Benjamin Tal, deputy chief economist at CIBC World Markets, expects interest rates to remain low, and when he spoke at a Toronto Real Estate Board event, said the odds were 50-50 that the Bank of Canada would again reduce its overnight target rate.
But the BoC announced it would maintain its overnight target rate at 0.50 per cent, citing a setback in the economy brought on by a decline in oil and commodities prices. The Bank projects Canada’s economy to grow by about 1.5 per cent in 2016 and 2.5 per cent in 2017.
“We have a generation of Canadians that have never experienced high or even rising interest rates,” says Tal. “For them, these extremely low mortgage rates, that’s the norm.”
While interest rates will remain low, real estate in Canada will be tested this year, he says. The economy is in “uncharted territory,” given the prolonged slump in oil prices.
Another issue is the level of foreign investment in Canada real estate over the past few years, which some say is leading to inflated prices. Tal says we should expect more of this activity in Toronto and Vancouver, in particular, in the next couple years, reflecting uncertainty in Chinese economy.
Find out what else Tal foresees for real estate markets in Canada this year in this video.