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Carney praises province’s resilient economy and our stable housing market during recent chamber luncheon
Feb 12, 2010

At a recent Real Estate Investment Network (REIN) meeting in Calgary, Don White, chair of WinnipegREALTORS® commercial division and Peter Squire, MLS® market analyst for WinnipegREALTORS®, both emphasized Winnipeg’s residential and commercial real estate markets have been performing impressively over the last few years. 

For example, the average price increase on an annual basis over the last decade for residential-detached properties or single family homes was 12 per cent and 14 per cent for condominiums. During the last five years of the decade, the average days on market for MLS® residential-detached sales was consistently in the 20s, which is impressive, especially in comparison to many other markets in Canada. MLS® dollar volume climbed from $1 billion in 2002 to just shy of $2.5 billion in 2009.

Another indicator is the success WinnipegREALTORS® had in converting listings to sales. In 2007, over 80 per cent of home listings sold. Looking at similar conversions in other Canadian markets, 60 per cent was more typical. The average home sale price to list price ratio was 100 per cent or higher commencing in 2004 and to the end of 2009. 

On the commercial side, Winnipeg was referred to as a calm island in a global storm. Don White said the commercial real estate market shrugged off the global recession, and within one year will  likely surpass the market’s average sales and leasing transactions of $300 million. 

During an all-day REIN workshop featuring Winnipeg, there was a positive response to the city’s performance, resulting in a request for WinnipegREALTORS® to do a similar presentation at REIN’s Toronto chapter meeting in March 2010.

At a recent Winnipeg Chamber of Commerce luncheon, Mark Carney, the governor of the Bank of Canada, said Manitoba was in an enviable position by not being overly dependent on one sector of the economy to get through tough times. In his speech, The Coming Thaw, Carney said Manitoba is not only the geographic centre of our country, but also mirrors Canada’s economic diversity. Manitoba’s distinctive blend of primary industries, manufacturing and service sectors represents a true cross-section of the Canadian economy, he added.

The governor said Canada's better economic performance can be explained by two factors. 

First, with a highly-credible monetary policy and the strongest fiscal position in the G-7, Canadian policy-makers were able to act swiftly and effectively with extraordinary accommodative measures. The Bank of Canada began cutting interest rates in December 2007 and proceeded with a series of aggressive reductions until the key policy rate reached 0.25 per cent in April of last year, the lowest it can effectively go. 

Further, the central bank then provided an interest rate policy to achieve its inflation target in order to maximize the monetary stimulus. Carney said fiscal stimulus has already been substantial and will continue to have an important impact on economic growth this year.

Second, Canada entered the recession with notable advantages, including a well-functioning financial system, strong corporate balance sheets, and relatively healthy household finances. In addition, our economy has a demonstrated ability to adjust quickly to changing circumstances. 

Excerpts from Carney’s Winnipeg speech:

“Against this backdrop of relatively subdued global and U.S. growth, domestic factors in Canada will prove decisive for the recovery in the near term. Current strength in housing demand and consumer spending will provide important impetus this year. Owing to the improved financial and economic conditions, 2010 should mark the hand-off from growth that is heavily influenced by public policy to growth that is largely determined by the private sector. By next year, the private sector should be the sole contributor to domestic demand growth in Canada.

“Canada's corporate sector begins with a number of advantages. Domestic demand is expected to be relatively strong, providing a base of support for some sectors. Corporate balance sheets are in outstanding shape, and margins have held up very well for this stage in the economic cycle.

“In addition, Canada's overall financial conditions are now contributing to, rather than retarding, the recovery. While net financing needs would be expected to be limited, given the stage in the economic cycle, business credit has started to grow again. In part due to monetary stimulus, overall borrowing costs for Canadian businesses remain very low. 

“Taken together, results from the bank's latest Senior Loan Officer Survey and the Business Outlook Survey suggest that, following a period of substantial tightening, credit conditions for businesses eased slightly in the fourth quarter of 2009, for the first time since the financial crisis began. The improvement in credit conditions mainly affected large firms, as some small and medium-sized entities continued to experience tightened conditions.

“It is in this environment that the first signs of a thaw in corporate attitudes have begun to emerge. In our latest Business Outlook Survey, more firms said they are now planning to increase investment spending and employment than did either last summer or fall. With the improvement in financial conditions, economic activity, commodity prices, and growing confidence, business fixed investment should pick up in 2010. This recovery will be relatively modest; it is not until 2011 that we anticipate an acceleration of investment spending, as the excess supply in the economy is taken up. 

“However, given the external environment, the question is whether this pickup will be sufficient. The significant drop in investment that occurred during the recession included spending on new technology, which could have helped firms address coming economic challenges. The relatively slow recovery expected in our most important trading partner, along with ongoing sectoral adjustments, means that firms have to find new markets. In doing so, they will face increased competition. For example, due to exchange rate moves and stellar productivity performance, the competitiveness of the U.S. corporate sector has improved significantly. The need for capital investment by Canadian businesses to meet these challenges is clear. 

“In short, Canadian companies are emerging from the recession to an altered world — one that may require deeper restructuring and bolder strategic initiatives than currently contemplated. New suppliers need to be sourced; new markets opened; a new approach to managing for a more volatile environment developed. To recognize this reality is also to recognize the opportunities available to corporate Canada.  

“To conclude, recent events were a watershed. The global economy that emerges from the recession will be different than the one that led into the crisis. A powerful and sustained restructuring of the global economy has begun. Canadian business will need to develop new markets as the traditional advantage of relatively open access to U.S. markets becomes less valuable. To seize new opportunities, our productivity levels must improve. 

“In the face of these challenges and the ongoing uncertainties about the global outlook, the credibility of macroeconomic policy is essential. One constant is the bank's unwavering commitment to price stability. The single, most direct contribution that monetary policy can make to sound economic performance is to provide Canadians with confidence that their money will retain its purchasing power. That means keeping inflation low, stable and predictable. Price stability lowers uncertainty, minimizes the costs of inflation, reduces the cost of capital, and creates an environment in which households and firms can invest and plan for the future.” 

In a question-and-answer session following his speech, Carney was quick to dismiss talk of a housing bubble in Canada or in Winnipeg’s stable market. He said there is no need for structural change in the mortgage market. In fact, it has performed exceptionally well, allowing the housing market to weather the storm. While not dismissing concerns of the extent of borrowing, he indicated interest rates will change to historically normal levels in the future.