TD Bank sees house prices coming down in all but Canada’s two hottest markets this year, with falling oil prices taking an especially large bite out of the housing markets in energy producing regions.
Only Ontario and British Columbia — propelled by the seemingly perennially hot housing markets in Toronto and Vancouver — will avoid falling prices and sales in 2015, the bank forecast. The bank sees house prices rising 3.1 per cent in Ontario this year, and 2.9 per cent in B.C.
“However, decreases in affordability tied in part to further gains in home prices over 2014 will likely act as a growing headwind in markets in Ontario and B.C.,” the bank noted.
The strength of Toronto and Vancouver will help pull average house prices up for the year, by a relatively small 1.6 per cent, but overall home sales across Canada are expected to fall 1.7 per cent this year.
The worst of it will be felt in the economies that, in recent years, have benefitted most from what used to be high oil prices — Alberta, Saskatchewan and Newfoundland.
TD bank sees home sales plunging by more than 20 per cent in Alberta this year, with prices falling 3.5 per cent. Saskatchewan will see sales drop 6.7 per cent and prices fall three per cent.
The report sees “signs of extreme weakness in the housing market” in the province, despite its more-diverse economy when compared to Alberta.
Oil Producers Will Have Slowest Economies
TD Bank predicts “a sharp widening in economic performance” between the three oil-producing provinces and the rest of Canada.
That’s good news for Ontario, which the bank says will lead economic growth in Canada this year and next, with GDP growing 2.8 per cent in 2015 and 2.5 per cent in 2016.
With lower energy costs for manufacturers and a lower loonie making exports more competitive, “Ontario ... is particularly well-positioned to benefit,” the bank writes.
However, just how much good that lower loonie will do is open to debate. A report from CIBC last week suggested it may take a while for manufacturers to benefit because a great deal of industrial capacity has vanished from Canada in recent years.
TD predicts Alberta, Saskatchewan and Newfoundland will see the slowest economic growth among Canadian provinces, with Newfoundland’s economy outright shrinking by 1.1 per cent over the course of 2015 and 2016.
Alberta’s economy is “projected to grind to a virtual standstill” this year, with GDP growing a paltry 0.5 per cent and then some bounce-back to 1.8-per-cent GDP growth in 2016. Still, that is a much slower pace than Alberta had seen in recent years.
The TD report notes that government spending in Alberta will also be a drag on its economy, as the province grapples with a multi-billion-dollar budget hole from lower oil revenues.
Alberta Premier Jim Prentice has already hinted at cuts, but has noted his government will rely on deficits to get the province through the hard times as well.