Pricey Canadian housing market to lift economic growth this year: Reuters poll

Wed Feb 24, 2016 8:26am EST
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By Anu Bararia

(Reuters) - Canada's housing market will be a net contributor to economic growth in the coming year, impelled by rising prices, but become a drag soon after due to a slowdown in buying and high levels of household debt, a Reuters poll found.

Boosted by borrowing costs near record lows, the housing market has been one of the brightest spots in Canada's recovery since the global financial crisis.

While house prices in the neighboring United States have been recovering slowly after the historic crash of 2008, in Canada they have nearly doubled in the past decade with households piling on record amount of debt.

The recent collapse in the price of oil, a major Canadian export, has created a schism in the Canadian housing market.

Two interest rate cuts and cheap debt have pushed prices in the already stretched markets of Toronto and Vancouver to new highs. But in oil-producing provinces like Alberta, job losses triggered by the oil market crash have hit property values and raised fears of a correction that could spill over to other parts of the country.

Indeed, in a December poll , analysts said the housing market would become a drag on the economy in a couple of years.

Still, for 2016, the latest poll of 24 housing market analysts forecast house prices would rise 3.3 percent, an upgrade from 3.0 percent in the previous survey.

"The housing market may remain a key contributor over the next three to six months as the knock-on effects from home prices, sales and housing starts gains can be lagged," said Diana Petramala at TD Economics.   Continued...

Construction workers finish siding work on a new housing development on lands owned by the Tsawwassen First Nation, a short distance south of Vancouver, British Columbia, March 9, 2015. REUTERS/Julie Gordon