The chief executive of Canada’s most valuable company is sounding the alarm on runaway house prices in Toronto and Vancouver.
“I’m increasingly concerned by the unhealthy combination of factors that have driven the market to the current point of strain,” RBC CEO Dave McKay said in his opening remarks at the bank’s annual general meeting in Toronto on Thursday.
“Long-time persistent supply and demand imbalances in the GTA and Vancouver, low interest rates, and speculative activity. All of these factors are mixing to push prices up to unsustainable levels, stressing household balance sheets and locking many people out of the housing market.”
Speaking with reporters after the annual meeting, McKay noted that one of the tools typically used to tame the housing market – higher interest rates – isn’t an option right now.
“Normally, higher rates of monetary policy would cool things down. But we’re in an environment now where we’re not able to raise rates; therefore, we have a highly stimulative monetary policy that’s adding to the problem,” McKay said. “When you have those conditions – strong demand, lack of supply, monetary conditions the way they are – you see speculators … [and] they exacerbate the price increases.”
McKay’s words of caution come one day after Finance Minister Bill Morneau requested a meeting with Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory to discuss the scorching price growth in the country’s hottest housing market.
RBC’s CEO said access to affordable housing is becoming a “distant dream”, especially in Vancouver and Toronto.
McKay said he welcomes recent housing measures announced by Ottawa, and he acknowledged Ontario and Toronto are studying the situation. He also encouraged all three levels of government to coordinate their strategies, “and to do so reasonably quickly.”
“Any single solution is unlikely to be successful on its own. A complex problem like this requires a multi-faceted solution, which addresses supply constraints and speculative forces and is mindful of the rate environment, which can be a moderating force,” he added.
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