Canadian government officials delivered a vote of confidence in the country’s housing sector and banking system, telling lawmakers that Vancouver and Toronto’s real estate markets are supported by fundamentals that leave risks well-contained.

Senior officials from Canada’s Finance Department testified Wednesday evening to the Senate finance committee, fielding questions about the stability of the housing market, risks posed by high household debt levels in Canada and the recent downgrade of banks by Moody’s Investors Service Inc.

The hearing came amid questions about the future of Toronto-based mortgage lender Home Capital Group Inc. and any knock-on effect that a potential failure there could have on Canada’s housing sector, particularly in Vancouver and Toronto. The core message from the officials was Canada’s market was stable and, despite some risks, policymakers’ measures are taking effect.

“We don’t think there’s any systemic risk across the country,” said Phil King, a director at the economic and fiscal policy branch at Finance Canada. “There are specific pockets of concern, which seem to have ameliorated somewhat in the very-near term but we’re keeping a very close eye on those.”

Vancouver and Toronto have “very, very strong fundamentals” supporting prices including immigration, strong job creation, strong income gains and high wealth, he said.

King described a national housing market with distinct regions — surging Toronto and Vancouver, soft markets in energy-producing regions such as Calgary, and other cities like Montreal and Ottawa where policymakers have “no concerns whatsoever.”

In Toronto and Vancouver, he said, recent “exceptionally strong growth” in prices is more problematic. A foreign buyers tax and other policy measures “appear to be working” in Vancouver, King said. Further, around Toronto, the most recent data suggests “the market has pulled back quite a bit” in response to recent measures from the Ontario provincial government, he said.

Asked whether he was painting “a rosy picture,” King said: “Hopefully I haven’t been too sanguine, on the housing market in particular."

“We do have concerns about it. That’s why the government has implemented measures so many times over the last five years or so,” he said. “We think they are well-contained.”

The officials were also asked about the Moody’s downgrade of Canada’s six major banks earlier this month.

Market reaction to the downgrade suggested “no one is particularly worried” about Canadian banks, said Elisha Ram, a director of the financial markets division at Finance Canada.

Speaking separately to the same committee, an official from Canada’s banking regulator said some of the ratings agency’s arguments were “familiar.”

“I think if you read the material that Moody’s put out in support of their position, the material is very familiar" and not dissimilar from issues raised by the Bank of Canada, said Carolyn Rogers, an assistant superintendent at the Office of the Superintendent of Financial Institutions. She declined comment on Home Capital.

“You try to avoid surprises, we like to be on top of things and understand the risks that are in the environment our institutions are operating in,” Rogers said.

Bloomberg News