UPDATE 3-Canada, fearing bubble, looks to cool housing market

(Adds economists' comments)
By Ethan Lou
TORONTO, June 23 (Reuters) - With home prices booming and
fears of a bubble, Canada's finance minister on Thursday
announced a working group of federal, provincial and municipal
officials to recommend policy changes.
The panel, to be formed within days, will meet throughout
the summer to review supply and demand, affordability and the
stability of the market, Finance Minister Bill Morneau said in
Toronto.
The move suggests a new round of regulation changes to
tighten mortgage rules is not imminent, but could come as early
as the fall amid fears the market is overheated and consumer
indebtedness too high.
The government will evaluate whether further steps are
needed to protect borrowers and lenders to help maintain a
stable market, Morneau added.
He and Prime Minister Justin Trudeau have both commented in
recent weeks about high prices in Toronto and Vancouver,
Canada's hottest markets, echoing concerns by some analysts who
fear a housing bubble.
House prices have climbed since 2009 as low interest rates
fueled demand. While the energy slump has cooled sales in oil
country, the run-up in prices in Ontario and British Columbia
have pushed consumer debt to record levels and increased worries
that both consumers and housing are in precarious positions.
Some have called for a flipping tax to curb speculators from
buying and selling houses. Some want limits imposed on foreign
investment to prevent wealthy Chinese buyers, among others, from
driving up prices, particularly in Vancouver.
Morneau said increasing foreign ownership does make up "some
element" of the high prices.
He did not offer details on potential methods or the group's
deadline.
Canada has tightened mortgage regulations five times since
2008 in a bid to cool the market, shortening the length of loans
and increasing the minimum down payment.
Benjamin Tal, deputy chief economist of the Canadian
Imperial Bank of Commerce CM.TO , said the inclusion of
municipal officials means the government seems to favor
adjusting municipal property taxes over tweaking mortgage rules.
"Clearly they have indicated that we're talking about two
cities, in particular, Toronto and Vancouver, and therefore you
have to deal with the municipality-specific issues," he said.
Comments by policymakers should also help to cool things
off, said Tom Davidoff, a University of British Columbia
economics professor.
"Expectation setting is quite important to the extent the
market is being driven by 'fear of missing out,'" he said.
"People hearing 'We don't intend to let prices explode forever'
can be important."