Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Dirty money from Canada is the biggest source of cash laundered through real estate. Global Financial Integrity (GFI) conducted a study, and found US$626.3 million ($822.7 million) of real estate bought with laundered cash. Over 88% of it was residential real estate as well. The most shocking part is they only used 35 major, newsworthy cases. We dive into why this is just a tiny drop in the bucket of money laundering, and how Canada turns a blind eye.
Canada’s parliamentary budget officer (PBO) completed its breakdown of the housing plan. The non-partisan office found the $73 billion plan would have a “limited” impact on supply. In the number of issues it listed, it said its impact on supply creation is questionable. Many of the programs appear to only take credit for existing supply in the pipeline. Further, many of these programs don’t have affordability requirements. It’s a hefty bill to not create much more supply, or affordability. In fact, this would mean it only creates bigger profit margins for developers.
Canadian and US bond yields are falling, despite massive economic improvements. While some think this means low yields are here to stay, experts see a more abrupt climb coming. The chief economist at Desjardins said he expects yields to fall this quarter (Q3). By the end of the year, he sees the trend making a sharp reversal. The disconnect between yields and the economy is increasingly becoming larger. The wider this gap gets, caused by the central bank’s easing, the sharper the reversal.
Canadian banks are seeing a surge in mortgage growth, led by Ontario. Chartered banks held $1.48 trillion in mortgage debt in Q1 2021, up 8.2% ($112 billion) from a year before. It was the second-highest rate of annual growth since 2012. The previous quarter was the first. Click through for a regional breakdown.
Toronto and Vancouver real estate both saw the SNLR make a sharp reversal and climb last month. In Toronto, the ratio climbed to 74.8% in July, up from 68.6% the month before. In Vancouver, it hit 76%, up from 64% a year before. While not the 120%+ ratios they had in December, they are moving in the same direction. That is, fewer people are selling right now — but buyers are picking up very quickly. This is coming despite the fact a number of sellers have expressed the intent to sell this year.
Canada has a labor mismatch, and it’s leading to odd employment data, said one of the country’s biggest banks. Survey data shows 41.5% of businesses are reporting a skilled labor shortage. Another 29.9% report being unable to find unskilled labor as well. BMO notes this is a new record, where job vacancies outpace job seekers in Canada. This normally happens during the best economies, not one where unemployment is elevated. This will likely cause wage pressures that are inflationary instead of productive.
Toronto Real Estate
Greater Toronto condo prices are selling over-ask, but paradoxically falling in price. TRREB reported the typical condo price fell to $639,400 in July, down 0.5% ($3,200) from the month before. In the City of Toronto, it fell to $659,600, down 0.6% ($4,100) over the same period. Somehow, around half of units sold over the asking price last month. One potential explanation might be listing below market value to get a “bidding war” might not be as effective as it once was. It’s not even getting many people back up to market price.
Vancouver Real Estate
Greater Vancouver condo prices were flat last month, bringing its brief run to a halt. The price of a typical condo across the region was $736,900 in July, down 0.1% from a month before. Annual growth is still 8.4% higher than the same month last year, but decelerated lower from the month before. The most surprising thing is prices are only 2.8% higher than they were 3 years ago. This is most likely to print neutral, or even negative, once inflation is adjusted by the current year.
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