Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
The Bank Of Canada Will Raise Rates In Two Weeks, End Year 500% Higher: JP Morgan
One of the world’s largest banks is making a bold call — the Bank of Canada will raise interest rates this month. JP Morgan sees the central bank raising rates at the January 26th meeting. The bank calls Canada’s economy short of “remarkable,” with inflation now the big issue. The country’s robust economy is expected to drive rates 5x higher by year-end, a common forecast from other banks.
Four Canadian Banks Urge The BoC To Raise Rates, Another Is Warning Home Buyer’s
Four of Canada’s largest banks call for the Bank of Canada to raise interest rates. RBC is the latest bank to chime in, saying rates need to rise before inflation hits wages. Since we don’t roll back wages, the inflation is no longer transitory if that happens. Three other banks have made similar remarks, urging the central bank to hike rates. An additional bank has also warned there’s risk in buying a home today, since rates will need to climb.
Canadian Cities Have Seen Up To 90% Of New Real Estate Supply Scooped By Investors
Canadian cities are seeing investors scoop up housing inventory much faster than usual. Investors now own 1 in 5 (21%) homes in the country’s cities as of 2020, but 1 in 3 (33.7%) new homes built after 2016. The share of newly completed homes going to investors is faster than usual, rising up to 90% in cities. Cheap capital and a backstopped housing market attract a disproportionate amount of money. High home prices divert a significant amount of capital from businesses and innovation.
Here Are Canada’s Top Cities Where Foreign Investors Are Dropping Capital
Canadian cities have a lot more foreign ownership than transfer data shows. Cities had a 2.4% median rate of non-resident participation in homeownership in 2020. This is up 2.1% from the year before. That’s just the median rate, with some cities reaching as high as 6.4% — an astronomical share. The national statistics agency focused on owners with no residency information this time, instead of self-declared residency.
Bank Of Canada Will Raise Rates 500% This Year, To Start Within Weeks: National Bank
The Bank of Canada will raise interest rates by 500%, forecasts National Bank. Economists from the bank see the overnight rate rising in March, with four more hikes in 2022. By year end, the interest rate should hit 1.50% — 5x the current level. A robust economy and high inflation no longer justify the current level of stimulus.
Canadian Real Estate Construction Costs Are Amongst North America’s Lowest: RLB
Canadian real estate construction costs are the lowest in North America. Global construction consultancy published data showing building costs for major North American hubs. Toronto and Calgary are amongst the cheapest to build in, yet have the highest home prices. Part of this is due to taxes and fees, which for example add nearly $200,000 to the cost of a 1 bedroom in Toronto. That’s the cost of a whole home in some of North America’s biggest cities.
Canadian Building Construction Investment Is Rising, But It’s Entirely Due To Inflation
Canadian building construction investment is climbing, but it’s all due to inflation. Investment increased 0.8% in November and is now 10.9% higher than the same month a year before. However, the monthly movement is -0.7% once inflation-adjusted, and annual growth falls to -3.9%. The declines are more significant than headline CPI, showing much higher non-productive gains.
Canadians Are Dumping Big Cities By The Tens Of Thousands As Locals De-Urbanize
Canadians are de-urbanizing at a rapid rate, shows the latest population data. Net-intraprovincial migration reached -60,091 in 2021. That means 60,091 more people left cities for rural parts of their province than arrived. Big cities like Toronto (-64,121 people), Montreal (-39,904), and Vancouver (-12,245) lead for outflows. A similar trend can be observed for Canadians that left their city for a rural area in another province. Typically advanced economies see people flow into cities. Steep home prices make cities less attractive.
Bank Of Canada Quietly Updates Real Estate Affordability Data To The Worst In 13 Years
The Bank of Canada has quietly updated its model for housing affordability. Households now need to spend 37.1% of their disposable income to pay a mortgage in Q3 2021. The quarter is 5.2 points higher than the previous, one of the sharpest increases ever made. Canada is the least affordable since 2008 but interest rates were much higher back then.
Canada’s Unemployment Rate Is Falling While Long-Term Unemployment Soars
Canada’s labor market has nearly recovered, but structural issues are now forming. In October, the unemployment rate fell to 5.9%, just 0.2 points from pre-pandemic levels. However, long-term unemployment hit 137,200 people in 2021, up 163% from the previous year. Low unemployment and high job vacancies make this an ideal time to find a job. However, the share of people unemployed for longer than a year has reached the highest point since 1997.
Toronto Real Estate
Toronto Is Turning Into A Retirement Village As The Senior Population Explodes Higher
Toronto has a booming population, but most of the increase has been seniors. The population reached 6,572,524 people in 2021, up 0.2% (15,924) from last year. Seniors (aged 65+) now represent 15.7% of the city’s population, up from 11% two decades ago. The population of working aged people (15-64) is the highest-earning and highest-spending demographic. As the demographic loses ground to fixed income households, economic growth will slow.
