Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian housing investment has never dropped this fast without popping a bubble. Residential investment dropped to $133.1 billion in Q3 2023, a 13.8% decline from last year. The decline is part of a longer decline in residential investment—the sharpest drop since the 1980s. Back in the late 1980s, it marked the first sign of the bubble popping.
One of Canada’s largest financial institutions sees a big drop ahead for real estate prices. Desjardins shared their worst-case scenario, which would see home prices fall as much as 30%. However, they warn that won’t be enough to return affordability to markets like Ontario. Places like Greater Toronto will require a much longer period—up to a decade. Are millennials ready to wait until they’re 50 to get into the market?
Canada’s labor market surprised with much better-than-expected job gains. The country added 40k jobs in August, nearly double the consensus estimate. Unfortunately, even doubling expectations isn’t enough to keep up with the current population boom. Statistics Canada (Stat Can) estimates an average of 50k jobs per month need to be added to keep up with this growth. For context, Canada has averaged just 31k jobs per month over the past 3 months. Keeping up with the record population growth requires adding nearly record job growth every single month.
The Bank of Canada (BoC) is once again hitting the pause button, but what does it mean? The last pause resulted in buyers returning, and sending prices ripping higher. However, don’t expect a replay says BMO, one of Canada’s largest commercial banks. The economy is much weaker today, with interest rates climbing and unemployment ticking higher. Most importantly, there’s no mortgage rate relief in sight this time, warns the bank.