The country's frenzied housing market is undoubtedly a hot-button issue - the state of Canadian real estate now has the attention of international media outlets. The New York Times defined "a soon-to-burst real estate bubble." While Reuters proclaimed "Canada's red-hot housing market has become a bonfire."
New Zealand, a country often grouped with Canada in regards to real estate is also home to a red-hot housing market. The New Zealand government is trying a new solution, making it more difficult to get a mortgage. Bank of Canada is no doubt keeping a close eye on the progress of this new approach. Many are suggesting our country do the same.
Tiff Macklem, the BoC's governor, was asked about the matter last month and seemed to dismiss the idea. He explained that righting the country's economic ship was far-more important.
"Do we need measures right now with respect to housing?" asked Macklem in a news conference. "Right now, the economy is weak, we're just out of the second wave. I think we need the support, we need the growth we can get.
The Bank of Canada announced yesterday it would hold interest rates pat, at record lows. Critics both here and in New Zealand believe these have been partially responsible in igniting house prices.
The fear of speculative investment activity which hinges on high demand, rising prices and low rates has forced action from the New Zealand government as well as the Reserve Bank of New Zealand (RBZN)
After COVID-19, "the availability of affordable housing - that was the No. 2 issue identified as being most important," explained Emanuel Kalafatelis, Managing Partner of Research New Zealand.
"We are now concerned about the risk a sharp correction in the housing market poses for financial stability," stated RBNZ deputy governor Geoff Bascand last month. "There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged."
The RBNZ elevated the minimum requirement for mortgage down payments early this month, intending on raising them again and introducing more rigid borrowing requirements for investors in early May.
As of May, the majority of buyers who plan on living in their home will be obligated to put down 20 percent. Investors will be required to shell out 40 percent.