| TORONTO, April 3
TORONTO, April 3 A lack of comprehensive data on
Canada's housing sector poses risks to the country's hot real
estate market by restricting information that could help
investors make sound decisions, according to a prominent
Benjamin Tal, senior economist at CIBC, Canada's
fifth-largest bank, called on policymakers to address the issue
as rising interest rates are expected to begin to test the
He pointed to many measures of activity in the mortgage and
housing markets that are tracked in the United States but not
publicly available in Canada, including credit score
distribution across mortgages and homeowners' equity positions.
"The gap between the importance of the real estate market to
the economy and the lack of publicly available information on it
is mind-boggling," Tal wrote in a note titled "Flying Blind"
With a new set of policymakers at the helm, including a
recently appointed finance minister and a Bank of Canada
governor named last year, officials "have an opportunity to
chart a course that reduces any potential risk of a real estate
bubble by making data availability a top priority," Tal said.
Canada's hot housing market has so far defied expectations
of a U.S.-style collapse. While some still warn the market could
crash, others expect it will level off from here, or at worst
suffer a correction.
While economists agree that the real test of the Canadian
housing market will come when interest rates start to rise, the
lack of data makes it difficult to determine how sensitive
borrowers are to an increase in rates, Tal said.
The result is an "asymmetrical" debate over the scale of the
pullback the market could face, he said. Banks and other lenders
cannot reveal the information they hold on borrowers. That
leaves the average observer to form opinions based on anecdotal
evidence or "questionable macro-based indicators," such as the
debt-to-income ratio and price-to-rent ratio, he said, noting
these opinions are usually bearish.
"The 'Short Canada' position that is slowly gaining
popularity among foreign fund managers is also based on similar
partial information," Tal said.
Still, the lack of more granular economic data in Canada
relative to the United States is not exclusive to the housing
sector, said BMO Capital Markets' Doug Porter, another prominent
Canadian economist, when asked for comment.
That is partly due to the U.S. economy being larger and more
diversified, he said.
Even so, the shortage of detail seems to be contributing to
a negative view of Canada's housing market, particularly among
those outside the country, Porter said.
"It is interesting how there is a lot of bearish opinion of
course on Canada's housing market, but the majority of it seems
to come from outside of the borders, not within," said Porter.
"When you only have limited data points, you might come to the
Tal called on the Canadian Mortgage and Housing Corp, the
Superintendent of Financial Institutions, the Canadian Bankers'
Association and the country's credit bureaus to find ways to
provide more comprehensive data.
(Reporting by Leah Schnurr; Editing by Nick Zieminski)