The Growth of the Canadian Economy

When Bank of Canada (BoC) Governor Stephen Poloz lowered the prime interest rate to .75% earlier this year in response to what he called the “effects of the oil shock” it came as a surprise to economic pundits and economists alike. Many thought the central bank would hold off on moving the rate until late 2015 or early 2016, with the next adjustment expected to be a hike.

"We have an oil-price shock, which will reduce the income flowing into Canada and lead probably to some increase in unemployment overall," Poloz said.

Until the “oil shock”, Canada seemed to be headed for some post-recession growth. Still, Poloz said he was encouraged by signs of economic life, particularly in Canada's non-energy sector, thanks to a low loonie and strong U.S. growth.

Yet, we still hear about housing bubbles and overvalued real estate. It’s true that house prices in many markets are on the upswing especially in the country’s two hottest markets -- Vancouver and Toronto.

However, the Spring market has turned out to be surprisingly strong and ReMax revised its house price projections upward last week citing high consumer confidence and low inventory. There are even bidding wars in some markets surrounding the “Big Two” – like Hamilton and Barrie in Ontario and in Victoria B.C.  And while in Calgary, the housing slump is evident (oil shock fallout), the Edmonton market is showing resilience.

There was talk that Poloz might lower the prime interest rate again, which did not happen. Poloz said the January interest rate cut was enough to support the nation’s economy as it recovers from the slump in oil prices. Total inflation is at 1%, reflecting the drop in consumer energy prices. Core inflation has remained close to 2%.

So what does that all mean for the Canadian housing market? At this time, little of what has occurred has had an adverse affect on the housing market in most areas of the country. Is there a housing bubble? Well, we have been hearing about a potential housing crash since 2010 – if it was going to happen, it likely would have happened by now.

During these past four years, the government has imposed tighter restrictions to mortgage qualifications and mortgage products, which have altered the lending landscape, and which appear to have prevented a housing collapse. As always, there will be doomsayers.

A better thought is to look at all the positives in the economy starting with the latest Bloomberg Nanos Canadian Confidence Index. According to the results of its recent telephone poll, Canadians are optimistic about real estate, with consumer confidence the highest it’s been in three months. Homeowners are more confident than renters.

When we review the recent federal budget, there are more positive signs for housing and the economy. For one, it was a balanced budget and the government is projecting a surplus of $1.4 billion dollars. Seniors get a new tax credit for home improvements to improve accessibility. Small business gets a tax rate drop to 9% from 11% over the next four years. Manufacturers get a tax break. And the budget held off on any new measures to cool housing.

“There has been an appropriate and desirable moderation in housing activity in most regional markets across Canada. Toronto and Vancouver, in contrast, have continued to experience periods of strong sales and price growth, with housing market strength in these cities supported by such factors as population growth and land scarcity,” according to the budget.

This, despite the fact that household debt levels have reached record levels, again.

Also, when we look at the news coming out of some key sectors, this is what we find:

•  Real gross domestic product (GDP) by industry increased in every province and territory except New Brunswick, Newfoundland and Labrador and Yukon in 2014. Nationally, real GDP by industry rose 2.4% in 2014. (Stats Canada)

• Employment increased by 29,000 in March. The unemployment rate was unchanged at 6.8%.

• Oil prices are showing signs of improvement and so is the loonie. (Stats Canada)

•  Average wages have grown by 2% over the past twelve months, which means that incomes are rising a little faster than the average price growth, as measured by the Consumer Price Index (CPIP), which stood at 1% in February. While not spectacular, this signals a small expansion in the purchasing power of the average Canadian worker. (TMG’s David Larock: http://www.movesmartly.com/2015/04/how-will-the-latest-employment-data-affect-canadian-mortgage-rates-april-13-2015.html )

• Canadian housing starts rose much more sharply than expected in March as groundbreaking on new condominiums and apartments in urban areas surged 48.2%. (CMHC)

•  A robust U.S. economy will ensure that slow growth will not be Canada’s new normal (Fraser Institute)

All of this good news in the Canadian economy trumps the small news and makes Canada a growing, stable economy that can weather short term fluctuations for a strong and prosperous future.

A Lesson in Customer Service

By Mark Kerzner, President TMG The Mortgage Group

How many times have you heard one of the following?

1.  “It’s our policy.”
2.  “I have to check the policy manual”
3.  “Because I have to”
4.  “I am just going on my break”
5.  “Let me provide you with a website address where you can fill in your comments”

… and the list goes on and on and on. While these are just a sampling of my personal business pet peeves, my blood boils as I simply recall them and write them down.

Let me share a couple of challenges I had with the customer service practices of a car rental agency as a lesson on how not to treat customers.

Last winter I rented a car at the Calgary airport.  After completing the compulsory paperwork the rental agent handed me my keys.  To my surprise there were three identical keys on the key chain.  Over the past few years I have become a personal fan of the keyless car starter if for no other reason than to reduce the bulk of what I have to carry around. I was travelling on my own, so I said I would just take one of the keys, asked that they keep the other two. They refused. The reason: because I have to take them all.

I didn’t let it go quite that easily and tried to reason. I said, “If I happen to lose the keys, I would lose all of them if I had three with me on the single key chain. At least if you have the spare you could help me out.”  It didn’t work.  At that point I simply didn’t have the energy to continue and went on my way.



A few months later I had the exact same experience. Knowing where this was likely going to end I decided to circumvent the conversation by asking how I could get feedback to a decision maker so that they would have the opportunity – yes, I do believe it was an opportunity -- to hear feedback directly from a customer. The rental clerk said she could provide me with the contact information for the owner of the franchise and I could give my feedback directly to them. I was happy with this outcome until I got the “business card” of the franchise owner. (See below)



Despite my frustration at receiving a form email alias rather than contact for an accountable human being, I decided to follow through with the feedback form and went to the main home page of the company to provide it.  By the time I was ready to submit I had some additional feedback as well. The car that I was given was dirty inside and out. I wrote up a nice, long note, and went to submit it when the system bounced me out. Nothing I wrote was saved and I would have had to rewrite it all again.  Which I did not do.

By the way, I was not able to submit feedback to the survey URL provided from the rental agent. There was no room for feedback and I would have had to provide the digital Rental Record number to complete the survey.  In the end the car rental company never had the opportunity to hear my feedback and lost my future business.

I guess what I was hoping for was an opportunity to help empower the client service people so that they could remove the above excuses from their vocabularies. 

As mortgage brokers, we know our business is evolving and has become more competitive.  Our clients are asking us for more than they did just a few years ago. Many of our clients are better educated about finances and mortgages when they speak with us. They have already done research online or with their personal bankers.  This is actually a good thing for both the client and us. 

As problem solvers we ensure clients have the best product for their unique circumstances.  But it’s also about being there with answers and not just standard phrases such as “those are the lenders’ rules”. We owe it to our clients to explain why policies are what they are. This means we must be more diligent about knowing our lenders, their products, and the policies. We need to connect with underwriters and BDMs to makes sure of the varying conditions and be informed with recent changes.

It also means keeping in regular contact with clients to keep them informed of what’s happening in the industry and how those changes impacts them. And, if there is a complaint, then we need to listen to what they’re saying and find ways to continually improve our level of customer service.