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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.

He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.

In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.

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The major banks in Canada have begun raising their key mortgage rates. In the meantime the central bank of the country decided to hold steady its key overnight rate. The housing starts have decreased in September. Have the perpetual negative economic news from the United Stated finally started to damage the Canadian economy prospects?

Earlier this month the Canadian Mortgage and Housing Corporation reported 6.6% decrease in the seasonally adjusted annual rate of housing starts around the country. The annual starts from 214,800 units in August 2002-2003 went to 200,600 in September 2002-2003. There were no significant differences between the levels reported about the urban single houses and rural starts. The drop in the urban multiple starts was considerable instead - 17.6%. The most accentuated negative trend has been reported in the province of British Columbia and at less scale in the most populated and powerful economically province of Ontario. In Quebec the situation between August and September was almost unchanged.

On the financial front earlier this week the Bank of Canada decided to keep steady its key overnight rate at 2.75%. The bank's governor Mr. David Dodge explained this position with the expectations of a limited economic growth in the country over the next three quarters. His current statement was in contrast with some previous public appearances of the governor when his economic forecasts were more optimistic. In the middle term the Canadian economy growth will decelerate from 4.0-4.5% to 3%.

In the meantime the Canadian commercial banks have begun to higher their key mortgage rates by about one-third of a percentage point. The reason for this move is that the borrowing on the bond market where the banks finance their mortgages has become more expensive. The recent rally in the stock markets around North America only aggravated the situation lowering investors' demand for bonds and thus forcing interest rates up in the bond market.

In the last 13 months following 9/11 the construction industry and the real estate market were responsible for keeping afloat the Canadian economy. In the first half of 2002 the development of the construction industry compared to 2001 was double-digit. This achievement can be explained by both the lower interest rates, the growing population in the major urban centers, the lower unemployment and the strong exports to the USA.

What to expect in the next months on the real estate market? Even without any interest increase by the central bank, the market will hardly meet the record levels of housing starts set in the first half of 2002. We could expect a slow decrease in the business activity around the country. If the economist forecasts about the stronger Canadian dollar in 2003 become a reality, this will hurt the exports to the US and will further slow down the Canadian economy.

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