Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
The low rate tailwind boosting Canadian real estate over the past 40 years is coming to an end. The Bank of Canada estimates recent buyers will be renewing mortgages around the 4.5% level in 2025/2026. This means a 24% to 45% increase in payments for these borrowers who had benefited from stimulus rates. BMO notes this has only happened one other time — in the 90s.
Canadian real estate prices are doing the unthinkable — they’ve begun to fall. Now what? We take a dive through the Big Six banks’ adverse market scenarios. In a worst case scenario, banks see prices falling up to 30% in the event things go south.
Canadians are taking on an astronomical amount of debt, way outpacing their income. The debt to income ratio for Canadian households reached 180%. That means for every $1 households make in disposable income, they owe $1.80. As this ratio rises, repayments divert funds from future spending. This tends to act as a weight on the economy, diverting funds from future consumption.
The long awaited results from British Columbia’s inquiry into money laundering have dropped. The key takeaway appears to be that Federal money laundering resources are unreliable. Ultimately they suggest the province establish its own anti-laundering resources.
Canadian mortgage debt has reached a new all-time high, but the rate of growth is slowing. Households now owe nearly $2 trillion in mortgage debt, up 10.3% ($185.5 billion) higher than last year. If it wasn’t totally clear how large the number has become, it’s larger than the GDP of all but 15 countries.
Canadian mortgage originations were falling before interest rates began rising. What does that mean? We asked Toronto real estate broker Daniel Foch and mortgage agent Nick Hill to break it down. They drop some market perspective as observed from their investor clientele.
Canadian real estate inventory is rapidly rising as sales drop. The combination helped to relieve pressure on prices, which actually slipped lower. After just a few weeks of higher interest rates, not only has speculative demand plummeted — sellers are being motivated to sell their extra property.
Toronto Real Estate
Greater Toronto real estate prices are falling — and sharply in some regions. TRREB reported a median sale price of $1,050,000 in May, down -4.4% ($48,000) from a month before. Most regions across the board have seen prices drop with one even seeing the median sale price drop $190k. After such a huge climb, it’s hard to see many owners breaking a sweat.