Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canada’s monetary policy typically follows the US, but it may no longer be able to keep up. The US economy continues to show strong growth, potentially requiring even higher interest rates. In contrast, Canada’s economy showed virtually no growth, despite the rapid escalation in population. According to BMO, there is plenty of historical precedent that shows the two countries have diverged on monetary policy. However, doing so might not be in the country’s interest as it may drive inflation higher, requiring even higher interest rates.
When it comes to office space demand in Greater Toronto, businesses are out and schools are in. Commercial real estate giant Avison Young’s latest report found business demand is weakening, primarily for prime office space. At the same time, Ontario’s explosion in private colleges catering to international students have been scooping up space. It softens the blow but Canada’s economy is increasingly reliant on immigration to support its concentration in real estate. There’s a dangerous lack of diversification that can amplify economic shocks, making a downturn much worse than it needs to be.
Canadian insolvency filings dropped in the third quarter of 2023, but the year-over-year increase is still concerning. Business insolvencies hit a 10-year high, while consumer filings fell. This shift in composition may indicate a shift in credit risk. Households are doing better than pre-pandemic levels, but the bank warns things may get worse. The combination of higher interest rates and a lack of consumer spending could be a double-whammy on the economy.
A Greater Toronto real estate brokerage has finally been placed under receivership. Management of Wynn Realty Corp assets have been appointed to Grant Thornton following accusations of fraud against the brokerage and one of its key employees. Courtney Simpson, a Realtor and spouse of the brokerage’s owner, is currently facing 80 charges including fraud, uttering forged documents, and breach of trust. She’s no stranger to fraud either, having previously served time for a conviction related to a mortgage fraud scheme. The incident highlights a lack of regulation in Canada’s massive, but mostly privately regulated real estate industry.
Canadians love real estate so much that a third would change their vote for cheap credit. A new Abacus poll reveals a third of non-Liberal voters would consider changing their vote if mortgage rates fell. While the government can have a short-term influence on credit prices, it’s not without consequences. The benefits are also limited, since those that would primarily benefit are the investors that used cheap leverage to price out first-time home buyers and other end-users.