Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canada’s Foreign Investment Surge Isn’t Confidence, It’s A Looming Debt Crisis
Canada has seen a surge in foreign investment, but is it the vote of confidence reported in the media? The 12-month sum of foreign investment hit $256 billion in May, its highest level since 2022. A BMO report shows the flows targeted bonds, not equities. Most of which were government debt (58.4%), and the loonie isn’t getting a boost due to issuances in other currencies. The Bank of Canada previously warned that this type of purchasing is a systemic threat.
Canadian Homebuyers Need Nearly Double The Median Income To Buy
Housing affordability improved for a tenth straight quarter, the longest streak ever. The same National Bank data also emphasizes that more affordable isn’t affordable. Their numbers show that a mortgage on a typical home would take 51% of the median household income. Their income would need to almost double to actually qualify for that mortgage. That won’t just suck for prospective buyers, but it’ll be a problem for those looking to sell.
Canada’s Young Adults Make Less Than 50 Years Ago, Senior Incomes Surged
The median income stalled at $46,300 in 2024, unchanged after inflation from 2023. Real (inflation-adjusted) incomes generally peaked in 2021, failing to meet the inflation surge. Breaking it down by age, older households managed to buck the trend, hitting new highs in 2024. It’s a long-term trend, with those 65 and older seeing their real income surge 135% since 1976, more than 15x the average. The drag is younger households, who saw their real incomes peak almost 50 years ago.
Canadian Insolvencies Surge To Second-Highest June On Record
Households are starting to crack under their supersized household debt loads. The OSB received 13,254 insolvency filings in June, up 11.5% from last year, more than doubling 2020 lows. It was the second-highest volume of filings for the month, and ditto for the 12-month sum. However, the big difference here is that back then, the volume had already peaked before June. This time, filings are hitting new highs.
BMO Dismisses Canada’s Soaring Insolvencies. Here’s Why They’re Wrong
Soaring insolvencies aren’t a problem due to population growth, according to BMO. The bank called it a non-story, showing the filings per capita are similar to 2019. It sounds logical until one realizes that more people doesn’t mean more credit. The recent population boom was largely due to new immigrants who lack credit access. There’s a reason that institutions report a delinquency rate and not per capita. A point that Canada’s banks should be familiar with, as they hold a similar number of mortgages as they did in 2020. The population boom didn’t boost mortgages, but credit erosion boosted delinquency rates.
