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39 | Thursday, May 7, 2015 | OAKVILLE BEAVER | www.insideHALTON.com SPONSORED CONTENT QUARTERLY REPORT Dominion Lending Centres Chief Economist Says US Style Housing Crash Unlikely in Canada Responding to recent news reports about the IMF warning of an overheated Canadian housing market, the Chief Economist for Dominion Lending Centres, Sherry Cooper, says the prospect of a soft landing is good news for homeowners, "there is no doubt that letting some steam out of the boiling markets is a good thing because were prices to rise rapidly for too long, a nasty correction would be likely." Cooper, one of North America's most respected economic experts, points out that existing home sales were down 2 percent year-overyear in January, but were still up moderately outside of Alberta. Later data suggests that in February, sales rose month-over-month as gains in Toronto and Vancouver offset faltering markets in other parts of the country. More recently, Sales of existing homes in Canada rose in March from February, led by gains in the big Toronto and Vancouver markets. Sales were even up in Calgary where sales had slowed in recent months in the wake of the oil price decline. "With home ownership at a record high of 70 percent of households and interest rates at record lows, national sales growth will stabilize at a modest pace," says Cooper. "However, steady demand from immigrants and nonresident purchasers in Toronto and Vancouver should continue to support housing markets. In addition, Millennials are in their first-time home-buying years. While many might be priced out of the single-family home market, many will take the plunge into condos." On the supply side, housing starts and completions are down and are now trending slightly above household formation rates. Taking replacement demand into consideration, the current pace of overall home construction is at appropriate levels to meet long-run demand. We have also seen evidence of a recent increase in dedicated rental housing construction as institutional investors are providing increased funding in this longoverlooked area of the housing market. Condos have effectively replaced traditional apartment units and are an affordable alternative for those who are priced out of Toronto's detached housing market. Rental vacancy rates remain at extreme lows in Vancouver and Toronto. Cooper says the bottom line is that there is little evidence of an upcoming U.S.-style housing crash anywhere in Canada, even in the hardest hit energy-centered markets. Bank of Canada Remains On Hold With Hopes of Economic Rebound As was widely expected, on Wednesday April 15, 2015 The Bank of Canada announced that it is maintaining its target for the overnight rate at 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. Core inflation, at 2 percent, is a reflection of the dampening effects of a slowing economy offset by the pass through effects of the lower dollar. in the January MPR); however, the second quarter is expected to see a rebound to 1.8 percent growth, revised up from earlier expectation. The Bank continues to assert that, "Underneath the effects of the oil price shock, the natural sequence of stronger non-energy exports, increasing investment, and improving labour markets is progressing." This will be aided by an improvement in the U.S. economy and the easing in financial conditions. growth of 1.9 per cent in 2015, 2.5 per cent in 2016, and 2.0 per cent in 2017. The Bank also believes the risks to the outlook are balanced, an upgrade since the last policy meeting in March. As a result of this view, they judge that the current degree of monetary stimulus is appropriate and have left rates unchanged. I am cautiously optimistic that the Bank has got it right, but I continue to believe that the risks are on the downside for the economy and inflation. My forecast for Canadian growth this year is 1.5 percent-below the Bank's 1.9 percent forecast. Much hinges on the U.S. economy. The April MPR revised down its U.S. growth forecast for this year from 3.2 percent to 2.7 percent. Dr. Sherry Cooper Chief Economist for The Bank is hopeful Dominion Lending Centres that global growth will strengthen in coming There remains a good deal of uncertainty months to 3-1/2 percent--consistent in this sequence: While March with their forecast in January's Monetary employment in Canada improved Policy Report (MPR)--as a direct result substantially, business investment of central bank rate cuts and quantitative remains disappointing, manufacturing is easing in Europe. Lower commodity weak--especially in the auto sector--and prices will boost growth in some the improvement in trade has been less countries. The Bank also believes that than expected. strong growth will resume in the United States after a weak first quarter, which, of Real GDP growth is projected to rebound course, has yet to be confirmed. in the second quarter and subsequently strengthen to average about 2 1/2 per First quarter growth in Canada has been cent on a quarterly basis until the middle revised downward to 0.0 percent in the of 2016. The Bank expects real GDP April MPR (from 1.5 percent growth 1-888-806-8080 www.dominionlending.ca