This Week’s Top Stories: Banks Warn Canada Set Impossible Targets For Housing & Job Creation

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

Canadian Real Estate

Canadian Housing Supply Targets Don’t Make Sense, “Will Never Be Hit”: BMO

Canadian new housing starts are robust but will never hit “dreamt up” targets from policymakers. That was the take from BMO, one of the country’s largest banks, which points to further declines for new home starts in January. New home starts remain robust compared to the 2010s, they explain. However, the number of new homes peaked right around when policymakers released a budget to stimulate projects. The bank reminds people that building homes is a business, and supply flows with the amount that can be profitably built—not the amount policymakers want them to build. 

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Canadian Building Construction Investment Fell Sharply Before Rate Hikes

Canadian building construction investment climbed slightly but is largely losing to inflation. Despite the minor climb in nominal terms, adjusting for inflation wipes out that growth. In real terms it was actually the slowest December in years, and it isn’t due entirely to elevated interest rates. The issue started nearly a year before the first interest rate hike, furthering the trend of Canadians spending more and getting less.

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Canadian Real Estate Market Is Balanced, But Spring Activity Uncertain: BMO

Canadian real estate sales are climbing much faster than new listings of homes for sale. Existing home sales are rising from unusual low levels though, only putting the market in balance. While some are taking this as a sign of a market heating up before Spring, one of the country’s banks is reminding investors the winter is an illiquid market period. With bond yields climbing and likely to drive mortgage rates higher in the near term, it won’t be clear if the Spring maintains this momentum until it’s here.

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Canadian Bond Yields Surge, Mortgage Costs To Climb Ahead of Spring Market

Canadians were expecting cheaper mortgages, but they’re heading in the opposite direction. The Government of Canada 5-year bond yield peaked in October, and began slipping helping to push fixed term mortgages lower. Over the past few weeks though, these yields have reversed course—climbing dozens of basis points over a short period. Experts believe this can roll back some of the discounts, just ahead of the busy Spring buying season. 

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Canada’s Labor Market Absorbing Its Population Boom Is “Impossible”: National Bank

Canada tried to stimulate its economy via immigration, and it got a ton of labor. Now it has no clue what to do with it, according to an analysis from National Bank of Canada. The country’s population boom has been adding prime-aged workers at roughly twice the pace of job creation. As a result, more recent immigrants have found themselves arriving to a country with expensive housing and few employment opportunities. The bank suggests a non-partisan organization be created to assess realistic immigration targets that are actually beneficial to the labor arriving. 

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