To the dismay of prospective home buyers hoping for a cool down in the nations housing market, Bank of Canada governor Tiff Macklem left interest rates unchanged this past week. It was an odd move considering a 25bps rate hike was already priced into the markets, and there would have been no justification needed, given CPI inflation is currently running at thirty year highs. Instead, the Bank of Canada will wait until March to raise rates a mere 25bps. In essence, the Bank of Canada extended the housing bull market another six weeks. While rates will clearly be heading higher, it will take some time for this to filter through into housing. Remember, most buyers secure their mortgage rate for 90 days, so they won’t be impacted by any immediate rate hikes. This is particularly true for variable rate mortgages which can still be had for around a stunningly low 1.3%. It’s no wonder this product remains historically popular, with nearly 55% of all new originations opting to go with variable rates. Ironically, the only question the Bank of Canada received on the housing front was regarding the growing uptake in variable rate mortgages. The long winded answer from deputy governor

Consumer prices continue to rip higher in Canada, officially growing at their fastest pace in 30 years per Stats Canada data this December. Consumer prices were up 4.8%, while shelter costs, which make up a part of the CPI basket, were up 5% from last year. Of course this is stirring the ongoing debate on we measure inflation, as both resale prices and market rents are suggesting a much different picture. Prospective home buyers are currently grasping with the worst buying conditions on record. There are currently fewer properties listed for sale in Canada than at any point on record.  House price inflation is out of control, with the Canadian Real Estate Association reporting national home prices were up 26% year-over-year in December. This is the fastest pace of house price inflation on record, surpassing the previous highs set in 2017. While one can argue there is no national housing market, that housing prices vary region by region, one common denominator remains the same, house prices are up, a lot. Here’s home price growth by city over the past 12 months: – Toronto 31% – Victoria 24% – Montreal 23% – Vancouver 17% – Ottawa 16% – Winnipeg 12% – Calgary 10%

As of this week, unvaccinated US truckers will not be able to cross the Canadian border. This decision by the Trudeau government is going to have significant economic impacts. COVID politics aside, let’s discuss the economic ramifications moving forward and how this could ultimately come full circle for the housing market. More than 70% of cross-border trade moves by truck. Canada imports $21B worth of food from the US each year. Suffice to say, truckers are the lifeblood of the supply chain ensuring Canadians get their food, and other consumer goods. So who’s going to deliver the goods? According to the American Trucking Association, only 50 to 60% of US truckers are vaccinated. Meanwhile there is already an acute, structural shortage of truckers. It is estimated the US is short about 80,000 truckers, in Canada we are short by about 23,000. There is nobody available to replace unvaccinated drivers. In other words, expect more supply shortages, and with that, higher prices. Canadians are already grappling with empty shelves at grocery stores and consumer price inflation running at an eighteen year high. Things are particularly bad here in BC where many of our farms were completely wiped out a few months

Here’s a wild stat to start your week off, Canada added 410,000 new immigrants in 2021. In the United States, a country nearly ten times the size, added just 500,000 new immigrants. Canada is built on immigration, and it is certainly needed. However, perhaps it’s worthwhile to discuss the tradeoffs, which seemingly no media outlet wants to discuss out of fear of being cancelled. Our nation is in the midst of a housing crisis. The government has so far failed to adequately house its existing population. Current inventory for sale sits at its lowest levels on record, as a result national home prices have inflated at their quickest pace on record, up over 25% during the past year. So, while government has successfully been able to hit their arbitrary immigration targets, they have not succeeded in their housing targets. To be honest, i’m not even sure if they have a housing target or strategy in place. The reality is getting new housing built is a complicated, bureaucratic mess. Getting new housing built requires all three levels of government, federal, provincial, and municipal to work together in unison. Government is simply too big, too slow, and too inefficient to make this

It was quite the year for the nations housing market. As I highlighted a few weeks ago, this shouldn’t come as a surprise considering our monetary base has expanded by about 23% over the past eighteen months. We are undergoing the largest monetary experiment in modern history. But enough of that, let’s take a look at the numbers. The Vancouver housing market closed out the year with just over 44,000 sales. This is the highest figure on record, surpassing the previous record set in 2015 when we hit just over 42,000 home sales. Of course if you remember 2015 there was tons of media coverage, lots of bubble talk, and a lot of angst towards the foreigners who were blamed for outbidding all the locals. What do we hear today? Crickets. Either people have given up or people don’t know who to blame. My guess is on the latter. It’s pretty difficult to explain to people that all the helicopter money handed out during the pandemic eroded the purchasing power of the currency everyone is labouring over. There’s a belief out there in parts of society that we should actually do more fiscal handouts, because, well, cost of living man.