Paul Lioukras, CPA, AMP

Economic Update TSX +41.42 to 17,915.91 Dow +36.12 to 30,723.60 Oil +.93 to 55.69 CDN Dollar +.21 to 78.23 Gold +1.70 to 1,835.10 5 Year Canadian Bond Yield: +0.034 to .464 % Canadas 5-year bond yield is the basis for most long-term fixed mortgage rates. The spread (obtained by subtracting the bond yield above, from the industry average 5 year mortgage rate of 2.39) is over the top of the profit range at 1.95 TMBMKCA-05Y | Canada 5 Year Government Bond Overview | MarketWatch Canadian home prices expected to keep rising this year, outpacing inflation Poll of property market analysts finds prices expected to rise 5% this year Authors of the article: Reuters Mumal Rathore and Richa Rebello The Canadian housing market has showed resilience, helped by record low mortgage rates and massive fiscal spending. BENGALURU Canadian house prices will continue their upwards march this year, outpacing inflation after hitting record highs in 2020, according to a Reuters poll of property market analysts who said the risk of a COVID-19 resurgence derailing activity was low. Renewed lockdown restrictions after a second wave of infections hit the country are threatening expectations for a strong recovery after the economy likely posted its biggest GDP drop on record of 5.1 per cent in 2020. Yet the Canadian housing market showed resilience, helped by record low mortgage rates and massive fiscal spending. The Jan. 12-29 poll of 15 property market analysts showed house prices would rise 5 per cent on average this year nationally. That was the highest prediction since Reuters began polling for 2021 in February 2019. Prices were expected to jump 4 per cent further next year compared to 3 per cent forecast in September. Both 2021 and 2022 predictions are significantly higher than inflation expectations. Historically low interest rates, changing housing needs, high household savings and improving consumer confidence will keep demand (for homes) supercharged, said Robert Hogue, senior economist at RBC. The main restraining factors will be a lack of supply, waning pandemic-induced market churn, a modest creep-up in interest rates and an erosion of affordability. Call it a 2022 soft landing. The Bank of Canada was predicted to keep its key interest rate unchanged at near-zero levels until at least 2024, according to a separate Reuters poll. House prices in Toronto and Vancouver were expected to rise 5.3 per cent and 4.1 per cent this year respectively, up from 2 per cent predicted for both in September. Apart from easy monetary policy, a desire for more living space and a successful vaccine rollout were identified as the potential drivers of Canadian housing market activity this year, the poll showed. While prices are set to rise again this year, nine of 14 economists who answered an additional question on whether activity would be faster or slower than in 2020 said it was likely to be slower over the coming year. But most economists who responded to another question said the risk of a resurgence in COVID-19 cases derailing the housing market this year was low. Fading income support, expiring mortgage deferrals and rising interest rates would strongly suggest that the housing market will downshift over the course of 2021, said Brendan LaCerda, senior economist at Moodys Analytics. Housing is at risk, but not from COVID-19. Affordability remains a concern. When asked to assess house prices on a scale of 1 to 10, where 1 is cheap and 10 is expensive, respondents rated national, Toronto and Vancouver at 7, 8 and 9, respectively. Lower interest rates have improved affordability despite the increase in prices. However, that only implies homes are cheap conditional on rates. Rising rates in 2021 will strain affordability, said LaCerda. https://financialpost.com/real-estate/canada-house-prices-to-build-up-this-year-outpace-inflation