Policymakers need to improve the quality of publicly available data on the Canadian real estate markets, says CIBC World Markets economist, Benjamin Tal.
In a research note, Tal says that the quality of public data on these markets is sadly lacking. “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,” he says.
And, the problem, he suggests, is that, while banks and other lenders have access to plenty of information from their own portfolios, others have to make decisions largely based on anecdotal evidence and “questionable” macro indicators.
“This situation is unhealthy,” he says. “Due to competitive reasons lenders cannot reveal all the information they sit on, while other players are forced to use their limited information to make decisions. The key issue here is that the partial but publicly available information is what really controls the agenda.”
While having access to quality data may not be enough to prevent a housing market collapse, “it could be a necessary condition”, he notes. And, he suggests several ways to enhance public data, and reduce the information asymmetry. For example, he suggests that CMHC could provide more timely and comprehensive housing information; credit bureaus should incorporate mortgage information into their reporting; and, the Office of the Superintendent of Financial Institutions (OSFI) should provide more information regarding credit and default trajectories, as should the Canadian Bankers’ Association. “This should be supplemented by much better communication between policy makers, builders and lenders,” he says.
“The time to act is now. With fresh players steering our policy ship, the new Finance Minister, the new Governor of the Bank of Canada and the new head of CMHC have an opportunity to chart a course that reduce any potential risk of a real estate bubble by making data availability a top priority,” he argues.