BMO’s Downe Says Condo Concerns Focus on Vancouver, Toronto
January 11, 2012, 9:32 AM ESTBy Doug Alexander
(Updates with Nixon comments starting in fourth paragraph.)
Jan. 10 (Bloomberg) -- Bank of Montreal Chief Executive Officer William Downe said “warning signs” have emerged in Canada’s condominium markets, particularly in Toronto and Vancouver.
“With respect to two markets -- Toronto and Vancouver -- investor-owned condo properties have got to be a cause for concern, just because of supply and demand,” Downe said today at a banking conference in Toronto hosted by RBC Capital Markets.
Demand for housing in Canada has been supported by some of the lowest mortgage rates in decades, with last week’s average five-year fixed mortgage rate of 5.29 remaining close to a low of 5.19 percent set in September. The Bank of Canada projected in October that housing will add little economic growth in 2012.
There’s “no question” that Canada’s condominium markets, notably in Toronto and Vancouver, are the most vulnerable housing in the country, Royal Bank of Canada CEO Gordon Nixon said at the conference.
“When you look at markets like Vancouver and Toronto, there’s a level of caution from a risk perspective which is higher today than it would have been a few years ago,” Nixon, 54, said.
Ancillary Impact
Royal Bank, the country’s largest lender by assets, has about C$2 billion ($2 billion) in total exposure to Canadian condominium development, Nixon said, adding that it’s not a significant amount.
“We feel very comfortable that we can manage through a significant downturn,” Nixon said. “But, again, there would be an ancillary impact.”
Downe of BMO, Canada’s fourth-biggest bank, said he sees short-term credit stress in Canadian commercial real-estate development, and the possibility of a “soft landing” is more likely today than a year ago.
“I wouldn’t give up on the Canadian housing market, but there has to be a soft landing,” Downe, 59, said.
--With assistance from Greg Quinn in Ottawa. Editors: William Ahearn, David Scanlan
To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net
To contact the editor responsible for this story: Paul Badertscher at pbadertscher@bloomberg.net
