Toronto Star

Real Estate

Housing prices could rise if the economy starts tanking, but that won’t stop people from buying, according to Phil Soper, president and CEO of Brookfield Real Estate Services and Royal LePage.

“The cost of money might be cheaper as we may be in for another protracted period of low interest rates. People tend to look at the carrying costs of the home rather than the sticker price. Every hiccup in the global economy means that policymakers continue to use a low rate regime, and the housing market seems to get an extension of that stimulus.”

Unlike some other markets, he did not see Canadian real estate being used as a safe haven for disenchanted stock market investors.

Yet while home prices might be on the rise, commercial real estate could take a tumble, argues Ian Nakamoto, director of research for MacDougall, MacDougall & MacTier.

“We are forecasting an economic slowdown, although the market seems to be looking for a recession. A recession would hit the commercial property market because it could affect confidence. That would mean a decrease in usage of office space just when things were starting to pick up in the commercial sector.”

Interest rates

The sudden weakness in markets will give Bank of Canada governor Mark Carney food for thought in the lead-up to Sept. 7, the next date on which the bank rate will be set. The bank rate, a bellwether for consumer and business lending rates, has been at 1 per cent since last fall.

Last month, Carney had hinted that he might be ready to let rates inch higher this fall. But he said he was assuming that business conditions in Canada would continue to strengthen. He was also counting on a solution to the European debt crisis, although he acknowledged a “clear risk” existed to that assumption.

Higher rates can dampen consumer spending on big ticket items like cars and houses.

On the other hand, not everyone is a borrower. Some consumers, especially older ones, are trying to live on savings. They may welcome higher rates because it increases the income they can earn on their savings – as long as the higher rates aren’t accompanied by inflation that erodes the value of their assets.

Loonie

While the Canadian dollar has taken a battering this week, currency trader David Watt doesn’t expect that to be the case for very long.

“All it will take is a few weeks of not talking about whether Italy will default, or whether the U.S. will be having a double-dip recession,” said Watt, senior currency strategist at RBC Capital Markets.

Still, the volatility has even veteran investors nervous about dabbling in the currency market right now, said Watt.

A high loonie means either Canadian goods are comparatively expensive for U.S. customers, or the Canadian exporters get dinged because their contracts are priced in U.S. dollars (meaning they get less money for each sale).

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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