I’ve talked a lot about the great reopening trade. People are getting vaccinated, the weather is great, and people are desperate to get out of their house after tiresome lockdowns. In fact, Canada has now fully vaccinated 48.8% of its population against Covid-19, overtaking the U.S. for the first time. It’s no surprise that housing has finally come off the boil.

Official housing data released last week from the Canadian Real Estate Association shows seasonally adjusted home sales are off 25% from their peak in March. Sales declined month-over-month in nearly 80% of all local markets. Yes, the pandemic induced FOMO has finally been sucked out of the housing market.

Similar to the run on toilet paper at the onset of the pandemic, the run on housing created an acute shortage of supply, driving prices much higher. The MLS home price index, which adjusts for sales composition now suggests the typical home has risen 24.4% from last year- a record pace of home price inflation.

Here’s how it looks across major metros:

Toronto 19.9%
Montreal 27%
Vancouver 15%
Calgary 12%
Edmonton 8%
Ottawa 28%

Unlike the toilet paper crisis, the housing crisis will take longer to sort itself out. Total active listings for sale across the nation have dropped to their lowest total in over 10 years. New listings remain sparse, actually dropping 0.7% from last month. It seems both sellers and buyers are on vacation mode.

As I have emphasized recently, the housing story is far from reaching its conclusion, and we won’t get a better read on things until the fall. Furthermore, the prospects of a federal election being triggered this fall are increasing. Every major party appears to be in full pre-election mode. If so, you can bet housing will be front and centre.

More recently, Brad Vis, a conservative MP, introduced a motion in the House, which was passed, that will “put a freeze on purchases by non-resident foreign buyers. It’s inappropriate for that to price out Canadians.”

Even though the successful Conservative motion to disallow non-resident foreign purchases didn’t get much mainstream media attention, O’Toole recently said it would be far more effective than the Liberals’ “token” suggestion to place a one-per cent tax on property owned by non-resident foreign nationals. “That’s almost the cost of doing business. We have to actually stop it.”

Add to that, just a couple months ago, the NDP’s Jagmeet Singh proposed a 20 per cent tax for foreign buyers… Do you see where this is going?

Vote buying season is around the corner, what other goodies will the politicians throw out to lure prospective voters? We shall see.

Three Things I’m Watching:

1. Home price inflation across major metro cities. (Source: CREA)

2. Top 5 cities for home price inflation. (Source: Habistat, CREA)

3. The Bank of Canada announced a tapering of their QE program but they’ve still funded 87% of the budget deficit since Q2 2019. (Source: Richard Dias, Acorn Macro Consulting)

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