canadian housing market continuing to cool
News Posted On: 11 August 2010
The Canadian property market's residential sector has continued to cool in June and July according to recent data. The Canada Mortgage and Housing Corp. (CMHC) says that new housing starts fell 1.6% between June and July. And data from Statistics Canada showed that new home prices rose only 0.1% in June, slower than the running average of 0.3%, and slower than the median prediction of 0.2% by analysts.
On top of that existing home sales fell 13.3% in the second quarter compared to the first. As this continues it seems obvious that the higher interest rates, tax measures and stricter lending rules, all aimed at cooling the market, are having the desired effect.
With housing now failing to drive growth in the economy, some believe that the government will reverse the rate rises. Given that the government fully intended to cool the housing market others believe a reversal is unlikely, including Scotia Capital economists Derek Holt and Gorica Djeric, who said:
"This [CMHC] report confirms that housing has been lost as a driver of growth in the Canadian economy," Scotia Capital economists Derek Holt and Gorica Djeric said in a commentary.
"There are no [Bank of Canada] implications stemming from this report in our view. The BoC expected housing to cool, and it is being replaced as a growth driver by business investment in machinery and equipment."
History will tell of whether the Bank of Canada played the hand they were dealt in this crisis correctly or not.
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