Budget Day

Steve Saretsky -

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 another record high, up 76% from last year. Yes, weak base effects, fair enough, but even then, last months sales were 80% above the March 2019 levels. Supply remains chronically weak, stuck at just 1.7 months of inventory for sale, the lowest reading on record. This is despite new listings surging to record highs in March. Make no mistake, people are listing their homes for sale, but demand is simply overpowering the market.

As a result, home prices are inflating to eye watering levels. National home prices surged 20% year-over-year as measured by the home price index. Keep in mind this price metric makes hedonic adjustments to account for the type of product selling and often lags by several months. In other words price growth is arguably even higher. Either way, the home price index is accelerating at its fastest clip ever, even surpassing the 2017 bull market. Prices are screaming higher across Canada, here’s how it breaks down:

– Calgary  +6.2%
– Greater Toronto +16.5%
– Ottawa +29.1%
– Montreal +22.4%
– Moncton +30.5%
– Greater Vancouver +9.4%

Yes, the outlook for housing affordability remains bleak, despite years of political lip service. And while today marks an important day for the Federal Government, don’t expect any meaningful changes on the housing front. The near thirty year bull market will be preserved at all costs, until it eventually stumbles on its own accord.

Three Things I’m Watching:

1. National home prices are inflating at the fastest pace on record. (Source: CREA, Steve Saretsky)

2. Canadian homeowners have seen their values rise $120,000 over the past 12 months. (Source: Ben Rabidoux)

3. Canadian Real Estate returns have grossly outpaced equities. Full disclosure, past returns are not indicative of future performance. (Source: TD)

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022