A strong housing market and higher commodity prices have propelled B.C.’s economic recovery to the head of the pack in Canada, according to BMO Capital Markets Economics (TSX:BMO).
“Commodity prices we expect to remain high because of a large amount of demand coming out of emerging markets, and B.C. has what those markets need,” said Robert Kavcic, an economist with BMO. “Longer term, the housing market is a source of strength just because of the consistently strong populations flows you see in B.C.”
The province’s gross domestic product is expected to reach 3.9% this year after declining 2.3% in 2009.
Kavcic told BIV that exports should firm up as global demand gets back online, and the forestry sector could see a lift from a recovery in U.S. housing starts and sales to Asia.
Still, the housing market in B.C. is expected to cool for the remainder of the year due to the upswing in buyers who entered the market early to avoid interest rate hikes and the impending HST.
“Very near term the housing market is stretched, valuations are stretched and sales have already started to roll over a bit so it’s probably a short-term correction, longer-term strength,” he said. “In the commodities sector we’re seeing short-term and longer-term strength so if you take that all together the strength is more in commodities.”