Optimism that Canadian home prices haven’t hit their peak and the economy has better days ahead drove consumer sentiment to the biggest weekly gain in more than a year, weekly telephone polling shows.
The Bloomberg Nanos Canadian Confidence Index climbed to 53.2 in the week ending Aug. 21, up from 52.2 in the prior survey, the biggest increase since May 2014. Those who said home prices in their neighbourhood will increase in the next six months rose to a 34.1 per cent share of respondents, up from 31.7 per cent, the largest increase in almost a year.
“There was a noticeable one-week gain in terms of the perceptions of real estate,” said Nanos Research Group chairman Nik Nanos. “This will have to be monitored to see if this is a potential new trend.” Before the gains of the last two weeks, confidence fell to the lowest since April, 2013.
Housing is a bright spot for the world’s 11th largest economy in a year where lower oil prices have routed exports and business investment. Prime Minister Stephen Harper has made housing part of his bid for re-election on Oct. 19, with a pledge this month to restrict foreign speculators who may be squeezing local families out of the market.
“By some estimates as many as 15 per cent of the condos in Vancouver sit empty; no dreams are living there,” Mr. Harper said at a campaign stop in the West Coast city. “If such foreign non-resident buyers are artificially driving up the cost of real estate and Canadian families are shut out of the market, that is a matter we can and should do something about.”
Bank of Canada Governor Stephen Poloz has cut interest rates twice this year to boost growth and said housing-market excesses should be contained with “macro-prudential” policies.
Demand from domestic buyers and those from countries such as China has pushed the average price for a detached Vancouver home to $1.1-million in July, up 16 per cent from a year earlier.
The Nanos polling showed reduced pessimism about the economy last week. Some 43.1 per cent said the economy will be weaker in six months, down from 45 per cent a week ago.
Wide differences in sentiment by region persisted in the data. The confidence reading of 51.4 in the Prairie provinces, including Alberta’s oil-heavy economy, lagged the 57.3 reported in Ontario, where a weaker currency is aiding manufacturers.