Canada housing market no longer weakening – bank economist

23 May 2013 14:29  [Source: ICIS news]

TORONTO (ICIS)--Canada’s housing market is no longer weakening after cooling significantly in the past year, a bank economist said on Thursday.

“There is mounting evidence that activity is no longer weakening," said Craig Wright, senior vice-president and chief economist at Toronto-based Royal Bank of Canada (RBC), citing the bank’s latest housing affordability study.

Canadian home resales were down 13% year on year in the 2013 first quarter, but they were unchanged from the 2012 fourth quarter, indicating that the market has stabilised.

W
right said that while demand cooled in the past year - partly because of a tightening in rules for government-insured mortgages - the supply of homes for sale also fell, thus helping to maintain balanced market conditions.

“Exceptionally low mortgage rates” were the main factor in keeping Canadian homeownership costs relatively affordable, he said.

However, he warned that a sudden hike in interest rates would hit housing.

“Fortunately, the likelihood of a surge in rates is slim at this stage," Wright said.

"We believe that the more probable scenario in Canada is one of low interest rates over the next two years,” he added.

RBC expects that Canada’s central bank, the Bank of Canada, will begin to gradually raise the overnight rate in mid-2014, Wright said.

But even when interest rates eventually rise, it will be because the Canadian economy is on a stronger footing, he said.

Paul Hodges studies key influences shaping the chemical industry in his Chemicals and the Economy Blog


By: Stefan Baumgarten
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