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Thirteen of 21 housing analysts agree: the Canadian housing market will be a drag on economic growth over the next couple of years.
That majority assessment comes from a small poll of market-observers conducted by Reuters. The drag, according to the news agency, will be due to oversupply and high levels of household debt. Speaking to Reuters, David Watt, chief economist with HSBC Bank said:
“We have relied on housing and housing investments to carry growth through most of the post-recession period and it’s time for the housing market to put its feet up and take rest. The footprint of the housing market and residential investment on the economy is just unsustainably high.”
Also questioned by Reuters was Jean-Paul Lam, associate professor of economics at the University of Waterloo, who said:
“The housing market remains one of the biggest downside risks to the Canadian economy. With rising debt levels, a fall in housing prices would seriously impair the balance sheet of consumers, adversely affecting consumption and the Canadian economy going forward.”
Still, eight of the analysts polled said they believe the housing market will be a “net contributor.” The Reuters survey comes only days after TD Bank released a report that said while the Canadian housing market is indeed expected to cool over the next two years, the slowdown would be a “glancing blow,” not a “knock-out punch” to the economy.
House price inflation is expected to slow to 2.0 and 1.5 per cent in 2016 and 2017. Just one-third of the economists polled by Reuters forecast a correction by 2017. For more on the Reuters survey and what it might mean going forward, read the accompanying article here.