 30 per cent above where it should be.
Earlier this month, Poloz maintained the bank’s trend-setting interest rate at one per cent, where it’s been frozen since September 2010. Most experts don’t expect the rate to increase until at least the middle of 2015.
There are concerns some Canadians might have accumulated too much debt in recent years to be able to handle rate hikes.
Poloz is scheduled to give a presentation Monday at the finance ministers’ meeting, a get-together that will also reveal how much each province and territory will receive from Ottawa in transfers and equalization payments that the provinces use to fund health and post-secondary education among other social programs.
“Everyone’s number will be up,” Oliver said before heading into the opening dinner, where he would hand out the figures to each minister.
“We think (the finance ministers) all should be reasonably happy about it because in every single case their numbers will be increasing.”
Last week, Ontario Finance Minister Charles Sousa sent a letter to Oliver, saying that Ottawa’s recent unilateral rule changes on transfer payments put Ontario’s plan to balance its books by 2017-18 “at risk.”
Sousa said his province was the only one to see a decline in transfers.
On Sunday, Sousa told reporters in Ottawa he was pleased to hear the federal government would increase equalization and overall transfers to the provinces.
“The federal government is a transfer agent and up until now they haven’t been transferring the same degree at which they probably should,” said Sousa, who had yet to see Oliver’s figure on how much Ontario would receive.
“Certainly not last year. I recognize all of the provinces got more money — Ontario was the only province cut.”
Sousa was also asked whether he was concerned about the Canadian housing market and if he thought Ottawa should take action to temper it.
He replied that the government had already taken steps to keep it in check and he predicted a soft landing for the market.
Quebec Finance Minister Carlos Leitao, an economist, says he thinks the risk to the housing market is “moderate,” but that it has been well-managed by the Bank of Canada and the Canada Mortgage and Housing Corp.
“If there are further measures needed to cool off the market, then that will be done,” Leitao said Sunday before heading into the meeting.
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