As a huge contributor to the Canadian economy, the real estate industrial growth or decline affects the cash flow. Real GDP growth is expected to see a slow down as per assessment conducted by the PBO (Parliamentary Budget Officer).
This will persist on until 2022, with high interest rates contributing greatly. In an interesting twists of events, however, high home prices are off the table!
Over the last couple of years, the Canadian housing industry has pumped substantial revenue to the real GDP; this is GDP with adjusted inflation. From a 13% contribution, the contribution has grown to 6.45%.
In 2018, this contribution will likely stoop to 9.5%, with the GDP feeling the effect. A year later, the housing industry will only be contributing, a further decline to 5.2%. Between 2020 and 2022, the contribution is expected to be in line with prevailing inflation rates.
While the real GDP won’t be dragged, there will be no tangible contribution to growth.
The slowdown in the growth within the industry, according to PBO projections, is due to higher interest rates. Bank of Canada, in its bit to keep finances under control, will likely hold down the 1% interest rate till the end of Jan 2018.
In the consequent months, the Bank is projected to hike this rate by 0.25% on a quarterly basis. Once the interest rate hits 3%, it will stabilize and offer the market time for natural growth. With lesser disposable income gains and higher borrowing rates, consumer spending becomes moderate.
Higher interest rates will take up most of the money made in a majority of households. Canadians in most neighborhoods including Mimico will have lower chances of qualifying for financial loans, significantly cooling the demand for new homes.
PBO is optimistic that even in the midst of all this, the housing industry can’t cause a recession of even mild proportions. As is typical of government, it cheers the economy even with raw data being processed accurately.
For practical purposes, the government and Canadian Parliament in extension are mandated to maintain a balanced outlook. In their reassurance, the real estate industry will continue to do well even during these turbulent times.
It is still as good a time as any to get your prime real estate in neighborhoods such as The Annex. Simply contact us today to have the preliminary steps dispensed with.
With most of the Canadian population being millennials, there is huge speculation that the current rates are aimed at appealing to them. In a broader economic scope, this could have far reaching consequences should the economy suffer adversely.
While there is now more focus towards owning condos, the ownership of real estate should be prioritize as millennials start raising young families. With more credit allocation for new home owners, they will be getting into secure investments worth their hard-earned money.
Are you looking to get into the Canadian real estate market this year? Stomp Realty is ready and able to score you the best deal, taking into account multiple future projections.
Contact us today and procurement procedures will commence right away.