Whilst we are all enjoying some much needed downtime over the holidays, a recent slough of data reminded us the number of people actively migrating into Canada has enjoyed no downtime whatsoever. In fact, as per Stats Canada, Canada’s population increased by 208,234 from July 1 to October 1, 2019, driven mainly by an influx of immigrants and non-permanent residents. This was the first time that Canada’s population increased by more than 200,000 in a single quarter. This gain represents a quarterly population increase of 0.6%, the largest growth observed since the beginning of the period covered by the current demographic accounting system (July 1971). While the growth rate is nothing short of incredible, very few people, or even economists for that matter, have questioned why so many people are suddenly moving here, or asked how sustainable it is. Thankfully my good friend, Ben Rabidoux of North Cove Advisors, helped shed some light on this. As Rabidoux points out, the natural population increase in Canada is near record lows, so immigration is needed. We all know that. However, it turns out a huge share of the recent population growth is from non-permanent residents. This cohort is made up of foreign students, work permit holders, and refugees. They are currently responsible for

The Canadian debt story is getting lots of attention again in recent weeks. The buzz comes after recent data shows consumer insolvencies jumped 19% from a year earlier, the biggest annual gain since 2009. So far in 2019, there have been 102,023 consumer insolvencies, the second-most for the first nine months of a year in records dating back to 1987. It’s a rather perplexing stat given interest rates remain frozen at just 1.75% (below the rate of inflation) and the labour market still appears quite strong. However, the over indebted Canadian is a story that has been dragging on for over a decade. It appears, rubber is finally hitting the road- so to speak. The household debt service ratio recently printed a fresh record high- again despite incredibly low interest rates. A recent report from CIBC, helps shed some light on the recent surge in insolvencies. While CIBC cautions, on a per-capita basis, we’re neither climbing as steeply nor as far as in the last recession, there is, however, no question the genie is out of the bottle. Consumer insolvencies are highest in Alberta given their economic issues, but are growing at a concerning pace across the majority of Canadian

While we know all real estate markets are local, National housing figures provide a larger macro view on the Canadian economy and impact policy decisions moving forward. We saw another bounce in activity for the month of November. Home sales jumped 11% on a year-over-year basis, recording its ninth straight monthly gain. Further, on a seasonally adjusted basis home sales are above their 10 year averages. In other words, the Canadian housing market is still humming along after a brief pause last year following a mortgage stress test and higher mortgage rates. The recent easing in financing conditions (lower rates) is spurring borrowing again. We have residential mortgage credit growth accelerating faster than it did prior to the B-20 mortgage stress test, while new listings continue to fall. Despite a record number of new home construction, and record high prices, homeowners are choosing not to sell. It seems there is still a prevailing belief you can’t lose in Real Estate, and with central banks continuing to flood markets with liquidity the negative side effect is extremely low inventory as people horde houses. Here’s the 12 month average of listings for sale. As a result, we are starting to see home prices

This is a post from The Monday Morning Newsletter. You can subscribe here.  Happy Monday Morning! Another week, another reminder Canadian households are suffocating under a mountain of debt. It’s a tiresome story, one that gets repeated every few months, yet shows no signs of disappearing anytime soon. The statistics are concerning, Canadians owe $1.75 for every dollar of disposable income, while the debt servicing ratio reached a record high 14.96% in Q3 2019, despite interest rates near rock bottom lows. The Bank of Canada Governor, Stephen Poloz, who is responsible for setting interest rate policy, or in other words, the price of money, faced the music from critics this past week. Following a press conference in which Governor Poloz acknowledged “The high household-debt load is the most important risk facing the financial system” he was abruptly challenged by BNN Bloomberg’s reporter Andrew Bell. “But aren’t you the man who is to blame for that?” Bell asked. “You’re the candyman. You kept those interest rates so low all those years. You’re the main author of that bubble, aren’t you?” A rather stunned Poloz, who’s actions are rarely questioned by the media, paused for several seconds before acknowledging,  “A lot of

The BC Government is set to follow through with an increase in the BC speculation/empty homes tax, while also removing some previous exemptions. In the second year of the SVT: The tax rate for foreign owners and satellite families will rise to 2% in 2019, up from 0.5% in 2018. Property owners will benefit from a retroactive exemption for Canadian Armed Forces members and spouses while in active service, and a retroactive exemption for people who own properties accessible only by water. A longer phase-out will be provided for temporary exemptions: The exemption for rental restricted stratas will now end Dec. 31, 2021. The exemption for strata accommodation properties will now end Dec. 31, 2021. The exemption for vacant land will end Dec. 31, 2019. A couple pieces to note here. I’m not convinced that increasing the speculation tax will suddenly increase the number of people captured by the tax or cause a spike in new listings. As I wrote a few months ago, the first year results show The SVT (speculation vacancy tax) was paid by 11,783 homeowners across BC. More than half (65%) were foreign owners or satellite families. While I have been involved in transactions where someone was

This is an excerpt from The monthly Saretsky Report. You can subscribe for Free Here. Condo sales increased 50% from November 2018 levels, once again, weak base effects played a huge roll. Condo sales remain well below the frenzied levels during 2015-2017, but are just slightly above ten year averages. What we are seeing is a much more local market. People are still struggling with unaffordability and so condos remain the only option for many buyers. Similar to the detached market, new listings are plunging, falling 17% from last year. Again, we believe holding power and perhaps a renewed sense of confidence in the Vancouver market is keeping sellers, and for that matter investors, from selling their units. Is this sustainable? We believe it is not, given there are a record number of new apartment units under construction. There are over 36,000 units under construction and are expected to complete over the next couple of years. However, as it stands today, new listings remain quite low. With condo sales bouncing higher and new listings falling, the months of inventory has remained stable at 3.4 months of supply. Anything below 4 months is considered a market that favours the seller and

There’s been lots of talk about a bounce in Canadian housing and certainly recent data suggests that is the case. That doesn’t mean risks have disappeared, merely it seems a recent easing in global monetary policy has provided a lift to many asset classes, including housing. The plunge in bond yields has spurred an increase in household borrowing. Canada’s Residential mortgage credit growth on a 3 month annualized pace has accelerated to 5.74% in October. It is now growing faster than it did prior to the introduction of the B-20 mortgage stress test. That will certainly damper further suggestions to tweak or abolish the mortgage stress test. Mortgage credit is accelerating and that should provide momentum for house price growth. Per Capital Economics, local Real Estate board data for Toronto & Vancouver show big gains in the sales-to-new listing ratios in November. This suggests the national ratio reached 65.0, almost surpassing 2017 levels and pointing to very strong house price inflation nationwide. Perhaps this is just a false positive, it’s certainly hard to fathom what would propel house price inflation into double digit territory, baring another inflow of foreign capital. One things for sure, this will keep policy makers up

This is an excerpt from The Saretsky Report. Sign up to receive full report Here.  Greater Vancouver detached sales increased 60% year-over-year in November. Again, weak base effects are responsible for the head turning increase, as November 2018 recorded the fewest detached sales since November 2008. What we can see in the chart below is that despite the huge increase in sales this month, detached sales for the month of November were still 4% below the 10 year average.  Meanwhile, as sales volumes have increased, new listings have plummeted. New listings were 11% lower than last November, and continue to fall on a 12 month moving average basis. So why are new listings falling? There’s likely no one answer but a couple do come to mind. First, we aren’t building a whole lot of new single family housing. Second, sellers aren’t being forced to sell. Interest rates and economic prospects remain accommodative for sellers to hold-out if they can’t get their price. We are not in a “Big Short” situation where interest rates are rising, credit taps have turned off, and foreclosures are flooding the market. In fact it is quite the opposite, at least right now.  As a result,