Scotiabank has stared into its crystal ball and seen a slow market in 2014 due to interest rate hikes and stunted job growth, though brokers may not be willing to accept the prophecy as gospel.
“I think (economists are) very myopic in their view; they don’t see things very well, from what I can see,” Jeff Evans of Centum Innovation Financial told MortgageBrokerNews.ca. “I find that they tend to create sensationalism to kind of manipulate.”
Though the report warns of a slowing market, it also assuaged fears that an impending market crash is imminent.
“The combination of moderately higher interest rates and slowing job growth will likely dampen home sales later this year and into 2014,” the company said in its Global Real Estate Trends report. “Meanwhile, increased supply should limit price gains. However, the risk of a large price correction nationally remains low barring a major adverse shock such as a sharp rise in unemployment.”
Scotia economists also believe housing starts will drop.
“Slowing home sales should in turn lead to a reduction in new home construction. We expect starts will fall to about 170,000 units in 2014,” the report stated. “A period of below-average construction will help absorb excess housing stock.
“Unsold inventory has been creeping up in recent years with starts exceeding household formation trends, but is not particularly high from a historical perspective.”
As for the condo market, which many believe is saturated in Canada’s major cities, the bank believes high-rise starts will continue to dwindle in and beyond 2014.
“The slowdown primarily reflects fewer high-rise projects breaking ground. Toronto apartment starts have fallen almost in half this year, from 30,000 units in 2012 to an annual rate of 16,000 from January through July,” the report stated. “Given the weakening trend in new home sales, construction will likely move even lower over the coming year.”
However, Evans isn’t quite sold on the idea that there is anything to worry about; especially considering he has benefitted from acting against economist predictions in the past.
“I tend to believe that a lot of the time these economists are incorrect in their assumptions,” Evans said. “In 2008 or 2009 they were telling people to lock into fixed rates and I advised my clients to get into variable rates and my clients were getting 1.65-2.35 for most of that time.”