Canada home prices to keep rising despite economic slowdown: Reuters poll
By Anu Bararia
(Reuters) - Canadian home prices are set to rise a little over 5 percent this year and 2 percent in 2016 despite a slowdown in activity as the economy weakens, a Reuters poll found.
Canada's economy shrank in the first three months of the year and quite possibly between April-June as well owing in part to slumping oil prices. House prices have defied this weakness so far and have kept climbing.
The Reuters survey of over 20 analysts predicted home prices would rise 5.2 percent this year, up sharply from a forecast of 3.4 percent in June's survey.
The latest expectations for 2016 and 2017 have also been revised upwards, to 2.0 and 2.3 percent from 1.3 and 1.7 percent respectively. Canada's Teranet-National Bank House Price Index was up 1.2 percent in July.
Calling the Canadian housing market "bullet-proof", Mark Hopkins, senior economist at Moody's Analytics said: "It seems to not only be defying the odds in terms of surviving the large downturn in the global economy, but even now with gross domestic product contracting, it seems as though existing home prices have accelerated which is a bit strange and counterintuitive."
A majority of analysts predict a slowdown in home buying despite two rate reductions by the Bank of Canada this year.
"Even though the Bank of Canada is lowering rates, we are going to see a slowdown starting as people find that it is more expensive to buy stuff, and the home renovation activity will begin to slow down," said David Watt, chief economist at HSBC.
In recent years, the housing market has been an important driver of the Canadian economy. It went in the opposite direction to the U.S. housing market crash and helped Canada brave the worst of the global financial crisis. Continued...