Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian real estate printed huge price gains this year, but how does it compare to other assets? Comparing returns for other investments that have been popular with Millennials, it was kind of slow… as hard as that is to believe. A downpayment invested in the Bitcoin, FAANG, or even just the NASDAQ 100 would have made bigger returns. The thing about central banks flooding the market, is the cash flows into everything – not just housing.
BMO, one of Canada’s Big Six banks, released a research note on the big gains in home prices. Not just in big cities, but in small ones most Canadians couldn’t find on a map – like Woodstock, for example. A typical home there increased by $117,200 over the past 12 months. This is far in excess of the median income, leading the economist to ask readers to come to their own conclusion as to what it means.
Speaking of the gains home prices made, they’re unusually out of control right now. The price of a typical home increased $14,400 just in January. Prices at the national level are now up $79,800 from last year, almost clearing the pre-tax median income. That’s just at the national level though. Many local markets are outperforming, with suburban markets seeing prices rise up to $73,000 over just one month. Yes, one single month.
Canadian real estate sales had a big start to the year, with a record monthly print. There were 36,897 unadjusted sales on the MLS in January, up 35.2% from the same month as the year before. Seasonally adjusted, that number is 61,371, up 2.0% from a month before. Only 8 months in the past two decades have seen larger 12-month growth rates. Of those, 6 of them were the year before the Great Recession.
Young Canadians are seeing their net worth soar, just not in the country’s biggest city. Canada’s median net-worth for people under 35 jumped to $48,800 in 2019, up 88% from 1999. In Toronto though, their median net-worth fell to $48,000, down 10% over the same period. Yes, fall. Toronto is one of two cities to see the median net-worth decline over the past two decades, with Calgary being the other.
Canadian mortgage lenders are preparing for record losses on homes. The expected credit losses from mortgage lenders reached $1.48 billion in Q3 2020, up 86% from a year before. The sharp rise is a record rate, but is relatively low. It turns out as long as you print more mortgages than you lose, you can keep the rate low. Great, as long as you’re not the borrower.
Toronto Real Estate
Many Toronto real estate investors plan on selling due to a vacant home tax. The local real estate board’s survey found 40% of investors will sell if a tax is implemented. This is up significantly from a year before, when it was just 34%. The rate is high enough to imply that even investors that don’t have a vacant home, would sell. This may mean they believe it will have a general impact on prices.
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