What Are The Latest Canadian Real Estate Market Trends?
What Are The Latest Canadian Real Estate Market Trends?
Latest on Canadian Real Estate Market Trends by Steve Saretsky, August 12, 2019
New Zealand made it official, stunning markets by slashing interest rates 50 basis points to all time record lows of 1%, joining a chorus of dovish central bankers around the globe. The Reserve Bank of New Zealand (RBNZ) Governor, Adrian Orr, greeted the media after the decision, suggesting “It is easily within the realms of possibility that we might have to use negative interest rates.”
While the controversial move is being considered an insurance cut, fears over a domestically deflating property bubble have raised concerns. After years of runaway home price inflation, which triggered warnings of a potential bubble from both the International Monetary Fund and the Bank for International Settlements, home price growth has since slowed to a seven year low, and when adjusting for inflation, house prices actually declined by 0.4% in 2018. The decline comes after a controversial law was passed to ban foreign buyers in August 2018.
With Central Banks caught up in a race to the bottom, Stephen Poloz at the Bank of Canada remains isolated on an island of his own, opting to maintain his hawkish stance. Canadian Economists are even more optimistic, convinced he will somehow buck the trend of his dovish peers. Of the 15 economists surveyed by Bloomberg, nine expect the Bank of Canada to remain on hold to the end of 2020. Robert Kavcic, senior economist at BMO Capital Markets, provided a logical reason for Poloz and his colleagues to buck the global easing trend. “Do they want to go back to 2015 where they cut rates and stoked a big acceleration in credit and home prices? That’s pretty fresh in their minds. I don’t know if they want to go there right now.”
Logic aside, the bond market remains unconvinced, the entire Canadian yield curve is now below the Banks Overnight interest rate, with nearly 80% of the yield spreads dipping into negative territory. Economic and Canadian Real Estate Market trends aside, markets are suggesting Poloz will soon jump ship and join his peers towards their quest to zero.
Three Things I’m Watching:
1. New Zealand home price growth has slowed, dipping into negative territory.
2. Poloz is one of the worlds most hawkish central bankers today.
3. Canada’s entire yield curve is now below its policy rate.
