Photo: James Bombales
Canada’s third quarter GDP growth numbers will be released this week, and according to economists, the housing market hasn’t been much of a boost over the past three months.
“Growth popped higher in the second quarter, but momentum has slowed since then,” writes CIBC economist Royce Mendes, in his most recent note. “Household spending appears to be feeling the pinch of higher interest rates. So is the housing market, which is also being dragged lower by tighter mortgage lending standards.”
The Bank of Canada (BoC) hiked the overnight rate to 1.75 percent last month, and is widely expected to do so again before the end of the year.
Housing Market News Alerts
Sign up now for news alerts on the Canadian housing market
The higher rates have been dissuading some would-be buyers from entering the market, cooling sales across the country. Others have been unable to qualify for a mortgage, after stricter rules came into effect in January.
In Mendes’ view, it’s unlikely that the housing market will be able to boost the economy in the final quarter of the year, as sales activity continues to remain relatively flat.
BMO chief economist Douglas Porter agrees, noting that the lacklustre numbers should keep the BoC for hiking rates again until next year.
“A soft handoff from Q3…suggests that the final quarter of 2018 won’t look much better,” he writes, in his most recent note. “That should leave the Bank of Canada on the sidelines until 2019.”
Porter adds that the anticipated Q3 numbers reflect the fact that the economy was missing a “growth engine” over the past few months.
“Look for slim gains in consumer spending and business investment, and a flat performance for housing,” he writes.