MONTREAL, July 25, 2012 /CNW Telbec/ - Laurentian Bank Securities (LBS)
Economic Research has released today the new edition of the Provincial Monitor, which highlights some of the key factors that will influence the
Canadian provinces' economic performance. More specifically, it
sketches a map for the understanding of specific housing market
dynamics within each large city, as well as presents conclusions and
forecasts which were based on a multitude of economic indicators
relevant to the real estate market.
In light of recent economic data showing signs of a weaker economic
outlook for Canada, LBS Economic Research has also reduced its
provincial forecasts, limiting growth to 2% in 2012 and 2013. An
interest rate hike by the Bank of Canada is still in the cards but
global economic conditions would have to improve considerably for this
to happen by mid-2013, at the earliest. Furthermore, a tightening in
mortgage rules was recently implemented by the federal government and
this time this set of measures is expected to cool down the housing
market by restraining demand. In addition, these new mortgage
restrictions should prevent a further deterioration in indebtedness so
that, by the time the interest rate increase does occur, households
should be in a better position to face it.
Moreover, in a few large metropolitan areas, the housing market is
showing signs of overvaluation. There is much controversy over how
overvalued the Canadian housing market might be. This is a question,
however, that depends mainly on the specific market, since each
metropolitan area has its own characteristics and is not necessarily at
the same stage in the real estate cycle.
The report takes an in-depth look at five major metropolitan markets --
Montreal, Toronto, Calgary, Edmonton and Vancouver - and presents
conclusions for each of them. As to price direction, we expect Calgary and Edmonton to continue growing chiefly owing to favorable economic conditions and
increased demand, mainly a reflection of a rapidly growing labor force.
As for Toronto, its strong historical population growth has fuelled a number of new
projects, namely on the condominium market. As a result, the city now
has to deal with the issue of a large supply of dwellings coming on to
the market. Prices on the resale market are nevertheless expected to
continue growing in 2012, and slow down in 2013 without entering
negative territory. Concerning Vancouver, it should see a slow decline in prices, as the market has already
started correcting itself. Sustained demographic growth, however,
should prevent any serious drop in prices. Finally, Montreal should experience a decline in prices. While a greater share of
immigrants is now settling in the Montreal area, overall demographic
growth is much weaker than in all the other large metropolitan areas.
Furthermore, the greater immigration volume is mostly fuelling the
apartment rental market, rather than absorbing the heavy supply of
condos that are about to hit the market within the next two years.
Finally, while any real estate story is related to a variety of external
and internal factors, the most important ones remain: incomes,
employment, interest rates, demographic trends and geographic location.
As a result, and since none of these variables are expected to undergo
any dramatic shocks in the short to medium term, there is no reason why
housing prices should freefall and the country return to recession
because of a real estate crash.
The full report is available on Laurentian Bank Securities Economic
Research web site: http://www.lb-securities.ca/EconomicResearch. For any question, contact Marie-Claude Guillotte, Economist at
About Laurentian Bank Securities
Laurentian Bank Securities (LBS), is an integrated full-service
investment dealer, focusing on five lines of business. The well
respected Institutional Fixed Income division has a strong presence in
Government and Corporate underwritings, as well as in secondary
markets. In addition, the Institutional Equity division is solidly
established across the country and focuses on serving clients through
research, trading and investment banking in the small capitalization
sector. The fast-growing Retail division and Discount Brokerage
division currently serve clients through 15 offices in Quebec and
Ontario. Furthermore, LBS' corresponding business provides complete
back office support to a wide range of customers.
SOURCE: LAURENTIAN BANK OF CANADA
For further information:
Public Relations Advisor
514 284-4500, extension 4695
Laurentian Bank Securities