Recent data from the Canadian Bankers Association shows the number of Canadians seeking financial relief is still growing, even as the economy re-opens. After having stalled out for a number of weeks, mortgage deferrals began creeping higher once again. As of June 30th, 760,000 Canadians have now opted to defer a mortgage payment. That works out to 16% of total mortgages outstanding across the Canadian banks. In addition to that, the banks have now approved 445,000 credit card payment deferrals. In other words, financial reprieve remains plentiful amongst Canada’s most indebted households. A headwind for not on the Canadian economy, but the housing sector in particular. If that wasn’t enough to get your head spinning, consider the impending contraction of population growth, and household formation. As is typical in recessions, population growth slows as job prospects dry-up. This is particularly the case for non-permanent residents which is made up of foreign students, work permit holders, and refugees. However, thanks to COVID, the contraction in population growth is likely to be severe this time around. Just this past week, the federal immigration department told international students they will not be allowed to enter Canada if they have received a student visa after the

The Bank of Canada was back at it with their latest views on the direction for monetary policy. The latest dove at the helm, Tiff Macklem, signalled his commitment for a zero interest rate policy, and unprecedented levels of Quantitative Easing. Both interest rates and QE are here to stay, until the recovery is well underway, and that will take at least a few years. In other words, as Macklem so eloquently put it, “Interest rates are very low, and they’re going to be there for a long time. We recognize that Canadians, and Canadian businesses are facing an unusual amount of uncertainty, and so we have been unusually clear about the future path for interest rates. So If you’ve got a mortgage, or if you’re considering to make a major purchase, or you’re a business and you’re considering making an investment, you can be confident that interest rates will be low for a long time.” In central bank lingo, they call this forward guidance. On main street, we call it a green light to lever up on cheap credit. Borrow to your heart’s content. It’s a slippery slope, however. Canada currently ranks third amongst the G-20 in terms of private debt

“We took on debt so Canadians didn’t have to.” That was the message from PM Trudeau following the latest figures which show direct federal aid to individuals and businesses as a result of COVID-19 has now reached $212 billion. Of which, $55B has gone directly to the pockets of 8.25 million Canadians who have collected a CERB cheque. Indeed the numbers are head turning, The federal government now expects to post a $343-billion deficit in 2021. And while these figures are pause for concern, the current economic outlook provides very few options. Private sector balance sheets in Canada are a mess, private sector debt to GDP sits at just over 260%, one of the highest in the G-20. Years of borrowing in the household and corporate sector have left the Canadian economy in a vulnerable scenario, one which now requires the public sector to fill the void. Left unchecked, the demand destruction could sew the seeds of a private sector debt crisis. Economic studies are mounting regarding the perils of private sector debt. Ex banker Richard Vague, in his most recent book ‘A Brief History of Doom’ highlights this relationship. Every economic crisis over the last 150 years has manifested: the combination

The Vancouver housing market continued to pick up steam in July following a strong bounce in June. There’s truth to the pent-up demand story as buyers who normally would have pulled the trigger in the spring were pushed into the summer thanks to COVID. In fact, July was the busiest month of the year for home sales in 2020. It was also the busiest month so far for new listings. Realtors were run off their feet in July, in what is normally a slower time of the year. So yes, the spring market came unnaturally late this year, making it difficult to predict if this demand is sustainable as we move forward into the last part of 2020.

The Vancouver Real Estate market made headlines this past week with a whopping 64% increase in sales on a month-over-month basis. While headline readers may be stricken with a sudden panic of missing the dip (if you can call it that), further analysis suggests there really is nothing to fear. Due to the rather inconvenient timing of a once in a lifetime global pandemic, the spring housing market was essentially shut-down this year. In what is normally the two busiest months of the year, April & May were complete duds, recording multi-decade lows in sales. As the economy re-opened, the pent-up demand from the spring market resulted in nice uptick in June. It looks like the spring market was essentially bumped to this summer. However, after further review,  it turns out the pent-up demand was rather not that impressive after all. June sales were still 21% below their ten year average. Suggesting home buyer demand remains weak. The real story here is all about inventory. The total number of homes for sale in June slipped 27% year-over-year, as sellers opted to stay put in their homes during these uncertain times. Considering the government essentially mandated stay at home orders, issuing