Confidence in real estate takes a dive
Gauge of Canadian sentiment sees largest drop in three years
“Consumer expectations and spending might suffer until labour-market displacement issues are addressed and households can repair their balance sheets.
ROBERT LAWRIE
ANALYST
Canadians are starting to lose faith in their housing market.
A gauge of real estate sentiment dropped by the most in three years last week, according to telephone polling by Nanos Research Group. That dragged the broad consumer confidence index down for a sixth week, as the Liberal government introduces measures to restrict mortgage availability in larger cities.
Younger, heavily indebted families in Vancouver and Toronto pose a risk to Canada’s financial system because they may become unable to meet obligations in the event of another economic shock, Bank of Canada policy-makers said this month. Finance Minister Bill Morneau identified similar problems the week before when he imposed tighter mortgage regulations to address pockets of overheating home prices in cities such as Toronto and Vancouver.
Those messages seem to be sinking in. The share of respondents in the Nanos survey who see an increase in local real estate prices dropped 3.9 points in the survey period through Dec. 24, the biggest decrease since Nanos began weekly polling in May 2013. The reading of 31.5 per cent matched the lowest since January. The share of those who see prices decreasing rose to 18.6 per cent, the most since February.
“Consumers have reacted to the extremely low level of interest rates with a worrisome imbalance between housing market speculation and traditional household investment,” Robert Lawrie of Bloomberg Economics said. “Consumer expectations and spending might suffer until labour-market displacement issues are addressed and households can repair their balance sheets.”
The ups and downs of the oil market were reflected in the Bloomberg Nanos confidence index throughout 2015. The measure declined from 55.8 at the start of the year to lows of 53.6 in February as the oil shock took hold, and to 52.0 in August on signs the economy may have fallen into a recession.
The index then reached its 2015 peak at 58.6 on Nov. 13, as optimism swelled after the last federal election brought Prime Minister Justin Trudeau’s Liberals to power, with pledges to embark on deficit spending to spur economic growth.
Since then crude oil prices have fallen below $35 a barrel, keeping confidence in the Prairie provinces at about record lows. The index rose to 46.6, from 46.1, in the latest polling, still well below the mark of 57.2 where it began the year.
The survey is based on phone interviews with 1,000 people and uses a four-week rolling average of 250 respondents. The national results are considered accurate to within 3.1 percentage points, 19 times out of 20.