Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canada’s job market continues to grow but economists warn context is important. The country added 64k jobs in September, which would have been a blowup job report pre-2020. A recent population boom means that’s now the bare minimum needed to keep the economy afloat. In addition, a large share of the jobs added were part-time and concentrated in a handful of industries. More concerning is this doesn’t appear to be one or two economists seeing headwinds, but skepticism about the details were a broadly observed issue.
Canadian real estate bears are preparing for another raid. That was the take from BMO Capital Markets, noting the loosening market conditions in most major markets. More inventory, fewer sales, and mortgage rates that won’t stop climbing. The bank warns this fall/winter market won’t be very comfortable for housing investors.
Canadian bond markets are flashing a warning for a sharp climb in mortgage rates. The Government of Canada (GoC) 5 year bond yield has been rapidly increasing in recent days, hitting a multi-year high this week. Yields are now at the highest level since 2007, meaning mortgage rates are about to follow. Don’t look to 2007 to get much of a read on how markets will behave though, rates were only able to hold that level for a few weeks. High rates aren’t expected to fade quickly this time around, as central banks warn interest rates will climb “higher for longer.”
Canada’s record population growth is supposed to make it easy for the economy to grow. After all, more people means more consumption, even at just the basic level. Even with this boost, the country’s GDP is no longer rising with per capita GDP falling 2% in per capita terms. BMO warns this magnitude of decline is only typically observed during recession. Hitting the gas on population growth this hard is turning inflationary, wiping out the gains it would traditionally provide.
Toronto Real Estate
Toronto real estate prices have been falling for three consecutive months, wiping out earlier gains. Home sales are weak and new listings are up 44% higher compared to last year, leading to a buyer’s market. This indicates prices will continue to move lower, as first-time homebuyers remain on the sidelines.