Vancouver leads way as Canada experiences boom in home building
Central bank remains confident that the sector will avoid collapses seen in the US and Britain
Record housing construction led a faster-than-expected gain in building permits in January, Canadian government data showed as the central bank said any further housing sector stimulus could bring "trouble".
One of the largest municipal gains was led by multiple-unit housing in Vancouver, a market that national policymakers have said was most at risk from over-building and a glut.
Bank of Canada deputy governor John Murray said the country probably would avoid housing crashes that happened in the United States and Britain, citing the example of the stability of Australia where overall consumer debt burdens were higher than Canada.
Consumer spending brought Canada through the worst of the 2008 global financial crisis as banks avoided collapse while low interest rates and government stimulus boosted debt-fuelled home buying.
"The household sector is now largely played out; pushing it much further could lead to trouble," Murray said. "Although countries such as the US and the UK have experienced sharp and painful corrections at comparable debt and price levels, leading to much more serious economic and financial consequences, it would be a mistake to assume that a similar outcome is therefore inevitable in Canada."
The central bank forecast for a soft landing of the sector conflicts with the opinion of Pacific Investment Management (Pimco), which says home prices may fall as much as 20 per cent in the next five years.