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Money Talks: Volume 2

20 August 2016

This edition of Money Talks explores the resilience of Canada’s housing sector despite a slowing economy.

Canada’s economy is in the doldrums, and experts believe it’ll get worse before it gets better. Canadian employment declined by 31,000 in July, as the unemployment rate edged up to 6.9%. Yet despite this, the real estate sector continues to hum along, as the combination of cheap credit and growing household equity fuel demand for housing.

Volume 2 of our re-vamped Money Talks series explores the continued resilience of Canada’s housing market against the backdrop of domestic and international volatility.

Personal Finance

Since the last edition of Money Talks, Canadians have seen their wealth steadily rise. The value of the Toronto Stock Exchange reached more than one-year highs this past month, as global markets continued to rebound from the post-Brexit tidal wave. The S&P/TSX Composite Index has quietly enjoyed the strongest advance of any major North American stock index, gaining 13% since the start of the year.

Canadian retail sales declined unexpectedly in July and were revised lower for the month of June. When we exclude automobiles, retail sales fell 0.8%.

Retail sales are seen as an important indicator of consumer spending, which accounts for the majority of Canadian GDP.

Real Estate

Home sales declined in July for the third consecutive month, thanks to a slowdown in the Vancouver market resulting from a new tax on foreign investors. The Canadian Real Estate Association (CREA) recently reported that housing sales 3% nationally in July. However, the national average sales price of a home sold in July surged 9.9% annually to $480,743. Even when we exclude Toronto and Vancouver, the average sales price was up 7% year-on-year.[1]

Beginning in August, foreign buyers will have to pay a 15% transfer tax for home purchases in Metro Vancouver, as the BC government tries to improve home affordability in the region.


Mortgage rates remain near rock bottom, as banks continue to entice borrowers with attractive four- and five-year commitment terms. According to Canadian Mortgages Inc., the average commitment rate on a five-year fixed term mortgage was 2.34% last week.

Interest Rates

The Bank of Canada (BOC) left its interest rate unchanged at 0.5% last month, where it is expected to stay for the foreseeable future. In July the BOC lowered its growth outlook for 2016 as a result of lower crude production in Alberta and the after-shock of the June 23 Brexit vote. BOC Governor Stephen Poloz said that Brexit probably gives businesses more reason to postpone major purchases, thereby undermining growth and investment. The Brexit vote could shave 0.1% off GDP growth by 2018. In a low-growth scenario, interest rates are expected to remain highly accommodative for the foreseeable future.[2]



[1] Craig Wong (August 15, 2016). “Home sales volume down in July: CREA.” The Star.

[2] Sam Bourgi (July 16, 2016). ‘Canada’s Economy to Feel the Brexit Blowback as BoC Lowers Growth Forecast.” Economic Calendar.

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