If you needed further evidence Canadians are bored at home and shopping for Real Estate, look no further. Per data from Realtor.ca, one of the most popular website for house hunters, property page views topped 1.7 billion in 2020, up 73% year-over-year. Yes, we have a Real Estate boom that mirrors the 2016 frenzy as bidding wars rip across the nation. This time, however, the speculators are local.

Unlike 2016, this time around, the foreigners are stuck at home, largely unable to participate in the housing boom. Per data from Canada Border Services, in the last two weeks of January international arrivals fell to 106,000 people, and in the first two weeks of February, the figure fell further to 94,000 people. International travel to Canada is running at about 10% of normal levels.

Thanks to a host of government guarantees, mortgage lending is running hot, inspiring locals that Real Estate remains a can’t lose proposition, seemingly backstopped by the Government at any cost. Let’s take a look a further look at February housing data.

In Greater Vancouver, home sales surged 73% year-over-year, the second strongest February on record besides 2016. Home prices are being led higher by single family homes, up 14%- and 20% in the Fraser Valley. Over 43% of single family home sales in Greater Vancouver sold ABOVE their original asking price. Meanwhile, condos are now taking flight, with the sales to actives ratio ripping up to 43%, the highest reading since early 2018- pointing to higher prices ahead.

Meanwhile, In the Toronto region home sales hit a record high for the month. Toronto home prices also surpassed the million dollar mark for the first time ever. The average home price jumped 14.9% from the year before to $1.05 million. It’s the second Canadian city to join the million-dollar club after Vancouver.

Even in Calgary, where the housing market has largely stagnated for a decade, is benefitting from the credit boom. Home sales jumped more than 54%, hitting volumes not seen since 2014. Home prices jumped an unprecedented 8% year-over-year. “Despite continued COVID-19 restrictions, housing activity continues to improve. Much of the strong sales activity is expected to be driven by exceptionally low mortgage rates,” noted Calgary Real Estate Boards Chief Economist Ann-Marie Lurie.

Again, I can not emphasize enough this current housing boom is much different than 2016. It is not offshore money, rather, it it is a domestic credit boom that was manufactured by the politicians in Ottawa. Governments have hijacked commercial bank balance sheets, and are pushing broad money growth sharply higher. By providing commercial banks with government guarantees on their loans, it creates a major incentive for banks to expand their balance sheets. As of the end of December, Canadas M2 money supply is up 14%. This is the sharpest increase since 1980.

We are entering an era of financial engineering. Governments are beginning to understand the ability to direct credit where they see fit by providing banks with loan guarantees. It is possible we could see the politicisation of credit, where Governments may opt, or at least have the ability to direct credit towards productive investments and away from speculative investments. So far that has not been the case, but increasingly higher real estate prices could prompt them to intervene merely due to societal frictions.

Three Things I’m Watching:

1. Residential investment as a percentage of nominal GDP continues to inflate higher. (Source: Ben Rabidoux, North Cove Advisors)

2. Monthly price appreciation is accelerating rapidly in Vancouver & Toronto.  (source: Bloomberg)

3. Home sales ramping higher across Canada, except for Montreal. (source: RBC)