DATE

Steve Saretsky -

The growth in Surrey has caught my attention for quite some time. It’s been an attractive growth city given job creation and the relatively more affordable housing prices. It should be no surprise that the annual population growth is just over 2.5% and more than double the city of Vancouver where the cost of living is out of reach for many. Given the cities growth and the sharp run-up in prices elsewhere, developers have been pretty bullish on the Surrey market. The relatively affordable land prices in years prior sparked a sharp increase in residential land development sales. Per Altus Group, annual land sales for the purpose of residential re-development began increasing in 2014, and more than doubled just two years later. New home sales have also been strong and steady up until the end of 2018. Although, they have since fallen off markedly in 2019. This shouldn’t be overly surprising given new home prices are reaching levels well beyond what is deemed affordable for the area (one of the main reasons people move to Surrey), Concord Pacific’s Park George high-rise reached average sales prices of $875/sqft, record highs for the area. Given the recent slowdown, which has seen the

Steve Saretsky -

Global bond yields continue to tumble as investors dogpile into bonds over fears of a looming recession. The worlds central bankers are rewarding such behaviour by slashing interest rates further into negative territory. Negative yielding debt is becoming the norm, surpassing $16T globally, a stunning example of a broken monetary system. Right on cue, In the world’s largest covered-bond market, a Danish bank unveiled its 10-year mortgage-backed notes at a negative coupon. Jyske bank will offer 10 year mortgage bonds to investors at a fixed rate of minus 0.5%. In other words, investors are paying for the privilege to lose money, assuming they hold to maturity. Jyske Bank says it would rather not be setting such records, given the global economic weakness that’s behind the historically low interest rates. “It’s a first not only for us but for all Danish mortgage institutions,” said Christian Bech-Ravn, head of ratings and investor relations at Jyske’s mortgage arm. “Overall, I don’t think it’s a good sign for the economy with these very low interest levels that we are seeing at the moment.” Meanwhile in Australia, with threats of a bursting property bubble, the Aussie central bank has been swift to slash interest rates

Steve Saretsky -

BC’s provincial housing market showed signs of stabilizing in July. The month of July notched a 12% increase in home sales year-over-year (not seasonally adjusted). This was the first time sales had increased on a year-over-year basis in eighteen months. However, sales are still below historical averages, ultimately suggesting the housing market is not out of the woods just yet. When looking at seasonally adjusted data, it also appears sales have bottomed, at least in Greater Vancouver which notched a 24% gain year-over-year. However, active listings across the province are still growing, up 12% from last year. A record number of new homes under construction in BC should add to that in the year ahead. Despite the uptick in activity in July, it remains a sluggish year for the BC housing market. The weakness in Greater Vancouver has spread across the province. This has prompted a year to date 14.4% decline in sales and a 5.3% drop in the average sales price.  

Steve Saretsky -

As the global economy slows Central Banks across the world are aggressively slashing interest rates towards zero. Desperately trying to avoid a recession, there remains little room to maneuver as interest rates slide closer into negative territory. Stimulus in the form of lower interest rates is nearing an end game, however, it appears to be providing one last shot in the arm to the housing market. National home sales in Canada increased slightly in June, growing 0.2% month-over-month, and 0.3% on a year-over-year basis. Further, July data from local Real Estate Boards across Canada suggest National home sales should increase again in July. This was bolstered by a jump in home sales in both Greater Toronto and Greater Vancouver which both recorded a 23% year-over-year increase in July home sales. Credit growth is also showing signs of picking up. Residential mortgage credit growth increased to 3.68% in June after hitting an eighteen year low earlier this year. Meanwhile, household credit growth also increased in June, after initially slowing to its weakest pace of growth since 1983. The recent uptick along with potential rate cuts coming from the Bank of Canada has stoked concerns of potentially re-inflating a property bubble. In

Steve Saretsky -

The Greater Vancouver condo market was responsible for most of the rebound in the July sales figures. Condo sales increased 15.2% year-over-year and were nearly in line with the ten year average (just shy by 3.9%) for the month of July. We believe falling mortgage rates, and relatively easy access to credit are responsible for the increased purchasing activity. Yes there is a mortgage stress test but banks are still eager to lend, as seen in the mortgage rate wars this year, and borrowers are still credit worthy (fully employed). However, buyers are still bargain hunting and looking for deals. Overpriced and or less desirable condos are not selling. Units in a poor location, or in a poorly run strata building are sitting for long periods of time. Condos that are priced sharply are still moving quickly, albeit at lower prices. This is reflected in the benchmark price of a condo which fell again in July, dropping 8.8% from last year. We also saw the average price per square foot drop 6.8% from last year.  Condo inventory continued to build off a low base from last year, increasing 30% year-over-year. Inventory still remains low from a historical perspective and that

Steve Saretsky -

Last July marked the fewest detached sales in Greater Vancouver since data was collected back in 1991. It should be no surprise that this year marked a noticeable uptick with sales jumping 31% year-over-year. As you’ll see in the chart below, this year was still one of the slowest from a historical context. Dating back to the year 2000, there have only been two other years with fewer detached sales in July (2012 & 2008).  It is much too soon to conclude the sharp bounce in sales year-over-year is indicative of a housing market that has “bottomed”. As we will highlight further in our report, sales increased on lower prices. The benchmark price of a detached home slipped further in July, now down 10.5% year-over-year. The benchmark price has now been in contraction for twelve consecutive months, the longest correction period since 2012/13.  It does appear that the sharpest annual price declines are behind us, at least for now, as we are seeing the year-over-year rate of price declines bottom, and begin to trend higher. This could further be solidified through the reduction in inventory, the number of homes for sale actually fell year-over-year, dropping 8% from last year. Sellers

Steve Saretsky -

Greater Vancouver home sales bounced again in August, increasing 16% year-overyear. This was the second consecutive month home sales had increased on a yearover-year basis. However, it is important to contextualize the movements before jumping to conclusions and getting too far ahead of ourselves. Without a doubt sales activity has increased, which shouldn’t be overly surprising considering we endured a twenty year low in purchasing activity through the first half of this year. It appears some of the demand that was cautiously sitting on the sidelines is finally pulling the trigger, thanks to lower prices and much lower mortgage rates. Today we are seeing 5 year fixed uninsured mortgages as low as 2.69% with further indications that those should sink lower as the 5 year Government of Canada bond yields continues to tumble. Despite the massively inverted Canadian yield curve, banks are still eager to lend, many of whom are actively competing for new borrowers despite shrinking margins. As a result, the housing market appears much stronger, sales activity is picking up, banks are lending and prices appear to have stabilized. However, resounding calls echoing that the bottom is in, are likely premature. Let us dive in further.

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The Canadian Economy

Steve Saretsky -

The growth in Surrey has caught my attention for quite some time. It’s been an attractive growth city given job creation and the relatively more affordable housing prices. It should be no surprise that the annual population growth is just over 2.5% and more than double the city of Vancouver...

Steve Saretsky -

Global bond yields continue to tumble as investors dogpile into bonds over fears of a looming recession. The worlds central bankers are rewarding such behaviour by slashing interest rates further into negative territory. Negative yielding debt is becoming the norm, surpassing $16T globally, a stunning example of a broken monetary...

Steve Saretsky -

BC’s provincial housing market showed signs of stabilizing in July. The month of July notched a 12% increase in home sales year-over-year (not seasonally adjusted). This was the first time sales had increased on a year-over-year basis in eighteen months. However, sales are still below historical averages, ultimately suggesting the...

Steve Saretsky -

As the global economy slows Central Banks across the world are aggressively slashing interest rates towards zero. Desperately trying to avoid a recession, there remains little room to maneuver as interest rates slide closer into negative territory. Stimulus in the form of lower interest rates is nearing an end game,...

Steve Saretsky -

The Greater Vancouver condo market was responsible for most of the rebound in the July sales figures. Condo sales increased 15.2% year-over-year and were nearly in line with the ten year average (just shy by 3.9%) for the month of July. We believe falling mortgage rates, and relatively easy access...

Steve Saretsky -

Last July marked the fewest detached sales in Greater Vancouver since data was collected back in 1991. It should be no surprise that this year marked a noticeable uptick with sales jumping 31% year-over-year. As you’ll see in the chart below, this year was still one of the slowest from...

Steve Saretsky -

Greater Vancouver home sales bounced again in August, increasing 16% year-overyear. This was the second consecutive month home sales had increased on a yearover-year basis. However, it is important to contextualize the movements before jumping to conclusions and getting too far ahead of ourselves. Without a doubt sales activity has...

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The Saretsky Report. December 2022