According to Craig Alexander, chief economist of Deloitte Canada, the Canadian economy isn’t receiving nearly as much support from the real estate market, as well as consumer spending as it once did.
Craig Alexander’s new study attempts to warn readers that “a year of economic transition, both internationally and in Canada” is ever so present for the year 2019.
When discussing global economic growth, Alexander states that “growth appears to have peaked in 2018, and the base forecast is for growth to moderate in 2019 and 2020… Canadian economic growth possibly will gear down from close to 2.0 percent in 2018 toward 1.6 percent in 2019”, states Craig Alexander.
The mortgage stress test, a system designed to benefit the Canadian economy upon economic stress, has significantly reduced the amount of home sales undergone when considering the past few quarters. This test’s implementation is the result of the B-20’s decision.
“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.”
It’s important to note that Alexander put major emphasis on the fact that “Some buyers were pushed out of the market, particularly in the least affordable cities.” These cities being Toronto, Ottawa, and Vancouver (examples).
According to Alexander, the future holds a somewhat stagnant apparatus. Economic conditions will be noticeably weak, the ability or willingness to take on household debt will drop significantly, and borrowing costs will rise. Home prices will most likely maintain themselves throughout a stagnant stature.
Spending in regards to consumers will most likely be labeled as strong for the majority of 2019, as expenditures may just “average 1.5 percent growth in 2019 and 1.4 percent in 2020.”
According to Craig Alexander, “This will reflect more modest employment growth, compensation 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.
Stick with us for more future information regarding Canada’s real estate market and economy.