Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Unemployment Still Climbing As Population Outpaces Jobs 3x
Canada’s economy continues to add jobs, but not nearly enough for its population growth. The latest data shows employment grew 0.1% (+27k jobs) to 20.5 million jobs in May. At the same time, its working-aged population grew 0.3% (+97.6k) over the same period—3x the rate of jobs added. It’s a trend that’s been consistent over the past year, driving the unemployment rate to 6.2%, about 0.7 points higher. Experts warn the rising share of unemployment is more than enough to trigger a recession at this point.
Canada Begins Real Estate Developer Bail Out With 55-Year Loans
The Government of Canada (GoC) is quietly attempting to bail out real estate developers. The CMHC, the GoC’s national housing agency, confidentially notified lenders that they can amortize certain developers’ loans for up to 55 years, explicitly stating it can be used for “default” management. While this might help manage short-term liabilities, extending the term longer than the practical lifespan of buildings is almost certain to be inflationary, providing upward pressure on prices.
Canadian Economy Underperforms US, Largest Gap On Record: RBC
Canada’s largest bank is growing concerned the country’s economy is falling behind. RBC warns that Canada and the US are seeing the largest divergence on record. Historically, the tight integration between the two economies has led to similar moves, with economic output moving in tandem. Rising household debts and bubbly housing costs have changed that, reducing local consumption and spending. As a result, Canada isn’t just expected to fall behind the US, but the BoC has also forecast the economy will underperform the global economy.
Bank of Canada Cuts Rates But Warns of Excess Supply, Policy Still Restrictive
As widely expected this week, the Bank of Canada (BoC) cut its key overnight rate by 0.25 points to 4.75%, returning to a level it saw less than a year prior. BoC Governor Macklem attributes the cuts to a slowing economy, warning that “excess supply” is beginning to appear. While excess supply is good news on the inflation front, cutting rates can also increase demand for certain goods like housing, thus driving costs higher.
Toronto Real Estate
Toronto Real Estate Spirals As Inventory Surges, Demand Hits Historic Low
Greater Toronto real estate is suddenly seeing a surge of supply, but demand isn’t catching the same headwind. The local board reported just 7,000 sales in May, a drop of 22% from last year. With the exception of 2020, that makes it the worst May since 2000. At the same time, a surge of new listings has produced the worst demand balance on record for the month.
Vancouver Real Estate
Vancouver Real Estate Inventory Climbs 46%, Weakest Demand In Years
Greater Vancouver real estate is suddenly cooling, despite being generally resilient over the past few months. Data from the local board shows existing home sales fell 20% y/y in May. At the same time, new listings climbed 12.6% as more sellers looked to sell. How many more? Total active listings climbed to 13.6k homes for sale at month end, about 20% higher than the 10-year average.
I know an efficient bureaucracy is necessary, but ours is anything but – I wish there was some way to determine how many government and government contracts were not adding any real goods or services to the economy.
Once you take that deadwood out the picture is bleaker but also: useful.