Well the Canadian economy was the absolute talk of the town for almost all of 2014. Plunging oil prices sent our dollar into the ground and sent economists into a tail spin over everything from predictions on capital markets to predictions on housing markets. In Q2 of 2015 we thought perhaps things would level out by year end, but this has not occurred, which has led to a host of speculation about 2016.
Now that oil prices have managed to reach all-time lows for the entire 2015 calendar year, some are beginning to forecast what the impact could be if this trend remains in effect over the course of the next 5 years.
2015 finished out with oil prices hovering around $45USD per barrel and an unemployment rate of approx. 7%.
CMHC was recently covered in an article on CBC.ca discussing what the housing market would look like if oil prices hit $35USD a barrel and stayed there for 5 year: “CMHC chief executive Evan Siddall presented that scenario to a Canadian Association of New York luncheon on Monday, saying house prices could decline by 26 per cent if that happened.”
This is not to mention that the article forecast that if the same occurred, unemployment could rise to 12.5%. What is remarkable about speculation as that Siddall apparently went on to indicate that he did not expect though that this scenario will play out.
Interest rates are another area where many continue to make predictions. The interesting thing is that CMHC amongst others expect joblessness to become a bigger risk to the housing market than the interest rate. Canadians are carrying record levels of debt and while some data has come out supporting that some Canadians are using debt to finance investments and build wealth (taking advantage of historically low interest rates), others are fragile and a job loss could see them in default of their debt, mortgage and even facing foreclosure or power of sale.
As far as interest rates are concerned, it is hard to imagine how they could go up if oil prices maintain these lows considering that that point alone could be the cause of so much pressure on the economy.
We thoroughly enjoyed this article and so saw it as worth both blogging about and sharing – we hope you agree. So, looking forward, what are your 2016 economic predictions?
For more tools to make your life as a lender easier and deal with the ups and downs for 2016, please visit http://lenders.purview.ca/.