OTTAWA - One of Canada's foremost experts on the housing trends and household debt says what we don't know about the market could hurt us.
CIBC deputy chief economist Benjamin Tal argues in a new report that, despite all that is written about the market and measures enacted to either speed or slow it down, even policy-makers are operating somewhat in the dark.
The problem is Canada doesn't collect or publicly disseminate some data that could give us a clearer picture about what is actually happening in the market — whether it is headed for a soft or hard landing — and whether households can withstand increases in mortgage rates, how much and how quickly.
Tal says the situation could come back to haunt Canadians because a collapse in housing, as some are predicting, would not only hit homeowners in the pocketbook, but would also negatively impact the wider economy and job creation.
"Granted, having all that information is not a sufficient condition for preventing a collapse, but it could be a necessary condition," he writes.
"Most agree that the Canadian housing market is overshooting. The debate is largely over the trajectory of the adjustment. All agree that the real test of Canadian housing will take place when interest rates start rising. But how can you determine the level of rate sensitivity if you do not have information on the distribution of mortgages by actual mortgage rates, the level of down-payment and the distribution of their debt service ratio?"
Some of that information is available to lenders, for their own portfolios, but not shared. As well, there is only anecdotal evidence of how foreign investors are impacting the hot - and some believe overpriced - condo markets in Vancouver and Toronto.
In an interview, Tal agrees the data that is made public, such as home sales, starts, prices and household debt is useful, but says is not sufficient for Canadians or policy-makers to make decisions that are fully-informed.
David Madani of Capital Economics, who has issued warnings about the overpriced Canadian market for years, says more data would help, but adds the nature of Tal's paper is equally worrying.
"When one of Canada's leading economists, at one of the largest banks, complains openly about not having enough housing data, it only makes me more nervous about Canada's bubbly housing market," he said.
Tal says while policy-makers have more information at their disposal than ordinary Canadians, as do banks, he believes even they don't have all that data they should.
With a newly minted finance minister, Joe Oliver, and relatively fresh Bank of Canada governor, Stephen Poloz, Tal said now may be the time to ensure agencies such as the Canada Mortgage and Housing Corp. and the financial institutions regulator, as well as private players such as the Canadian Bankers Association, to either collect the data, or release data they hold.
In response, Oliver's office said the Superintendent of Financial Institutions has requested more information from banks and other lenders, adding the minister "closely monitor(s) Canada's housing markets, and stands ready to implement further measures if necessary."
The CMHC said it already provides information on its own portfolio holdings, and is always open to improve the content and reporting, but did not commit to doing so.
Tal says many countries do collect most of the data he is requesting, although for some that didn't prevent a housing collapse in 2008, while Canada's market went from strength to strength.
Still, ignorance is never bliss, says Tal. Having accurate and timely information gives policymakers a chance to "chart a course that reduces any potential risk of a real estate bubble," he said.