According to the Bank of Canada (BOC), the Canadian housing market could be looking up in 2019.
At the April 24, 2019 interest rate announcement, the BOC maintained the overnight interest rate at 1.75%. This was due to several factors, including global trade uncertainty, the decline in oil prices, and “weaker-than-anticipated” housing and consumer consumption.
However, the BOC also stated that housing activity could be picking up during the second half of 2019.
“The Bank expects growth to pick up, starting in the second quarter of this year,” the BOC stated.
“Housing activity is expected to stabilize given continued population gains, the fading effects of past housing policy changes, and improved global financial conditions.”
The BOC also stated that consumer consumption could be rebounding as well as it is underpinned by strong growth in employment income.
However, not everyone agrees with this assessment. Notably, Mortgage Professionals Canada took to Twitter to say that the effects of “past housing policy changes” are not fading as the B-20 guidelines are still in effect. Mortgage Professionals Canada has been calling for reforms to the B-20 regulations.
In a newsletter, Dominion Lending Centres Chief Economist Dr. Sherry Cooper stated that housing stabilization may vary by location. For instance, the effects of B-20 could persist in areas with high house prices that have been subject to other changes to housing policies, such as the Greater Vancouver Area.
Cooper also said that factors like the First-Time Home Buyer Incentive could also play a role in housing activity forecasts.
In the meantime, the BOC is taking a more accommodative approach towards interest rate increases. Many economists speculate there won’t be another hike until at least 2020.
“We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive,” the BOC stated in the April 24 release.
“In particular, we are monitoring developments in household spending, oil markets, and global trade policy to gauge the extent to which the factors weighing on growth and the inflation outlook are dissipating.”
The next BOC announcement is scheduled for May 29, 2019.
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