Allow the housing market to maintain itself
Finance Minister Jim Flaherty recently announced that he’s satisfied with the Canadian housing market and he has no plans to intervene further.
As you may recall, the federal government shortened the length of mortgages from 35 to 30 years, and then to 25 years, in response to concerns about the condo markets in Toronto and Vancouver. However, the minister has said the markets in those two centres have calmed.
It now appears that the initial shock of a shortened mortgage period has faded and Canada’s strong economy will support the current market.
Although Canada’s economic situation is in good shape, there are still concerns about the American and European economies. In particular, there’s the question of whether the U.S. Federal Reserve will eliminate the monthly stimulus or fiscal easing practice. The fear, of course, is the potential for inflation.
While job growth is always strongest in the summer, moderate long-term economic growth is still projected for Canada over the next two years. Canadians are saving more and their debt-servicing ratio continues to gradually fall.
It’s interesting to note a survey of home-buying intentions over the next year peaked on the west coast and gradually declined moving east. B.C. had the highest percentage, followed by a dead heat among Alberta, Saskatchewan and Manitoba. Considerably lower was Ontario, then Quebec and finally the Atlantic provinces. But the east coast is expected to bounce back due to some pending long-term mega-projects.
On a civic level, Edmonton appears to be showing the largest increase in housing starts this year. Other large markets are expected to bounce back in 2014, although Regina and Winnipeg probably won’t reach the lofty heights they experienced in the record year of 2012.
A trend that has been a staple in Winnipeg for years has started to take hold throughout the rest of Canada. We have always had rather low new home inventories because there is not a lot of speculative building here. New-home builds are based on new-home sales. That has not held true in other parts of the country, where a “build-it-and-they-will-come” attitude has been more prevalent.
Perhaps a little Prairie sensibility when it comes to spending is exactly what Canada needs.
Mike Moore is the president of the Manitoba Homebuilders’ Association