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“Anyone who sits and looks at what happened and says, ‘Well, that wasn’t a Great Recession,’ hasn’t appreciated the scale of what was done to ensure an outcome that wasn’t as extreme as before, particularly on the fiscal side. Anyone who doesn’t appreciate the gravity of the last couple of years hasn’t thought through or appreciated the scale of what will be required to adjust fiscal back to normal.”
Those were the words of wisdom uttered by Bank of Canada’s chief Mark Carney, who was warning against thinking than a faster than expected recovery is a sign that the financial crisis wasn’t so serious, after all.
Nothing further from reality. The global economic system is still being held in place for the most part by huge amounts of government disbursement. The rising debt, both in public sectors and private households, as consumers in countries like Canada capitalized extremely low interest rates to borrow the unborrowable, is changing the rules of the economic game.
Canadian businesses must plan ahead their operations in this new global economy, Mr. Carney said.
“We have to look at that and think of how to rebalance our own economic activity.” Businesses have to “decide whether the only impulse, or the principle impulse, that we want to take from the fastest-growing part of the world is just on the price side, through terms of trade on commodities; or do we want to do so on the volume demand side by selling a wider suit of services and goods to those parts of the world?”.
Outlook for Housing Starts 2010-2013
The outlook for the housing market is more buoyant heading into 2010. Over the long-term it is expected that the global economic recovery will become a positive influence on Canada’s economy and housing market. As a result, residential construction will gradually increase as factors that drive housing become more stimulative and housing demand moves more in line with demographic fundamentals.
Following the downturn in 2009, Canadian GDP is forecast to grow in the range of 1.5 per cent to 3.2 per cent in 2010. The impact of historically-low interest rates and fiscal stimulus at all government levels is expected to lead to a strong rebound in 2011, when GDP growth will be in the 3.0 to 4.5 per cent range. Over the 2012 to 2013 period, growth in GDP is projected to average 2.5 to 3.5 per cent. Employment growth is expected to be constrained in 2009 and 2010, but will strengthen over the medium term to average between 1.2 and 2.0 per cent annually over the 2011 to 2013 period.
Population growth is a key driver of housing demand over the longer term and a major contributor to population growth is immigration. As the outlook becomes more positive over the 2010-2013 period, net migration is expected to increase. This will help boost population growth and household formation. Accordingly, this will support housing starts through 2013.
Housing starts are expected to strengthen as the economy improves. By 2011 starts are forecast to be just over 174,000 units while 2012 will see starts slightly higher than 176,000 units. Finally, by the year 2013, starts are forecast to be approximately 187,000 units.
In 2010 through 2013, global economies will recover. With low, but gradually rising mortgage rates and stronger job growth, housing starts will strengthen. Given the short-lived nature of the housing market slowdown, there will not be a significant build-up of pent-up demand. Because of this, housing starts will not return to the 200,000 plus unit pace of recent years. Rather, housing starts will remain in a range that is consistent with demographic fundamentals over the 2010 to 2013 period.
There will, of course, continue to be some uncertainty over the medium term, so it is appropriate to consider a range for our housing starts forecast in the medium term. On the downside, lingering effects from the financial market crisis and sluggish world economic growth could impede an economic recovery, which would cause housing starts to remain lower than forecast over the medium term.
On the other hand, the considerable monetary and fiscal stimulus introduced in 2009 could lead to stronger than forecast economic and employment growth. In this case, housing starts would be stronger than forecast. As a result, we expect housing starts to be in the 142,000 to 201,000 unit range in 2011, in the 143,600 to 203,300 unit range for 2012, and in the 152,400 to 215,000 unit range in 2013.
See Also:
Canadian Housing Statistics