A national database which estimates the worth of houses may contain errors that have fuelled inflation in the Canadian property market, where a steady rise in home prices has fanned fears of a bubble, a newspaper reported.
Banks, appraisers and mortgage insurers are increasingly concerned about the database, run by the nation’s biggest mortgage insurer, Canada Mortgage and Housing Corp, the Globe and Mail said in a report on its website late Wednesday.
Home prices have soared in Canada, raising concerns of a market crash, and making the housing market a key risk to the country’s financial outlook.
Statistics Canada data shows that new home prices in Canada were up 0.2% in August for a 17th straight month-on-month increase. August prices were up 2.4% from a year ago.
Dubbed Emili, the automated system uses data, such as from the recent sale of nearby homes, to set values, without having an appraiser sent to the address. The potential margin of error in making these calculations could cause problems for homebuyers, homeowners and banks, the paper said.
The report cited federal documents containing confidential statements from industry players, which indicated the data is flawed and has driven up home prices, the Globe and Mail said.
Those documents were part of a review by the federal banking regulator, the Office of the Superintendent of Financial Institutions, to see if Canada’s mortgage lending rules had to be tightened, the paper said.
In June, Finance Minister Jim Flaherty announced stricter rules on lending in a bid to cool the housing market.
Lenders are relying too much on the database, which was introduced by the CMHC in 1996 to help banks determine how much money can be lent for a residential property, the paper said.
(Reporting by S. John Tilak; Editing by Bernadette Baum)
The Calgary Sun