Housing sales and prices should remain fairly steady into next year, as a slowing economy is balanced by low mortgage rates and relatively low unemployment, a BMO Capital Markets report suggests.
"Low interest rates have fuelled Canada's housing market in the past decade, pushing prices to new highs in most regions," said senior economist Sal Guatieri. "However, a weaker economy and new mortgage rules have dimmed activity recently."
Resales have slowed to their past-decade norm, with the tougher mortgage rules introduced by the federal govern-
ment in March, and prices have flattened in the last six months on a seasonally adjusted basis, Guatieri said in the report.
The slowing global economy should hold the Bank of Canada from raising its benchmark interest rate - now at a nearrecord low of one per cent - before 2013, which will keep borrowing affordable.
And an unemployment rate expected to remain around 7.3 per cent through next year should mean continued confidence from homebuyers.
Guatieri also points to immigration as a factor in keeping home prices and sales steady through 2012, as their increased numbers support demand.
"Meanwhile, Canada's relatively sound fiscal finances have made it a desirable destination for non-residents to park their wealth during these uncertain economic times."
Canadians already burdened by record levels of household debt are reluctant to take on big mortgages, particularly as job and income growth is expected to slow along with the general economy next year.
"The biggest threat stems from the perceived one-inthree chance of a recession, and the attendant loss of jobs," Guatieri said. "Another risk, though far smaller, is if interest rates spike higher next year."
© Copyright (c) The Province