Market Commentary
The Canadian Economy: Third Quarter 2011
November 14, 2011 | Posted by: Francine Tracey
Summary and Conclusions: Low mortgage rate and high net migration to Canada will help sustain employment, GDP and the housing market. Of 255,900 net migration expected to land on Canadian Soil during 2012, at least 42,000 are expected to be attracted to BC. These new immigrants will bring labour skills and investment to the BC region and will likely keep prices of BC real estate stable. Real Estate will continue to be a favoured investment of new immigrants, and Canadians should be aware of the risks of excluding real estate from their portfolios. First-time buyers should take advantage of current low-interest rates and affordability programs, and get into the market as soon as financially possible.
Passive income as a result of real estate investment activity has helped bridge the gap between rich and poor for many Canadians over the years, a gap which is continuing to increase for average Canadians. Today’s market enables homeowners to access the equity from their homes to make these types of real estate investments. Additionally, first-time buyers who partner on first home purchases can find that basement suite income supplements the mortgage payment for significant wealth building over the years.
Migration: Total net migration to Canada (net international migration including non-permanent residents) stood at 244,573 in 2010. In 2011, net migration is expected to decrease to 232,795. By 2012, however, net migration is expected to rebound to 255,900, which will help support Canada’s housing sector (source CMHC). Historically, British Columbia has experienced landings of 14-17% of the total migration to Canada (source BC Stats).
In 2012, Citizenship and Immigration Canada (CIC) plans to welcome 42,000 to 45,000 people under the Provincial Nominee Program (PNP), including nominees themselves, their spouses and
Mortgage Rates: According to CMHC’s base case scenario, posted mortgage rates will remain relatively flat until late 2012.
Employment: In the 12 months to September, employment has grown by 1.7% (+294,000), primarily in Ontario and Alberta. Over this period, full-time employment rose by 2.5% (+344,000), part-time work declined 1.5% (-50,000) and total actual hours worked increased 2.0%. This compositional change to full-time positions will continue to support Canada’s housing sector (source CMHC). However, the Globe and Mail report that in October 2011 Canada posted 54,000 net job losses. Therefore the compositional change to full-time positions is weaker than reported by CMHC but is still in the positive overall for the past 12 months.
- Gross Domestic Product: In accordance with the consensus among prominent Canadian economic forecasters, growth in Gross Domestic Product is forecast to be 2.3% in 2011 and 2.1% in 2012. Employment is forecast to increase by 1.6% in both 2011 and 2012.
- The Income Gap: The Income Gap between the Rich and Poor is increasing faster in Canada than in the United States. (Source Conference Board of Canada).