Leading up to the Federal budget announcement, the rumour mill was churning, with mainstream media outlets salivating over a possible tax on primary residences, including speculation taxes or even increased taxes on capital gains when selling investment properties. Instead, the federal government delivered none of that, ultimately opting not to tinker with the golden goose. But can you blame them? According to Ben Rabidoux with North Cove Advisors, residential investment has accounted for 46% of nominal GDP growth since Q1 2018. Yes housing is the economy. So, naturally, the Liberal Government opted to introduce policy that would provide the illusion they are doing something, while simultaneously ensuring the policy wouldn’t interfere with the red hot housing market. In other words, political lip service. Starting January 01, 2022, there will now be an annual 1% tax on foreign-owned vacant homes. “Houses should not be passive investment vehicles for offshore money. They should be homes for Canadian families,” said Finance Minister Chrystia Freeland in her budget address. However, according to official Government data, foreign ownership is just a small sliver of the market. Remember, back in 2019 CMHC studied non-resident ownership, concluding: Properties that have at least one non-resident owner amount to 6.2% in

It’s budget day. The much anticipated Federal budget is front and centre, with many citizens eagerly watching with bated breath, what, if anything, the Government will do to address the housing crisis. There are rumours suggesting there are plans to tax vacant residential property owned by non-resident, non-Canadian owners. We shall see. However, it’s unlikely any major changes are coming, after all, Canadian Real Estate is the economy. That might be a terrible way to build an economy, after all, buying and selling each other houses at ever higher prices doesn’t necessarily generate a whole lot of productivity. However, it is what it is- housing is driving the economic recovery. Furthermore, just last week finance minister Chrystia Freeland said, “We will continue to monitor housing market conditions across the country. To inform potential steps the government may take, we will closely examine the results of the consultation announced by the Superintendent of Financial Institutions.” Freeland is referring to the recently beefed up mortgage stress test on uninsured mortgages, which is poised to reduce borrowing power by 4.5%. Quick hint, it will do very little. Anyways, the latest figures released from the Canadian Real Estate Association say it all. March home sales hit

At the onset of the pandemic, Bank of Canada Governor Tiff Macklem pounded the table, urging Canadians to borrow money to prevent us from sliding into an economic depression. “Our message to Canadians is that interest rates are very low and they’re going to be there for a long time. If you’ve got a mortgage or if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time.” Sure enough, Macklem has made good on his promise, soaking up supply in the bond market, and driving bond yields (borrowing costs) lower. As of today, The Bank of Canada now owns 40% of the entire Government of Canada bond market. Since Q2, 2019, the central bank has absorbed and essentially funded 92% of the Canadian Governments budget deficit. Again this begs the question, are we in the early days of adopting Modern Monetary Theory? If you’re unfamiliar with the term, it’s essentially the new buzz word and a growing idea for reimagining monetary and fiscal policy. The central idea is that governments with a fiat currency system under their control can and should print (or create with

We have discussed in past reports the ongoing strength in the Canadian housing markets being largely attributed to excess liquidity and credit creation that was manufactured out of Ottawa. Commercial bank credit creation is running hot, thanks to Federal Government Guaranteed loans that have simultaneously been supported by the Bank of Canada’s Quantitative Easing Program. If this all sounds confusing, let me simplify. Essentially, banks are being asked to create new loans, with the full support of the government and the central bank. This has spurred new money creation, with the money supply in Canada growing by 19% year-overyear as of February. And so, it should hardly come as a surprise that national home prices, as measured by the Canadian Real Estate Associations home price index, is now up 20%. It appears policy makers might have overstimulated and they are now trying to reign in some of that generous support. In April we saw policy response from OSFI (the banking regulator),

What to do with the hot housing market? There’s probably not a whole lot that you can do right now. While we can attempt to reign in the abundance of liquidity sloshing around financial markets, that also risks derailing the economic recovery. The reality is a global pandemic has completely altered our daily lives, upending our work and living situation, with some people believing, right or wrong, that this is a permanent shift. As a result, people are moving. The past twelve months will go down as the Great Reshuffling. What was once considered “pent-up demand” has clearly morphed into something entirely different. A housing bull market that is being driven not only by excess liquidity but also human emotions. People are spending an inordinate amount of time at home and thus are re-considering not only where they want to live, but how they want to live. Look no further than the recent data coming out of Greater Vancouver. March home sales surged to all time record highs for the month. Despite little to no population growth and a weak labour market, home sales are ripping, surpassing even the 2016 foreign buying boom. Yes home sales are unbelievably high, but