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An economist with one of Canada’s biggest banks says the country’s real estate market is “set for a slog” this year, but nothing worse.

TD Senior Economist Brian DePratto outlines two main factors why the Canadian housing market isn’t hurtling towards a crash.

“So, why not a worse outlook, or even an outright crash? Two reasons: first, fundamental demand is still strong, particularly in key markets,” writes DePratto in a recent TD Economics report on the prospects of a Canadian recession.

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These fundamentals include strong population growth, a key driver of housing demand. In fact, Canadian population growth reached new heights last year, and the federal government continues to set historically high targets for future immigration.

“Second, the change in tone from both the Bank of Canada… provides some additional market sentiment support in the form of lower than previously expected borrowing costs,” he continues.

The central bank has been gradually increasing its policy rate, which influences mortgages, since summer 2017. But appears poised for a less-aggressive approach this year in the face of weaker-than-expected GDP growth.

Growth of 1.2 percent had been forecast for the fourth quarter, but the economy ended up expanding by 0.4 percent over that period, notes Capital Economics, an economic research firm.

“On the basis of this latest set of woeful GDP figures, the Bank of Canada must surely be considering following the [US] Fed and abandoning any talk of further interest rate hikes at… [the next] policy meeting,” writes Paul Ashworth, the firm’s chief North American economist, in a note.

When the Bank of Canada makes its next rate announcement on March 6th, it is widely expected to stand on the sidelines and leave the overnight rate untouched at 1.75 percent.

Higher interest rates increase the cost of homeownership, so naturally stalling further gains — many observers are still calling for one hike in the second half of this year — or cutting rates creates a more positive climate for real estate markets across Canada.

“The outlook is for modest activity that leaves less of a growth-cushion in the event of a negative shock, but growth nonetheless,” writes TD’s DePratto. “Less buffer alone does not a downturn make, and as it stands, the situation in housing markets points to elevated risks, not to a downturn.”

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