Canada housing market to become a drag on the economy: Poll

Tue Dec 1, 2015 3:32pm EST
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By Anu Bararia

(Reuters) - Canada's housing market is likely to be a drag on economic growth over the next couple of years, thanks to too much supply and high levels of household debt making further buying a risky affair, a Reuters poll found.

The housing market has been one of the brightest spots in the Canadian economy in recent years. Strong housing helped Canada weather the worst of the global financial crisis as the U.S. housing market south of the border collapsed.

But analysts say property will no longer be able to do the heavy lifting for Canada's economy as many new households stretching themselves to buy expensive property have become deeply indebted. Housing turnover has also slowed.

The slowdown has been particularly sharp in Alberta, where much of Canada's oil exports are produced, and which has been hardest hit by the collapse in the price of crude.

"We have relied on housing and housing investments to carry growth through most of the post-recession period and it's time for the housing market to put its feet up and take rest," said David Watt, chief economist with HSBC Bank Canada.

"The footprint of the housing market and residential investment on the economy is just unsustainably high," he added.

A slight majority of analysts in the Reuters poll, 13 of 21, anticipated the housing market would be a drag on the economy in the coming years, compared with eight who expected it to be a net contributor.

But even with all the concern over household debt and the economy slowing down, the median forecast of 23 housing market analysts showed home prices will still have risen by 5.5 percent this year, more than the 5.2 percent in August's survey.   Continued...

Residential and commercial buildings are pictured in Vancouver, British Columbia June 20, 2011.  REUTERS/Jason Lee