Daily Market Update: Not much chance of another cut in interest rates then Mr. Poloz?

by MPA21 Apr 2015
Not much chance of another cut in interest rates then Mr Poloz?
Bank of Canada governor Stephen Poloz has given a strong hint that there will be no further interest rate cut in the near future. Speaking in New York Mr Poloz said that the January cut of 0.25 per cent seems to have done the job the bank wanted; insuring against the oil price slide. With oil prices holding more steadily for now it is looking unlikely that there will be a reduction from the 0.75 per cent current rate. The governor also said he expected a bounce back in the economy in the second quarter after a weak start to the year.
Yet another warning over Canada’s housing market
The Economist says that Canada’s housing market is overvalued by at least 25 per cent. The magazine named Canada along with the UK and Australia as being ‘notable’ for having an overvalued housing market. The metrics it uses include home-value-to-rent ratios and prices relative to after-tax income. It’s not the first time that Canada has ranked highly in the Economist’s analysis of property markets, but it is the first time it’s been at the top. House prices compared to rents are 89 per cent overvalued, which is a rise of 73 per cent from two years ago. Compared with income prices are 35 per cent too high.
“No signs of cooling” says BC agent
Despite data and forecasts suggesting that the long-predicted “soft landing” for Canada’s housing markets in starting, there are many mortgage lenders and real estate agents who are not seeing that in their areas. Re/Max now says that prices will be up 3 per cent this year rather than the 2.5 per cent it was calling for, because activity is brisk. John McKenzie, a real estate agent with Royal Le Page in Sechelt, BC told The Financial Post that they aren’t seen “any signs” of cooling and quipped that government forecasters are like weathermen in that “Sometimes they’re going to tell you it’s pouring rain and you wake up and it’s a nice day.” Even in Calgary, where there has been some decline in recent months as concern mounted about the oil industry, is now seeing some improvement with sales figures up in March.
Consumers still expect house prices to rise
Optimism for the housing market is still rising according to the latest Bloomberg/Nanos Canadian Confidence Index. The index of what will happen to home prices in the next 6 months shows that by the end of last week 38.25 per cent thought they would be higher, up from 36.85 per cent the week before and almost 5 percentage points above the year’s average so far. Those who thought prices would be lower accounted for 18.17 per cent; 39.78 per cent said they would stay the same; 3.8 per cent don’t know. All four sub indexes improved last week with real estate, the economy, job security and personal finances above or near 2015 averages. Overall the confidence index advanced to 56.09 from 55.37 a week earlier. 


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