Tough times ahead for the economy, one important housing market

Tough times ahead for the economy, one important housing market

Tough times ahead for the economy, one important housing market A leading broker economist is sounding the alarm about economic turmoil – at home and abroad.

“The point to understand is that this is just the beginning,” Verico’s economist, Michael Campbell wrote in his latest economic report, in reference to the factors that led to Brexit. “My prediction is that 2017 to 2020 will make the economic and financial volatility we’ve witnessed over the last five years look like a warm-up act.”

A sobering viewpoint, to be sure. And closer to home, there isn’t much more reason for optimism, according to Campbell.

“Another important consequence of Brexit is that the uncertainty in Europe is a negative for global economic growth, which is already slow. That in turn will diminish demand for oil, which will bring prices lower unless there’s a major supply disruption,” Campbell wrote in the report, which was obtained by “Translation – the recovery in Alberta will be slow, which will be negative for employment growth and the real estate recovery in that province.”

Campbell also addressed issues closer to broker hearts, including affordability problems plaguing several housing markets.

He argues that, despite public outcry for it, the government has already done a great deal to rein in housing prices. That includes record-low interest rates, and property purchase taxes.

“The problem for government is that there is no tooth fairy and there is no magic policy bullet. Think about the superficiality of the political talk. “End speculation” - but what’s the definition?” Cambell wrote. “‘Increase density’ - but what about the change to the character of the neighbourhood? Penalize foreign owners – but do you support the same measures for Canadians who own real estate in the U.S.?”

The point, according to Campbell, is that there is no easy solution for policymakers.

“Can the municipal, provincial and federal governments do anything that will make a significant difference? I don’t see it,” Campbell wrote. “If government got rid of suspected dirty money, absentee foreign owners, taxed empty homes and discouraged speculation it won’t solve the affordability problem and at best slow the rate of price rise at the upper end.”

Campbell ended on a cautionary note – made all-the-more obvious by entitling the last section of the report “Caution."

“When it comes to the impact of China’s internal debt problems there is a fine line as to whether it’s positive or negative for our market,” Campbell wrote. “So far, problems in China have encouraged money to flow out of the country in search of safety but that could turn quickly if there is a credit crisis.”