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This Week’s Top Stories: Canada Says It Won’t Let Home Prices Drop, and Bubble Soft Landing Gets Less Realistic

Time for your cheat sheet on this week’s top stories.

Canadian Real Estate

Canada Says Property Bubble “Not Great” For Locals, Good For Foreign Investor

Canada officially said any home price drop is unacceptable, even if locals can’t buy a home. One of the country’s politicians in charge of housing policy said a 10% drop in price is unacceptable. He later said the market is unaffordable for locals but safe for foreign investors. The interview was even weirder than it sounds but gives us an idea of what kind of policy to expect.

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Canada Offsets Expensive Real Estate With Low Paid, But High-Quality Tech Labor

How is Canada able to attract top tech firms, despite scarce and expensive office space? With cheap, but high-quality engineering talent. Canada ranked amongst the most expensive tech hubs for office space. However, due to low wages, total operating costs for big companies were the lowest in the Top 50 markets. A deal for big companies, but not so much for some of the most talented engineers in the world.

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Canada’s Property Bubble Is Now So Large, A Soft Landing Would Take 19 Years

Canadians that think home prices will stall while incomes catch up, are in for a big surprise. It’s almost impossible for that to happen, without home prices falling. Both Vancouver and Toronto need home prices to stall at current levels for 19 years for incomes to catch up. It’s nice to think the whole generation will wait to prop up prices, but it’s not probably not going to happen. The longer prices stay at these levels, the more likely young adults will pursue better opportunities elsewhere.

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Bank Of Canada Expected To Hike Rates Sooner Than Planned, May Cool Housing

The Bank of Canada will be updating the public on its monetary progress this week. Three of Canada’s big banks think they’ll say rates may hike sooner than expected. Previously, when the country was doing a lot worse, the central bank said rates will be low for a long. This set off a buying spree, leading commercial banks to squarely lay blame on the central bank. This week it would be surprising to see the BoC not try to temper household expectations.

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BMO Sees Soaring Lumber Prices Crashing Soon, Which May Lower New Home Costs

North American lumber prices are soaring, and dragging new home prices with them. The Western Spruce-Pine-Fir benchmark reached $1,083/mbf last week, up 241.6% from a year before. US homebuilders estimate this makes construction US$24,386 higher than last year. BMO sees this being a temporary condition and expects prices to crash to US$415/mbf by 2022 — down 61.8%. For those that don’t think it’s possible, a similar surge and plunge occurred just a few years ago.

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Majority Of Canadians Believe Home Prices Only Go Up, Most Will Never Own: RBC

Canadians are so confident about home prices rising forever, they think the majority of people just won’t own homes going forward. RBC’s consumer survey found 61% of Canadians only see values rising. It also found 62% of people think the majority are now priced out of home buying going into the future. Homeowners will be buried with their homes apparently. It doesn’t make a lot of sense for the majority of people to never be able to buy a home. It does say a lot about the consumer mindset today though.

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Canadian Real Estate Sales Hit Highest Level Ever, As “Can’t Lose” Mindset Solidifies

Canadian real estate printed a number of new records for the market last month. CREA 76,259 unadjusted sales in March, up 76.2% from the same month a year before. The number of home sales is the highest of any month ever recorded. The rate of growth was also huge, soaring past the previous record set after the Great Recession. Last month wasn’t enabled by much of a base effect either, since March 2020 was minimally impacted. This is just a very large number of Canadians that have decided this is the perfect time to buy a home.

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4 Comments

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  • Jason 1 week ago

    Within 10 years everything will come crashing down I can guarantee it. The debt burden is too damn high and Canada hasn’t invested enough in factories and business’s to create enough GDP to pay off these debts. On top of that covid will severely hurt long term income making a debt crisis even more possible. Canada is a ticking time bomb right now. We aren’t being told the truth on CBC and Global. A salesman won’t tell people not to spend their money.

  • Doew 1 week ago

    Good is getting income basic increase follow house prices. And people have fund to invest foreign where are affordable but cant in local at least for now.

  • Djjdn 1 week ago

    It’s going up forever, Laura

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