The Royal Bank of Canada (RBC) is keeping a careful watch over home prices in both Vancouver and Toronto, according to media reports of an August 24 conference call to discuss RBC’s quarterly results.
The news comes at a time when Canada’s biggest banks are under pressure from the federal government over mortgage underwriting, with nervousness increasing over a possible price correction in either or both cities. The Office of the Superintendent for Financial Institutions tightened mortgage underwriting rules in July, and has told banks to "stress-test" to imagine a price correction scenario of up to 50 per cent.
RBC chief executive officer Dave McKay told journalists and analysts that the bank was closely monitoring the Vancouver and Toronto markets, although he added that RBC has less exposure to Vancouver than some of its competitors and that the bank's underwriting policies were robust.
His statement follows reports of Greater Vancouver home sales dropping in July, although the real estate board reported that prices were still rising. Sales data for August so far has revealed a further slowing in sales, which experts say is likely due to a combination of a wait-and-see reaction to the overseas buyer tax, and a natural summer lull.
McKay told media that the bank supported the federal government's move to set up a working group to help with housing issues.