{"id":7020,"date":"2017-09-29T10:10:46","date_gmt":"2017-09-29T17:10:46","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=7020"},"modified":"2017-09-22T09:13:27","modified_gmt":"2017-09-22T16:13:27","slug":"bc-housing-wealth-effect-is-expected-to-fade-over-time-in-2018","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2017\/09\/bc-housing-wealth-effect-is-expected-to-fade-over-time-in-2018\/","title":{"rendered":"BC Housing &#8220;Wealth Effect&#8221; is Expected to Fade Over Time in 2018"},"content":{"rendered":"<p style=\"text-align: justify;\">Canadian economic growth is expected to dip next year thanks to higher interest rates and a slowdown in the housing market, according to one of Canada\u2019s big six banks.<\/p>\n<p style=\"text-align: justify;\">This year, Canada\u2019s economy is anticipated to continue its above-trend growth by 3.1% \u2014 the best growth rate seen since 2011, TD Bank\u2019s economics team writes in its Canadian Quarterly Economic Forecast, published today.<\/p>\n<p style=\"text-align: justify;\">However, the second half of 2017 has seen a pullback in the economy\u2019s growth rate which is expected to continue into next year and 2019.<\/p>\n<p style=\"text-align: justify;\">\u201cWe\u2019re still getting fairly respectable growth rates. It\u2019s just not the kinds of really \u201ceye popping\u201d growth that we saw over the first half of the year. It\u2019s very hard to envision that continuing,\u201d Brian DePratto, senior economist for TD Bank, tells BuzzBuzzNews.<\/p>\n<p style=\"text-align: justify;\">Next year, TD forecasts that growth will moderate to a \u201crespectable\u201d 2% and in 2019 will decelerate to 1.7%, near the long-run growth rate trend.<\/p>\n<p style=\"text-align: justify;\">Except TD says the economy is not so easy to predict, with looming risks that could throw the growth trajectory off course, including the housing market.<\/p>\n<p style=\"text-align: justify;\">Over the first half of 2017, the Canadian economy was driven by consumers with the help of healthy job market and wage gains.<\/p>\n<p style=\"text-align: justify;\">However, TD believes the \u201cwealth effect\u201d of past gains in housing and other forms of household wealth also played a key role in boosting consumer spending.<\/p>\n<p style=\"text-align: justify;\">Housing activity in Ontario is an example of how the \u201cwealth effect\u201d is propelling consumer behaviour.<\/p>\n<p style=\"text-align: justify;\">According to TD, over the past few years home prices in Ontario have been skyrocketing and, in turn, retail sales have exceeded the national average, despite average employment gains in the province.<\/p>\n<p style=\"text-align: justify;\">With the introduction of the Ontario government\u2019s Fair Housing Plan in April to cool the Greater Golden Horseshoe region\u2019s market, a slight correction in market activity was observed, impacting the course of the national economy.<\/p>\n<p style=\"text-align: justify;\">\u201cIf we do see a little more weakness there [Ontario], given we had all that strength coming out of the consumption from housing wealth, that sort of takes away one of the big drivers for the economy,\u201d says DePratto.<\/p>\n<p style=\"text-align: justify;\">Ontario isn\u2019t the only market where consumer spending from the \u201cwealth effect\u201d is expected to fade over time, BC is also expected to see a decline.<\/p>\n<p style=\"text-align: justify;\">This, combined with expected higher borrowing costs, are key reasons for TD\u2019s forecast noting a decline in the economy\u2019s growth rate next year.<\/p>\n<p style=\"text-align: justify;\">The Bank of Canada increased its overnight rate, which influences the mortgage market, twice this year. Now sitting at 1%, the rate went up 25 basis points in July and September \u2014 the first time the central bank hiked the rate in seven years.<\/p>\n<p style=\"text-align: justify;\">TD expects the Bank of Canada to further dial up the rate to 1.75% by the end of 2018, calling it a \u201cmounting headwind\u201d for slowing the economy.<\/p>\n<p style=\"text-align: justify;\">However, the reaction from highly indebted households to rising borrowing rates is an unknown factor that cause the Bank of Canada to waver on its decision to hike the rate, says TD.<\/p>\n<p><a href=\"http:\/\/news.buzzbuzzhome.com\/2017\/09\/canadas-housing-market-impact-economy-2018.html\" target=\"_blank\" rel=\"noopener\">Canada&#8217;s Housing Market Set to Impact the Country&#8217;s Economy in 2018. Here&#8217;s How<\/a> by Kerrisa Wilson | Buzz Buzz Home<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Canadian economic growth is expected to dip next year thanks to higher interest rates and a slowdown in the housing market, according to one of Canada\u2019s big six banks. This &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2017\/09\/bc-housing-wealth-effect-is-expected-to-fade-over-time-in-2018\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-7020","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>BC Housing &quot;Wealth Effect&quot; is Expected to Fade Over Time in 2018 &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2017\/09\/bc-housing-wealth-effect-is-expected-to-fade-over-time-in-2018\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"BC Housing &quot;Wealth Effect&quot; is Expected to Fade Over Time in 2018 &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Canadian economic growth is expected to dip next year thanks to higher interest rates and a slowdown in the housing market, according to one of Canada\u2019s big six banks. 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