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House prices to stagnate
Economists are arriving at something of a consensus where Canada's housing market is concerned, projecting a drop in prices of 10 per cent to 15 per cent over the next few years, and notably in Toronto and Vancouver.

And while they're not expecting a U.S.-style meltdown, they are warning about the risks to the real estate market. And going forward, the market will largely stagnate.

"Even beyond mid-decade, Canada's housing sector faces the likelihood of a prolonged period of relatively modest sales and price gains," economists Aron Gampel, Adrienne Warren and Mary Webb of Bank of Nova Scotia said today.

"Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand," they said in a new report.

"The downturns that followed Canada's major housing booms of the 1970s and 1980s - defined by having flat or negative real price growth - lasted eight and nine years, respectively."

The Scotiabank economists project a cumulative 10-per-cent drop in house prices over the next two to three years. Toronto-Dominion Bank, in turn, forecast recently that average prices will likely slip by between 10 per cent to 15 per cent over the next two years.

The federal government, of course, has moved several times to cool things down, most recently last month.

And already, Toronto's condo market has started to cool, while Vancouver's overheated market is also slowing.

Separately, Central 1 Credit Union said today it believes that Vancouver prices will decline modestly. Across British Columbia, prices will slip and then rise "slightly" in 2013 and 2014, it forecast.

"Unless there is another recession with large scale job losses in the province, which we do not expect, house prices will temporarily decline by about 5 per cent," said Central 1 economist Bryan Yu.

Looking forward where the national market is concerned, demand is now "effectively exhausted" after the long real estate boom, the Scotiabank economists said, and home ownership levels are now at a record.

"Canada's housing market is expected to avoid the sharp downturn witnessed in the United States and Europe," they said.

"However, the downside risks to domestic housing activity are increasing. The full impact of the slowdown may not become fully visible until mid-decade. Affordability will be increasingly strained for existing and potential homeowners when mortgage rates eventually drift up. Historically low interest rates are currently maintaining affordability in the face of record home prices and rising home operating costs."

When will Europe act?
How long will it take before European policy makers and politicians, divided on courses of action and unable to stem their crises, move forcefully as their economies crumble about them?

As The Globe and Mail's Brian Milner writes in today's Report on Business, pressure is building on the European Central Bank and its chief Mario Draghi to act as the debt crisis in the 17-member euro zone deepens.

The group is divided - with Germany's Bundesbank opposing a bond-buying scheme - and to date has offered little more than promises. At the same time, Europe's leaders are hell bent on austerity, rather than growth, measures.

Yet day after day, the evidence of a deepening crisis emerge. Not only are Spanish and Italian bond yields, for example, near crisis levels, but the economies of Europe are fast eroding further.

Today alone, the Bank of England slashed its projections for economic growth, yet the central bank appears in no rush to act. At the same time, the Banque de France forecast the country will sink into recession in the third quarter. Germany's industrial output is also falling.

And those are just the latest readings.

It's not that central banks haven't acted, it's that there's more to do.

"Four years after the start of the global financial crisis, the world economy is struggling," said Andrew Kenningham of Capital Economics in London.

"In the past few months, the recovery has faltered in the U.S. and Japan while GDP is likely to fall in both the euro zone and U.K. this year. In early July, the ECB responded by cutting its key interest rate and the[Bank of England] extended its asset purchase program. However, central banks are under pressure to do more."

Mr. Kenningham does expect more, disagreeing with some observers who believe there's little left that central banks can do.

He believes the Bank of England will cut its benchmark rate again, by a quarter of a percentage point, and that the ECB may take similar action in time.

BCE boosts dividend
Shareholders of BCE Inc. started the day off in fine fashion as the Canadian telecommunications giant hiked its dividend, posted a jump in second-quarter profit and boosted its outlook for the year.

BCE earned $773-million in the quarter, or $1 a share, up from $590-million or 76 cents a year earlier.

As The Globe and Mail's Steve Ladurantaye reports, the only soft spot was a drop of almost 4 per cent in home phone revenue, though overall revenue climbed 6.7 per cent.

BCE hiked its annual dividend by 10 cents to $2.27.

It also forecast adjusted earnings per share of $3.15 to $3.20 for the year, up from an earlier projection of $3.13 to $3.18.

Air Canada loss deepens
I wonder what might have happened had Labour Minister Lisa Raitt not intervened in a contract dispute at Air Canada.

The airline today cited the labour strife as it posted a deeper second-quarter loss of $96-million or 35 cents a share, compared to a loss of $46-million or 17 cents a year earlier.

The airline is returning to more normal levels, however, it said.

"As previously reported, Air Canada's operations were adversely impacted by labour disruptions in March and April of 2012 which resulted in a decline in bookings for travel originating in Canada in the immediate aftermath," said chief executive officer Calin Rovinescu.

"Our brand is resilient and we were encouraged to see booking trends return to normal levels by the end of the second quarter of 2012."

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