2011’s economy wasn’t really much different from 2010, there were a few government changes that shocked Canada’s housing market for a couple of months, it then slowed down but picked itself back up again.
The economy has been in and out of the doctor’s office basically since September 2008. There’s some broken bones here and there and there are some minor viruses to shake, but the biggest one that doctors still can’t figure out is the solution to the biggest problem. They know it’s a disease and they think they know what to do, but they still haven’t figured out what the cure is, so here’s a big band-aid to cover it all up.
Here’s the thing, I know I sound like a broken record, but we are fortunate to live in Canada and especially in Alberta. Alberta’s economy is set to continue growing as we have resources that economies around the world require for their own growth and development and the price is set to stay level between $80-$100/barrel, this is the level that keeps our province humming.
There are going to be a lot of similarities to the past couple of years in 2012, especially if the government steps in to make their changes as household debt keeps creeping up. With current record high levels reaching 150.7% of income to debt ratios the government is likely feeling more pressure to make further changes to the mortgage rules. As much as I disagree with their changes as I believe household debt is good debt compared to credit card debt, likely to come is lowering the amortization from 30 to 25 years where we originally started and we may see the cash back (lender borrows you the 5% down) down payment go away.
If these changes come along, and we’ll know by the end of January, this again will start a whirlwind of sales and refinancing as people rush to get into the market before the changes come into effect and the annual running of the spring interest rates rise.
This will cause a minor spike in the industry in the first quarter, and then it’ll taper off in the second, while it resumes its usual run come mid-spring.
Alternatively, if the government doesn’t step on anyone’s toes then we’ll see a normal moving market and we’ll actually see our housing industry moving towards a balanced market. This is where everyone should be jumping up and down, because this is what we’ve wanted for years, but then the government stepped in and everyone panics to jump into the market.
Alberta is forecasted to continue growing in 2012, with gains in employment and with that comes more competition for employment thus increasing wages and to top it off more people migrating here. Alberta and Saskatchewan are going to have the highest migration gains as more people look for opportunities; this will cause more competition for housing and if all goes according to plan some home value gains.
As long as there aren’t any major catastrophes, be it natural or economic, then it should be pretty smooth sailing in 2012 as governments around the world have mostly repaired the wounds.
Let’s just hope that when the band-aid gets peeled back that the wound is healing as opposed to growing.
Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group and can be contacted for your mortgage appointment at 403-343-1125, texted to 403-391-2552 or emailed to firstname.lastname@example.org.