DATE

Bill Morneau and Justin Trudeau

The Only Game In Town

Steve Saretsky -

Why Politicians Don’t Want to Touch Canadian Real Estate

Just last week I told you about the Bank of Canada’s reluctance to hike interest rates. There’s no doubt the economy isn’t ready, anemic growth, massive debt, and, well, a one trick pony (real estate) keeping it afloat.

The argument wages on amongst economists whether it would be more prudent to deflate the bubble now, or keep it elevated and try to hold out long enough for the rest of the economy to recover to replace real estate as the economic driver. Big shoes to fill.

Of the 10 Canadian provinces, real estate is the top producing sector as a percentage of GDP for 7 of the 10 provinces. In BC it accounts for nearly 20% of GDP.

Real estate as a percentage of GDP
Real Estate as a percentage of GDP in Canadian provinces.

And so the show must go on. Condos are exploding, detached homes are heating back up. The exuberance is pushing into areas that should signal warning bells. The area of Whalley is experiencing a 99% sales/actives ratio. That means anything that even slightly resembles shelter is selling, likely in multiple offers.

Condos in Abbotsford are up 38% year over year according to the MLS benchmark. Last I checked there was plenty of land in Abbotsford.

Thing have become equally unhinged in Toronto where prices have soared 33% year over year.

A stench of recency bias fills the air, according to a CIBC poll 54% of Canadians think house prices will rise indefinitely. This is classic bubble psychology.

Meanwhile, 52% of millennials don’t believe they’ll ever own a home. Cities like Vancouver are already hollowing out. Hourly earnings have barely budged, increasing by less than 1.3%, that’s below inflation- not to mention the surge in housing costs.

But don’t worry Bill Morneau and Justin Trudeau are determined to rebuild the middle class…

Like this post? Get My Best Work Sent to your Inbox HERE.

 

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

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...

Steve Saretsky -

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....

Steve Saretsky -

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...

Steve Saretsky -

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...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022