Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
RBC is quickly turning into Canada’s largest real estate bear as key markets erode. Both Toronto and Vancouver real estate saw prices and sales fall last month. In some cases, by tens of thousands of dollars. The bank warns the correction is the deepest in a half century, and expects it to continue near-term.
Canada’s non-resident real estate buying boom sure attracted a lot of investors. Registry data shows 1 in 10 buyers owned multiple homes in Canada. It’s a lot of properties, and has been increasingly crowding out first-time buyers.
BMO is warning Canadian real estate markets have seen a sudden shift in sentiment. Major markets have seen sales fall, Toronto (-47%), and Vancouver (-43%). Markets also dipped tens of thousands of dollars, further eroding confidence. More Canadians now expect prices to fall instead of rise, and that hasn’t been the case in quite some time.
Cities were expected to bounce back as soon as public health measures were lifted. An analysis of Google mobile phone data shows that’s not quite the case. Weekday workplace traffic has plummeted in Halton (-45.0%), Toronto (-43.5%), and York Region (-42.6%). At the same time, weekday traffic for retail surged in cottage country. The biggest surges were in Bruce County (+100.9%), Parry Sound (+88.1%), Kenora (+61.0%), and Muskoka (+58.9%). Work from home might be a much longer shift for the real estate cycle than previously expected.
Canada’a tax authority has been on a mission to crackdown on unpaid real estate taxes. The CRA provided data showing the results of a real estate-related crackdown. From April 2015 to March 2022, the program resulted in $2.2 billion in audit assessments. That includes $298.9 million in penalties for non-payment. Did we mention this was just in BC and Ontario?
Ontario insolvencies are surging all of a sudden as household credit normalizes. The province saw 8,817 filings in Q2 2022, up 16.5% from last year. Substantial growth was seen in Toronto (+16.0%) and even bigger in Hamilton (+25.2%) over the past year. Higher interest rates might be a contributor but it’s too early to be the only factor. More likely this is the backlog from extremely low growth seen over the past two years.
Toronto Real Estate
Greater Toronto real estate prices are cooling after the two year boom. The price of a typical home fell to $1,157,500 in July, down 3.9% (-$47,400) from the month before. Annual growth fell to 12.9%, down 23.8 points from the February 2022 peak. The market went from one of the fastest growing to one of the fastest falling in the span of half a year.
Vancouver Real Estate
Greater Vancouver real estate prices were sticky, but they’re starting to give. The price of a typical home (composite benchmark) fell to $1,207,500 in July, down 2.4% (-$28,500). Prices are now back to January 2022 levels, and just 3 more months will reverse the past year of gains. Prices are still up significantly over the past two years, but risk is appearing fast.