Real estate contributing less to the moderating Canadian economy

Dated: March 18 2019

Views: 97

Real estate contributing less to the moderating Canadian economy

Real estate contributing less to the moderating Canadian economy

Real estate and consumer spending are providing less support to the Canadian economy, according to Deloitte Canada chief economist Craig Alexander.

In a new study, Alexander warned that 2019 will likely be “a year of economic transition, both internationally and in Canada.”

“Global economic growth appears to have peaked in 2018, and the base case forecast is for growth to moderate in 2019 and 2020,” the analyst explained. “Canadian economic growth possibly will gear down from close to 2.0 percent in 2018 toward 1.6 percent in 2019.”

A major contributor to Canada’s economic slowdown is the stricter mortgage stress test introduced by B-20 early last year, which has pulled down home sales over the past several quarters.

“The fallout of the mortgage income stress test has waned over time, but resale activity has also felt a headwind from rising interest rates. The weaker real estate demand has also been felt in new home construction.”

“Some buyers were pushed out of the market, particularly in the least affordable cities,” he emphasized. “The far greater impact was a reduction in the size of mortgage being qualified, which lowered the price point for transactions and reduced the average price of homes being sold.”

Read more: BoC’s Poloz should take care not to ‘overly tune’ policy – former gov

In the near future, the national market should expect home prices and sales activity to remain stagnant, “reflecting modestly higher borrowing costs, limited household willingness to take on significantly greater debt, and weaker economic conditions.”

And while consumer spending should end up a bit stronger for most of the year, expenditures are predicted to “average 1.5 percent growth in 2019 and 1.4 percent in 2020.”

“This will reflect more modest employment growth, compensation gains in line with or slightly above the rate of inflation, and relatively flat real estate markets that will dampen big-ticket household purchases, like furniture and appliances.”

Blog author image

Steven Axford

Steve is a award winning Realtor in Victoria BC, with his listings selling faster and for top dollar! Growing up in Victoria, BC and has always been active in his community. Steve is a Victoria Couga....

Latest Blog Posts

´╗┐The 2021 Victoria real estate market year in review

The 2021 Victoria real estate market year in reviewA total of 438 properties sold in the Victoria Real Estate Board region this December, 30.6 per cent fewer than the 631 properties sold in December

Read More

No change on the horizon for the Victoria real estate market

December 1, 2021  A total of 653 properties sold in the Victoria Real Estate Board region this November, 17.9 per cent fewer than the 795 properties sold in November 2020 and 12.3 per cent

Read More

A greater commitment to development required to balance local housing market

October 1, 2021  A total of 761 properties sold in the Victoria Real Estate Board region this September, 23.1 per cent fewer than the 989 properties sold in September 2020 and 8.4 per cent

Read More

CMHC says annual pace of housing starts in Canada slowed in July

OTTAWA — Canada Mortgage and Housing Corp. says the annual pace of housing starts in July fell compared with June.The national housing agency says the annual pace of starts fell to 272

Read More