Here’s a wild stat to start your week off, Canada added 410,000 new immigrants in 2021. In the United States, a country nearly ten times the size, added just 500,000 new immigrants. Canada is built on immigration, and it is certainly needed. However, perhaps it’s worthwhile to discuss the tradeoffs, which seemingly no media outlet wants to discuss out of fear of being cancelled. Our nation is in the midst of a housing crisis. The government has so far failed to adequately house its existing population. Current inventory for sale sits at its lowest levels on record, as a result national home prices have inflated at their quickest pace on record, up over 25% during the past year. So, while government has successfully been able to hit their arbitrary immigration targets, they have not succeeded in their housing targets. To be honest, i’m not even sure if they have a housing target or strategy in place. The reality is getting new housing built is a complicated, bureaucratic mess. Getting new housing built requires all three levels of government, federal, provincial, and municipal to work together in unison. Government is simply too big, too slow, and too inefficient to make this

It was quite the year for the nations housing market. As I highlighted a few weeks ago, this shouldn’t come as a surprise considering our monetary base has expanded by about 23% over the past eighteen months. We are undergoing the largest monetary experiment in modern history. But enough of that, let’s take a look at the numbers. The Vancouver housing market closed out the year with just over 44,000 sales. This is the highest figure on record, surpassing the previous record set in 2015 when we hit just over 42,000 home sales. Of course if you remember 2015 there was tons of media coverage, lots of bubble talk, and a lot of angst towards the foreigners who were blamed for outbidding all the locals. What do we hear today? Crickets. Either people have given up or people don’t know who to blame. My guess is on the latter. It’s pretty difficult to explain to people that all the helicopter money handed out during the pandemic eroded the purchasing power of the currency everyone is labouring over. There’s a belief out there in parts of society that we should actually do more fiscal handouts, because, well, cost of living man.

Christmas came early for the 69% of Canadians who own a home. The latest data released from the Canadian Real Estate Association shows national home prices inflated at the quickest pace ever, rising 25% from last year. The home price index which measures the price of a typical home in Canada now sits at $780,400, up from $582,700 or 34% from when the pandemic commenced in March 2020. Through the end of November 630,634 residential properties have traded hands via Canadian MLS® Systems, already surpassing the annual record of 552,423 sales for all of 2020. There is currently just 1.8 months of inventory on a national basis, tied with March 2021 for the lowest level ever recorded. Yes, the housing bull market is still in tact and growing more obscene by the day. Prices gains over the past 12 months: Greater Vancouver +16% Victoria +22.4% Calgary +9.3% Edmonton +4.1% Montreal +20.9% Greater Toronto +28.3% Winnipeg +12.8% As I wrote in last weeks piece, Canada is running wartime fiscal and monetary policy. There are no guns this time, but there is a virus, and so there is seemingly no limit on how much money we should throw at this. We just found

House shoppers are showing very few signs of fatigue. The latest data out of Vancouver & Toronto for the month of November suggests the bull market remains fully intact. Greater Vancouver home sales jumped 11% from last year, the second strongest November on record besides 2015. In case you forgot, the winter of 2015 was sparked by a frenzy of offshore buyers, pushing the market to dizzying heights before ultimately peaking a few months later in the spring of 2016. It feels a lot like that today, with sales up and inventory down a whopping 40% from last years levels. If you thought looking for a detached house last year was tough, well inventory has fallen another 25% since then and currently sits at its lowest levels ever. In other words, bidding wars and high prices. Detached home prices are now up 21% in Greater Vancouver and 36% in the Fraser Valley. There have certainly been better times to buy a house, and today isn’t one of them. Similar to the last bull market of 2015-2017, a rising tide lifts all boats. When the detached market peaked out in 2016, the condo market ripped in 2017 as buyers bid up

Bank of Canada deputy governor, Paul Beaudry is worried about the number of investors flooding the housing market. According to the Bank, investor buying has doubled since the start of the pandemic, while purchases by first-time homebuyers have increased about 45 per cent. “A sudden influx of investors in the housing market likely contributed to the rapid price increases we saw earlier this year. In such a case, expectations of future price increases can become self-fulfilling, at least for a while,” Beaudry said. “That can expose the market to a higher chance of a correction. And, if one occurs, the damage can spread far beyond the investors.” Of course there was no mention of the Banks involvement in the flurry of investors piling into the housing market. Need I remind you that the Bank slashed rates to near zero, pumped $5B worth of QE (money printing) into the financial system per week, and then begged the consumer to borrow money last July. And borrow they did. Residential mortgage credit growth is running at 10% right now, the fastest pace in a decade. In other words, the Bank of Canada blaming investors for inflating the housing market is akin to a drug

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC are already creating significant food and fuel shortages which is likely to compound on top of already high prices. Meanwhile, national home prices jumped again, rising a whopping 2.7% month over month in October. This was the fastest price gain in seven months. This gain was led by Toronto where prices ripped 4.8% in one month. Keep in mind these price gains are tracked using a smoothed out hedonically adjusted index which strips out volatility from high-end home sales. In other words, this was a monster move higher that was not due to a change in the composition of homes selling. Policy makers should absolutely be concerned. On the whole, national home prices are now up 23% from last year. To suggest policy makers have over stimulated the economy would be an understatement. The Bank of Canada should absolutely be reigning in stimulus measures but are trying to delay it

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal. “We are still dealing with emergency interest rates. Let’s remember that these are not normal interest rates and eventually they will rise. If you’re in the market now and you’re thinking about buying this huge house with a huge mortgage, let’s think about it for a second. Can you afford this mortgage if rates will be 10, 150, 200 basis points higher? If not, buy a smaller house or rent.” I can assure you many Canadians can not afford an additional 100 basis points, let alone 200 basis points on their debt. Ironically, Tal’s bank, CIBC, sure isn’t lending like a tsunami of crippling rate hikes are coming. CIBC’s total mortgage growth is running near 14% year-over-year, that’s even higher than during the 2017 bull market when regulators had to ask CIBC to pump the brakes. In other words, Tal’s comments are akin to the old term, watch what they do, not

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession period to back out of an offer, similar to what is standard in the pre-sale construction market. Let’s discuss. First, an end to the blind bidding system is welcomed, and to be honest, much needed. The existing system relies purely on trust, and let’s be honest, there are a lot of bad actors out there who might occasionally exaggerate on the number of offers on the table. However, what does an end to the blind bidding system look like? It is not a simple change, for if it were, it would have been done a long time ago. My guess is BC will implement something similar to what Ontario has. In Ontario, all bids are registered on the Real Estate Boards back-end system. Buyers agents are able to see how many offers are registered on the property, and from which brokerages. This provides much needed transparency. Second is a mandatory “cooling

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy rate sometime between April and September.” Markets are currently pricing in 4-5 rate hikes by the end of 2022. No doubt this has real estate bears frothing at the mouth. The idea of rising inflation forcing the central banks hands would be a dagger to the nations housing market. Perhaps this is welcoming news, given national home prices are now up 22% year-over-year and overvalued on many measures. Higher interest rates would bring some much needed sanity, and hopefully quell rising inflation in the process. However, the exit strategy for the Bank of Canada is going to prove challenging, and the simple equation of higher inflation must equal higher rates might prove illusive this time around. Let’s discuss. First, it’s important to understand monetary policy, particularly in Canada does not work in a vacuum. Monetary policy is globally coordinated, and largely set by the US, the Euro Zone and Japan.

he Canadian economy added 157,000 jobs in September, finally recouping all of the jobs lost during the height of the pandemic. However, wage inflation remains tepid, growing just 1.7% from last year, despite overall CPI inflation running at 4.1%, an eighteen year high. In other words, wage inflation is not keeping pace with the rising cost of living. The Bank of Canada’s Tiff Macklem took to the airwaves this past week, assuring Canadians inflation was likely to prove transitory. Macklem said supply disruptions and price pressures are “proving more complicated, they are continuing, so there is some risk that there’s a bit more persistence than we previously thought.” However, he added there are still “good reasons” to believe high inflation will be temporary. Let’s hope he’s right. Part of the Banks thesis for transitory inflation is a slowing housing market. However, i’m not sure what data Macklem and Co are looking at. September housing activity points towards a housing market that remains piping hot. Seasonally adjusted home sales in Toronto were up 0.7% in September, the first month over month increase since March. Meanwhile, active listings for sale plunged by nearly 50% from last years levels. There’s a paltry one month

We’ve talked a lot about the great reshuffling here. The pandemic changed a lot of things, including where people want to live, and how they want to live. The lust for bigger spaces for less money has driven an exodus away from the city. Recent data from Stats Canada shows Canadians are on the move. Interprovincial migration reached 123,500 people in Q2 2021. This is an increase of 55.1% from the previous quarter, and the largest migration since Q3 1991. Ontario saw the biggest outflows, losing over 11,000 people and marking the largest outflows since the 1980’s. Meanwhile, BC & Nova Scotia enjoyed the largest inflows. To be honest i’m a bit surprised BC remains at the top of the charts. Clearly sky high home prices are not deterring people from moving here. The average home price in BC now stands at a whopping $901,000 a 17.2% increase from last year. There’s really not a lot of affordable options left in BC. Here’s how average home prices stack up across the province, with annual price growth: – Chilliwack $710,238 (increase of 21.3%) – Fraser Valley $984,965 (increase of 20%) – Greater Vancouver $1,174,176 (increase of 8.9%) – Kamloops $558,291 (increase of 21.9%)

It took over $600 million of tax pay dollars to reach the same outcome, another liberal minority government. I can think of a few better places to spend $600 million, affordable housing supply being one of them. Nonetheless, what’s done is done, and we now have some clarity on the direction of government and how they plan to address housing in the years ahead. Here’s a summary of the housing plan the liberals campaigned on: Ban foreign money from purchasing a non-recreational, residential property in Canada for the next two years, unless this purchase is confirmed to be for future employment or immigration in the next two years. Introduce a new Rent-to-Own program, provide $1B in loans and grants to develop and scale up rent-to-own projects Establish an anti-flipping tax on residential properties, requiring properties to be held for at least 12 months. Reduce the price charged by the Canadian Mortgage and Housing Corporation on mortgage insurance by 25%. For a typical person, this will save $6,100. increase the insured mortgage cut-off from $1 million to $1.25 million, and index this to inflation invest $4 billion in a Housing Accelerator Fund which will grow the annual housing supply in the