Many Canadian home builders started 2015 with some apprehension over the impact higher interest rates might have on their businesses. A lot of economists were predicting the price of borrowing was going to rise in Canada, possibly as early as this spring. Here we are a few weeks later, and the Bank of Canada is moving in the opposite direction.
Governor Stephen Poloz surprised many by announcing a quarter point cut in the bank’s key overnight lending rate to 0.75%. Plunging oil prices are raising doubts about the strength of the Canadian economy, and have the bank taking action.
Overall economic growth rates are now expected around 2.1% this year. That’s markedly lower than the 2.4% rise in GDP predicted just a few months ago. Of course, housing is among the industries most directly impacted by dropping interest rates. Most properties are bought with borrowed money and, now buyers are likely to see easier access to that cash.
January’s rate cut by the Bank of Canada is designed to offset some of the impacts of a slumping resource sector. Re/Max recently issued its expectations for Canadian housing prices in 2015. Despite fears about oil industry challenges, the realty group is forecasting the average sale price of a Canadian house will jump to $416,300. That would be 2.5% higher than in 2014.
While more modest than increases in previous years, that number still suggests new buyers will be entering the market and current homeowners should have confidence to invest in their existing properties. This month’s unexpected interest rate adjustment is likely to ensure those steady price improvements.
The American housing market is looking even stronger in 2015. In the U.S., Dodge Data & Analytics foresees 700,000 new single-family housing units being built this year. That’s 11% higher than last year, with dollar values predicted to increase by 15%. Multi-family construction is also expected to produce a healthy 7% gain in units, and 9% in new housing values.
These outlooks, along with dropping interest rates, all point to a strong 2015 for HVAC contractors tasked with designing systems to keep those new homes comfortable to live in. A solid housing market, combined with lower mortgage costs should also encourage HVAC renovations. This year represents an opportunity for construction professionals who can position their services and offerings to capture some of that increased spending.