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The Bank of Canada increased the target for its trend-setting overnight lending rate on July 20, 2010, raising it by a quarter of a percentage point to 0.75 per cent. The increase follows on the heels of an equal interest rate increase in June 2010, when it was raised for the first time since 2007. The Bank rate now stands at one per cent.

In its most recent interest rate announcement, the Bank marked down its outlook for economic growth globally, emphasizing the uneven economic recovery in the U.S., and weakening prospects for European economic growth.

In the Bank’s view, Canada’s domestic economy is evolving largely as expected in recent months, but trimmed its forecast for economic growth this year and next by 0.2 per cent to 3.5 per cent in 2010 and 2.9 per cent in 2011. While the Bank raised its forecast for Canadian economic to 2.2 per cent in 2012, it nonetheless left the easing trend for growth intact.

The Bank indicated, “[this] revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.
Where the domestic recovery had previously been led by housing and consumer spending it is now guided more by government stimulus.”

The Bank also reaffirmed its view that housing activity and household expenditures were pulled forward into the first half of 2010, which is expected to cause them to soften in the second half. It also recognized that business investment has been weaker than it previously expected, “held back by global uncertainties.” The Bank anticipates “that business investment and net exports will make a relatively larger contribution to growth” over its forecast horizon.

As of July 20th, the advertised five-year conventional mortgage rate of 5.79 per cent was down 0.06 per cent from one year earlier, and 0.2 per cent below where it stood when Bank made its previous interest rate announcement on June 1, 2010. However, it is 0.3 percentage points higher than it was at the beginning of the year. The Bank has signaled to financial markets that it is leaving its options wide open as to whether it will raise interest rates further when it makes its next rate announcement on September 8th.

“As it did with its previous announcement in June, the Bank messaged financial markets that further interest rate increases are not pre-ordained,” said CREA Chief Economist Gregory Klump. “The strength of recent economic indicators have prompted the Bank to raise interest rates, but the Bank has signaled that it may keep rates on hold should the economic recovery begin to show signs of loosing steam.”

The Bank will make its next scheduled rate announcement on September 8th. Source : CREA

The Healthy House is bright, open, energy efficient and welcoming. It can be new or renovated, in downtown or suburbia. Wherever you find it, the Healthy House is characterized by five key elements.

1.Occupant Health Healthy Housing™ promotes superior quality of indoor air, water and lighting.

2.Energy Efficiency Homes account for about 20 per cent of all energy used in Canada. Of this, about 67 per cent is used for space heating and cooling, 18 per cent for lighting and appliances, and 15 per cent for heating water.

The Healthy House reduces energy use in all these areas, in all seasons. It minimizes heat loss in winter and gain in summer. It relies on efficient heating and ventilation systems, reduces the consumption of electricity and other fuels, and encourages the use of renewable energy. It also reduces the energy used in the manufacture of building materials and in house construction.

3.Resource Efficiency The Healthy House makes efficient use of all our resources. It is also affordable and adaptable to changing needs. Efficient use is made of building materials, and construction waste is well managed. Durability of building components is essential. The Healthy House conserves resources, especially water and energy.

4.Environmental Responsibility The principles that guide the construction and use of the Healthy House are the cornerstone of environmentally responsible housing.

The Healthy House uses alternative water and wastewater systems, encourages site planning that reduces land requirements, promotes resource-efficient landscaping and considers broader community planning issues such as transportation.

It involves a new way of thinking about how homes and communities contribute to the health of the planet. Houses are becoming smaller and more space efficient with multi-use floor plans. While building lots are smaller, they are more creatively used.

5.Affordability For the Healthy House to succeed in the marketplace, it must be good for the owner, the builder and future generations. Many features of the Healthy House make it affordable, and its design makes it easily adaptable to its occupants' changing needs. Source : CMHC

The housing market recovery that got under way in 2009 will continue in 2010, in the Montréal census metropolitan area (CMA). The first months of 2010 were marked by strong growth on the residential market. This vigorous activity resulted from the improved economic outlook, some catching up from the low level of activity registered at the beginning of 2009 and also the moving up of the housing demand caused by the anticipated increase in mortgage rates. The level of activity is now exceptionally high on the resale market, and the pace of construction is sustained on the new home market. The changes in the financing environment will dampen demand over the course of the year. In the end, 2010 will see housing activity grow in Montréal, on both the resale and new home markets. Next year, with the catching up and the moving up of purchases having come to an end, the market will decline slightly, even though economic growth will be more sustained.1 More favourable economic conditions.

More favourable economic conditions :

In Quebec, like in Canada, the economic environment has continued to improve since the last issue of this report was released in the fall of 2009. According to our latest forecasts, Quebec’s economic growth will reach about 2.6 per cent in 2010 and 3.0 per cent in 2011. As employment usually reacts to an economic recovery with a certain lag, the Montréal job market started gaining strength at the end of 2009 and, more so, at the beginning of this year. The labour market has effectively regained the jobs lost during the period of economic contraction and has even embarked on a new expansion phase. This job creation brought down the unemployment rate to 9.0 per cent in April (this rate had peaked at 9.6 per cent in July 2009). For 2010, we forecast that employment growth will reach 1.7 per cent and that the unemployment rate will remain rather stable, at 9.0 per cent. The proportion of unemployed persons will stay relatively high on account of a steady increase in the labour force. In 2011, employment growth will be more moderate (+1.2 per cent), and the unemployment rate will fall to 8.3 per cent. The increase in employment, although relatively modest, will still support housing demand in 2010 and 2011. Source : CMHC

In 2009, after experiencing a significant decline in the first quarter, the resale market posted a strong rebound starting in the spring. In addition to the release of the pent-up demand, earlier-than-planned purchases were also made during the year, in response to the anticipated rise in mortgage rates. The year 2009 finally ended with an increase of 3.4 per cent in MLS® sales, and the exceptionally vigorous activity on the resale market maintained its momentum in the first quarter of 2010. This strong demand, supported as well by the better employment outlook, comes at a time when housing supply is limited on the market, as a result of the robust demand and decrease in new listings throughout 2009. The relatively few new listings can be explained in part by the slowdown in demographic growth among people aged 75 years or older, resulting from the low birth rate during 1930s. Consequently, fewer seniors than before are putting their homes up for sale to change tenure options. The limited supply on the resale market since the spring of 2009, combined with the strong demand, has been favouring sellers and has put upward pressure on prices. These conditions will continue in 2010 but will ease starting in the second quarter, as the earlier-than-planned purchases will wane with the new rise in mortgage rates. In 2010, 45,700 MLS® transactions will be registered, and the average price MLS® will post a 6.6 per cent increase, reaching $293,000. Resale market activity will be sustained in all geographic sectors of the Montréal CMA. The return to a more balanced market will begin during the second half of 2010 and continue in 2011, since demand will be less vigorous and supply will increase progressively as a result of the growth in home prices. Based on the principle of communicating vessels, potential demand in 2011 will be limited by the sales registered in 2009 and 2010. In 2011, the market will post 43,000 MLS® transactions, for a decrease of 5.9 per cent from 2010. Despite this decrease, the volume of resales will remain high, as housing demand will be supported by the greater strength of the job market. The increase in prices in 2010 will cause active MLS® listings to rise by 15.3 per cent in 2011, when they should reach 23,400 units. Supply will better keep up with demand, and a less pronounced price increase can then be expected. The average MLS® price will therefore reach $298,000, up by 1.7 per cent. Source : CMHC