Tug of War

Steve Saretsky -

Happy Monday morning!

The Federal government is ramping up the noise amidst dismal polling numbers and a federal election only two years away. We had a cabinet shuffle just a few weeks ago, which included the immigration minister becoming the new housing minister. This week they arranged a housing retreat in Prince Edward Island to brainstorm the path forward.

After a barrage of outspoken economists, and a plethora of media attention, the immigration file is finally getting some attention in Ottawa.

“The international student program has seen such growth in such concentrated areas that it is really starting to put an unprecedented level of demand, in some instances on the job market, but given the economic conditions we’ve been living with for the past couple of years, you see it in a more pronounced way in the housing market,” said immigration minister turned housng minister, Sean Fraser.

When asked about putting a cap on such enrolments, Fraser said it’s one of the options the feds are willing to consider — albeit not at this stage in the game.

“I think we should start by trying to partner with institutions to understand what role they may play to reduce the pressure on the communities that they’re operating within,” he said. “We’ll have more to say after I’ve had the chance to engage with Minister Miller.”

The Ontario international student boom in a single chart.

Source: Mike Moffatt

According to Mike Moffatt, who was invited as an expert witness to the PEI housing retreat, suggests this is largely a result of the Liberal government amending the student visa program into a temporary foreign worker one. If the federal government simply rolled back these reforms, and returned to the rules of, say, 2016 or so, it would drastically cut back the use of international students as defacto temporary foreign workers, and cut down the demand for permits.

Will anything change? Don’t hold your breath.


Switching gears to big theme number two.


Mortgage broker Rob Campbell sums it up nicely. With an 8% mortgage stress test a lot of people today wouldn’t even qualify for their existing home, so they definitely won’t be upsizing anytime soon. In other words, people are stuck in their homes, whether they like it or not. We’ve been stuck with some of the lowest numbers of new listings in two decades, freezing the housing market and robbing it of price discovery.

Let’s not forget all the borrowers who were blindsided by the BoC. Stuck in a variable rate and deferring the pain, amortizations are blowing out. However, if you stay put, shut your mouth, and keep paying your mortgage the banks will mostly leave you alone. Recent Q3 earnings from TD and RBC highlight the magnitude of the problem.

Nearly 23% of TD & RBC’s mortgage book has amortizations longer than 35 years. That number was basically zero last year.

This all crescendos to big theme number three. Amidst a deteriorating economic outlook and a trippling in the cost of captial, the housing construction channel is grinding to a halt.

We’ve talked a lot about building permits, which frontrun not only housing starts, but the actual economy, are now at their lowest levels in over a decade.

Source: Ben Rabidoux

There are times when the data lines up perfectly with the anecdotes. This is one of those times.


For those wondering, Jen was the Chief City Planner of Toronto from 2012 to 2017. Suffice to say she knows a few people in the development community.

So just to summarize, we have a federal government grappling with an affordability crisis. A housing bust doesn’t get anyone relected so they desperately need new supply to ease the housing crisis or their political reign is toast. At the same time you have the BoC eagerly trying to slow demand, with a downturn in housing investment seen as a necessary evil.

Canadian households are stuck in the middle of a tug of war between fiscal and monetary policy.

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! At the beginning of the year I was part of a real estate pannel with REW on the state of the Vancouver housing market. On stage, in front of a live audience, the moderator asked me for my forecast for 2023. I promplty noted at the time that “we’re...

Steve Saretsky -

Happy Monday Morning! The housing crisis in this country gets a lot of attention, as it should. Fixing it, however, is proving to be rather difficult. Over the past several years we have attempted to beat demand over the head with a blunt instrument. The list of policy measures include,...

Steve Saretsky -

Happy Monday Morning! Headline inflation ripped higher than expected this week, jumping back up to 4% for the month of August. It turns out Chrystia Freeland’s premature victory lap marked the bottom back in June. There’s a lesson here in base effects, you’d think her economics team would have tapped...

Steve Saretsky -

Happy Monday Morning! Over the past several months we’ve been highlighting the marked slowdown in residential building permits, a leading indicator of future supply. This is what happens when the cost of capital doubles, and in some cases, triples. This is a disaster in the making for a federal government...

Steve Saretsky -

Happy Monday Morning! The Bank of Canada moved to the sidelines once again, appeasing premiers in BC & Ontario who publicly pleaded with the BoC last week. It’s no secret these two provinces have the most to lose, their coffers largely built on a highly levered housing market, but we’ll...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022