Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
The International Monetary Fund (IMF) is warning that real estate is a “key domestic” risk to Canada. Changes in price expectations, increasing mortgage rates, and unemployment could all be triggers that set off home price related trouble. IMF analysts didn’t elaborate, so we pulled the numbers to see what they might have been discussing.
The percent of income devoted to servicing mortgages is jumping to multi-year highs. In the first quarter of 2018, Canadians paid 6.67% of their income towards interest alone. The number is 1.83% higher than the same time last year, and is at the highest levels since Q4 1992.
The BIS noted Canadian real estate prices have been enthusiastic for over 10 years. In 2017, Canadian prices were the fastest rising in the G20. Since 2007, Canada has seen the third largest increase in the G20, with only India and Brazil outperforming the country. To contrast, half of G20 countries are negative in real terms, over this same period.
Worried bank profits are diminishing with record low interest rates? Don’t be, they’re making it up on volume. Canadian mortgage holders paid a massive $45.9 billion in interest in the first quarter of 2018. That’s just interest, not including principal or other fees. The amount of interest being paid every quarter, is now at the highest levels in history. Yes, even when mortgage rates were substantially higher in the early 1990s.
Toronto Real Estate
Greater Toronto real estate prices are slipping, as sales continue to drop while inventory rises. The benchmark price is now $722,400, down 5.4% year-over-year. TREB reported 7,834 sales, down 22.2% from last year. Active listings rose to 20,919, a 13.21% increase from last year. The declining sales and higher number of listings are releasing much of the pressure that sent prices soaring last year.
Vancouver Real Estate
Vancouver real estate prices are up, even though sales are dropping. The benchmark price is now $1,094,000, up 11.5% from the same time last year. The increase comes despite a drop of 35% in sales, and a 38% increase in inventory. In case you missed that, prices made a dramatic increase, despite a decline in sales and a rise in inventory. That’s the opposite of the supply and demand mantra people have been citing.
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