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A slowdown in the Canadian housing market is expected to put a drag on household spending and construction over the next two years, according to TD Bank’s quarterly economic forecast.
In the short-term, the bank says the impact of the prior decline in mortgage rates and a pick-up in listings following a severe winter should help boost home sale activity.
“Renovation spending will also likely provide a boost through the rest of 2014, due to the positive wealth affect from stronger-than-expected home price growth,” TD said.
But the acceleration will likely prove short-lived.
“Cooling new home construction and higher interest rates will lead residential investment [which includes new home construction, renovations of existing homes and ownership transfer costs] to resume its downward trend of the past several quarters, contracting two per cent in 2015,” the bank continued.
Overall, TD says it expects Canada’s economy to grow 2.2 per cent in 2014, before accelerating to 2.6 per cent in 2015. Conversely, RBC’s latest quarterly economic report, which was released earlier this month, predicted Canada’s GDP would grow 2.4 per cent in 2014 and 2.7 per cent in 2015.