Canada a booming economy
The Canadian economy has received much attention from global economists as it is one of the few economies that has resisted the impact of the global recession. Consistent low inflation certainly helped the Canadian economy from the deep depression that the rest of the G7 suffered. The Construction sector in Canada has remained a driving force along with international trade which has seen sustainable growth since 2010.
Construction sector in Canada
There has been concern for some forecasters over the amount of new listings in the Canadian real estate, especially from Toronto and the lead city behind the construction boom, Calgary. Toronto alone has left Statistics for July 2013 outlining that new listings had fallen. Property sales remain steady with a typical house costing on average $380,000 that is up from $254,000 back in 2006. Another worry is the fact that an average household debt to disposable income has increased to 160%. Mortgage rates have also soared as a result of large investment made on Canadian bonds. Lending in Ottawa has seen a dramatic drop in lending because of tighter regulations on mortgage lending. Some see this as the calm before the storm or the beginning of the end for Canada. As a matter of fact this is an intelligent move to prevent the bursting of the Canadian property bubble. Countries like Spain and Ireland had an over supply of houses then consumer confidence hit the cliff resulting in widespread defaults and an economic crash. Canada is simply slowing to prevent economic circumstances such as those stricken European countries. At the present time Canada does not have an over supply of houses, but when 1.3 million people are employed in an industry that makes up 7% GDP, policies must be implemented to control the situation. Canada can benefit from sacrificing rapid growth to a more balanced and slower growth over a longer period of time. If Canada chose to let the construction industry expand leading growth rates of 5% for example, the inflation would creep in and hamper potential growth in the economy.
For those looking to invest
For those looking to invest in bonds I have my doubts over the profits that can be made over investing in Canadian bonds. Heavy investment in Canadian bonds has already had adverse affects on 5 year fixed rate mortgages which have taken a 20 point hike since May 2013. If you are looking to invest in bonds have a look at Japan or if you want to hedge a long term bonds in an EU power such as France.