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A 5-year, 33-city home price forecast (which you’ll like unless you live in Sudbury, Regina or Moncton)

Briefing highlights

  • A five-year home price forecast
  • Markets at a glance
  • Canadian dollar tops 76 cents
  • Ottawa to aid steel, aluminum
  • Final tariff list also expected
  • Business confidence strong: survey
  • April GDP inches up 0.1 per cent

Housing market outlook

If you’re a price-obsessed policy maker fretting over Canada’s housing markets, take heart.

If you’re a price-obsessed homeowner, also take heart.

If you’re a price-obsessed homeowner in Sudbury, Regina or Moncton, heartbreaking comes to mind.

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A new short-, medium- and longer-term forecast for 33 Canadian cities suggests housing markets are in the midst of a soft landing, with a slowdown, but not outright contraction, in most regions.

There are some exceptions, as this forecast by Moody’s Analytics, based on data from RPS Real Property Solutions, suggests:

Average annualized projected single-family house price growth

Per cent

Name2018Q2–2019Q12019Q2–2020Q12018Q1–2023Q1*
Victoria3.9%2.5%3.0%
Vancouver-1.43.93.3
Abbotsford-0.30.41.4
Kelowna0.41.72.9
Calgary -1.4-3.23.0
Edmonton0-0.44.9
Saskatoon-3.4-1.54.1
Regina-10-91.0
Winnipeg-2.31.42.0
Thunder Bay-3.9-2.2-1.1
Windsor6.62.12.6
London 0.50.41.9
Sudbury-6.9-2.4-1.6
Kitchener-1.60.21.5
Brantford-2.2-1.7-0.3
Guelph2.91.13.2
Hamilton-0.30.41.5
Barrie -3.50.31.9
Toronto-1.12.22.6
St. Catharines-Niagara-0.20.71.6
Oshawa -2.42.72.6
Peterborough-3.5-1.9-0.6
Kingston1.6-0.90.7
Ottawa-Gatineau2.32.73.4
Montreal5.25.34.5
Trois-Rivieres-1.90.2-1.3
Sherbrooke 6.63.44.1
Quebec2.52.33.0
Saguenay-1.80-1.5
Saint John-0.5-1.9-1.3
Moncton-0.4-2.5-1.6
Halifax4.144.3
St. John’s3.80.72.6

Source: Moody's Analytics *April 2018 forecast

This comes after policy makers at the provincial and federal levels – the Ontario and B.C. governments and Ottawa’s commercial bank regulator – engineered a badly needed slowdown to tame inflated prices and borrowing.

Those provinces unveiled housing plans that included taxes on foreign buyers of local properties, while the regulator, the Office of the Superintendent of Financial Institutions, brought in mortgage-qualification stress tests at the beginning of the year.

It’s not all hearts and flowers, according to Moody’s Analytics, the sister company to the well-known credit rating agency.

“The overall effect is a pronounced slowdown in housing demand,” said Moody’s Analytics economist Andres Carbacho-Burgos.

“While such a slowdown is very much in order for the overheated Toronto and Vancouver housing markets, slowing demand is also being felt in the Prairies and a few of the Atlantic provinces, pointing to the downside risk that a housing downturn in these provinces could be contributing factor in the slide to recession,” he added in releasing the RPS-Moody’s Analytics house price forecast.

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The study also projects price increases for detached homes across the country will pick up gradually, from just 0.1 per cent this year, to 1.1 per cent next year, and 4.1 per cent by 2023.

Condo prices, in turn, will see growth of 1.6 per cent this year, 0.7 per cent in 2019, and 3.4 per cent in 2023.

“Despite the better medium- and long-term price outlook in the latest Moody’s Analytics Canada macroeconomic forecast, the short-term outlook is less sanguine,” said Mr. Carbacho-Burgos.

“Some of the immediate house price drivers such as per-capita disposable income growth and the new home and land price index will trend downward in the next few years … and will pull down on appreciation at the same time as higher interest rates and stress tests constrain demand.”

Of course, it all depends on where you live.

“Some of the undervalued housing markets, especially in Alberta, will do better despite weaker economic fundamentals, precisely because they have retained better affordability, while Toronto and Vancouver will see a house price correction for at least the next year,” Mr. Carbacho-Burgos added.

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“Montreal, in particular, currently looks like one of the healthiest housing markets in terms of avoiding both overvaluation and weak economic fundamentals.”

The policy measures have certainly made their mark.

The rise of residential mortgages has slowed, coming in at an annual pace of 5.2 per cent to $1.5-trillion by the end of the first quarter.

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Stocks, loonie at a glance

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Canada strikes back

Ottawa is poised to strike back in the U.S.-Canada trade war today, with aid for domestic steel and aluminum producers and a final list of tariffs on American imports.

As The Globe and Mail’s Bill Curry and Daniel Leblanc report, Foreign Affairs Minister Chrystia Freeland, Innovation Minister Navdeep Bains and Employment Minister Patty Hajdu are scheduled to unveil details at a Hamilton steel mill.

In this Tuesday, June 12, 2018, photo, trucks cross the Ambassador Bridge from Windsor, Ontario into Detroit

Paul Sancya/The Associated Press

Loans and loan guarantees for the steel and aluminum sector are expected, a response to American tariffs on those imports. Also expected are temporary changes to EI, and a final list of Canadian tariffs that will go into effect on Canada Day.

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Business confidence strong

Business confidence is at near-record levels in Canada despite the escalating trade showdown with the United States, according to the Bank of Canada’s latest quarterly business outlook survey.

The central bank composite indicator of business optimism posted its second highest reading in more than 17 years of tracking, based on interviews with 100 company executives between May 3 and June 5, The Globe and Mail’s Barrie McKenna reports.

There is “continued business optimism, particularly outside the energy-producing regions,” and companies are experiencing both price and capacity pressures, the bank said. Companies’ expectations for higher sales, investment and hiring all remain strong.

The survey results, combined with better-than-expected GDP growth of 0.1 per cent in April, give the central bank ample evidence to continue raising its benchmark interest on July 11.

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GDP inches up

It may be nothing to write home about, but Canada’s economy fared better than expected in April, expanding by 0.1 per cent.

That’s notable only because economists had expected Statistics Canada to come in today with a reading that was either flat or showed a tiny contraction of 0.1 per cent.

Leading the charge were manufacturing industries, which gained 0.8 per cent, and utilities. Lagging were construction, mining, and oil and gas extraction.

Services industries were flat.

Statistics Canada also noted how the weather played a role.

“Even though spring officially started on March 20, the first full month – the month of April – was anything but sprig-like, as colder-than-normal temperatures across the country, coupled with an ice storm across Central and Eastern Canada, impacted several industries,” the federal agency said.

Among those affected were utilities, with greater demand for heating.

Notable, too, was the gain among real estate agents, who had suffered three monthly declines in a row because of the new mortgage rules.

Canada’s economy has now expanded in each month this year, but for January.

But “April showers will have to bring May flowers to give Canada a decent second quarter,” said CIBC World Markets chief economist Avery Shenfeld.

“Remember that comes on the heels of two solid months, and sets up Q2 to be a roughly 2.5-per-cent quarter, good enough to keep the Bank of Canada on target for our forecast July hike.”

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