Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
TD is the latest bank to call a deep real estate correction for Canadian real estate prices. The country’s second-largest bank is now forecasting a 25% price drop nationally. That number is peak (Q1 2022) to trough (Q2 2023), an “unprecedented decline,” said the bank. Due to the price surge since 2020, they don’t see it causing wider economic fallout.
Canada’s largest bank made another downward revision to its risk forecast. RBC’s base case forecast assumes a price drop of 5.6% over the next 12-months. They previously said they’re placing more weight to the adverse scenario, however. In that case, home prices would fall up to 30%, which is closer to what they said a few weeks prior.
Canada’s economy was less dependent on real estate, but still dangerously concentrated. Residential investment as a share of GDP fell to 8.7% in Q2 2022, down 1.1 points from the previous quarter. It’s down from its peak, but Canada is nearly 30% more dependent than the US was at its peak in 2006. Back then, experts warned it made the US vulnerable to a financial crisis.
Toronto Real Estate
Greater Toronto real estate prices continued to slide last month. A typical home fell to $1,125,000 in August, up 8.9% from last year — but 15% below February. Prices are down to October 2021-levels, reversing nearly a year’s worth of increases. It isn’t expected to stop anytime soon.