Canadian Housing Optimism Hits Record Amid Curbs on Toronto
(Bloomberg) -- Optimism about home prices reached an all-time high in Canada just as policy makers stepped in to curb runaway prices in the country’s largest city.
The share of respondents in the weekly Bloomberg Nanos Canadian Confidence Index who see home prices rising in the next six months climbed to 48.5 percent, the most in records back to mid-2008. The overall confidence index reached 59.1, the highest since March and exceeding the 12-month average of 57.4.
“Bullish sentiment on real estate in Canada continues to drive consumer confidence,” said Nanos Research Group Chairman Nik Nanos.
Ontario Premier Kathleen Wynne and her Finance Minister Charles Sousa introduced a 15 percent foreign buyers tax in the Greater Toronto Area on Thursday, and said the province would allow Mayor John Tory to charge a vacant property levy. Similar moves in Vancouver last year helped slow rapid gains.
The measures follow statements from officials such as Bank of Canada Governor Stephen Poloz and Finance Minister Bill Morneau that 30 percent price gains around the nation’s largest city are probably unsustainable and being driven more and more by speculation.
Real estate optimists outnumber pessimists by more than four-to-one, with 10.9 percent predicting prices will decline. Some 38.2 percent see little change.
The bullish sentiment on home prices is at odds with the survey’s negative balance of opinion on personal finances. On the question of where they stand financially, 28.3 percent of respondents said their pocketbooks had deteriorated over the past 12 months, while 18 percent see an improvement.
Ontario tied with British Columbia for the highest regional confidence, both at 62.9.
Home prices in the Toronto region rose 6.2 percent in March, the biggest one-month gain on record, according the Canadian Real Estate Association. Prices have jumped almost 30 percent in the past 12 months.
Sousa laid out 16 measures to calm the property market last week, including quarterly meetings with Morneau to discuss housing pressure and share what is acknowledged to be scarce data on trends such as foreign purchasers.
“We have seen a very unsubstantiated growth in prices in Toronto,” Jake Abramowicz, a broker at Mortgage Edge, said Wednesday on Bloomberg TV Canada. Foreign buyers may make up 10 percent to 15 percent of the market, he said. “I hear of some open houses and bidding wars coming in where eight out of 10 bids are coming from foreign buyers.”
Outside of the housing market, consumer sentiment may also be getting a lift from a solid labor market and output growth. The survey’s balance of opinion on where the economy will be in six months turned positive for the first time in five weeks, with 23.9 percent saying it would be stronger and 23.2 percent calling for an erosion.
On jobs, the share of people calling their positions secure rose to 48.7 percent from 47 percent last week.
The confidence index is based on telephone polling with a four-week rolling average of 1,000 respondents, and is considered accurate within 3.1 percentage points, 19 times out of 20.