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.
The outlook for the Vancouver housing market heading into 2022 is likely more of the same. We are currently sitting at 4900 homes for sale across all of Greater Vancouver as of the end of December. This is the lowest count ever. The previous low was 6800 homes in December 2015. Unless demand falls off a cliff, prices are going higher. I actually think condos are going to outperform, similar to what happened a few years ago in 2017. Everyone gets priced out of single family houses and the liquidity trickles down. Let’s see.
Anyways, this housing boom isn’t unique to Vancouver. As my friend and housing analyst Ben Rabidoux recently highlighted, national home sales for 2021 will officially record new highs once December data is reported on January 15th. It’s anticipated they will smash the previous record by about 20%. In nominal terms, the typical house price in Canada rose $160,000 y/y in November. And that’s TAX FREE for primary residences. You’d have to make over $270,000 of pre-tax income to “earn” as much as the typical home did in the past year. In other words, it doesn’t take a rocket scientist to figure out why investment in business research and development continues to trend lower in this country.
I don’t see what reverses this freight train outside of some sort of monetary policy blunder or black swan event in financial markets. We can never rule that out. However, from a pure supply and demand standpoint today, oh boy. Meanwhile, the Liberal government is poised to add another 400,000 new immigrants in 2022. Not sure where we plan to house these people but at least nominal GDP growth will increase eh.
Anyways, wishing all my readers the very best in 2022, may it be as prosperous as your Real Estate was in 2021.
Three Things I’m Watching:
1. Greater Vancouver annual home sales hit new record high in 2021. (Source: Steve Saretsky)
2. Big Bank residential mortgage loan growth is running north of 10% for the first time in over a decade. (Source: BMO)