The recent developments in the Canadian housing market paint a daunting picture, especially in light of the ambitious promises made in Budget 2024. The government's pledge to construct an additional 2 million homes over the next 7 years appears increasingly improbable when examined against the current realities across various industries.

Consider housing starts - Despite the government's optimistic goals, data reveals a staggering housing supply deficit in Canada. The ratio of growth in the working-age population to housing starts has widened significantly, indicating a severe shortfall in housing construction. Moreover, building permits, a leading indicator, have plummeted to their lowest levels since 1983, foreshadowing a bleak outlook for future construction.

When we look to mortgages, renewal rates for fixed-rate mortgages have seen an unexpected increase in payment obligations, while there has been a notable shift towards shorter-term fixed-rate mortgages. However, the majority of homeowners possess substantial equity in their properties, signaling a sense of stability in the housing market.

The government has also woken up to the amount of mortgage Fraud we are seeing in our system. The government has finally acknowledged the prevalence of it, and has proposed solutions including direct income verification from the CRA, a measure that is long overdue and essential for maintaining the integrity of the mortgage system.

Credit card loans and HELOC payments are also on the rise, indicating increased financial strain among Canadians. Corporate insolvencies are climbing, and banks are reducing their own exposure to local business loans, further exacerbating economic pressures and driving down our overall GDP.

Despite economic uncertainties, Canadians remain optimistic about the housing market, buoyed by prolonged stability and government promises... However, the disparity between sales volumes and population growth highlights underlying challenges in the market. Even though we have more sales this April over last April, the number of sales overall has continued to diminish compared to long term historical averages. Think 2005 when April saw over 4,000 sales (nearly 50% more than we see today) with 600,000 less people in the region.

Lastly, we look at the weakening Canadian Dollar. The potential for interest rate cuts by the Bank of Canada threatens to devalue the Canadian dollar, exacerbating inflationary pressures and lowering living standards. Economic indicators suggest a fragile recovery,
characterized by labor market uncertainties, a cautious Federal Reserve, an inverted yield curve, and fluctuating oil prices.

While the Budget 2024's housing initiatives aim to address pressing issues, the prevailing economic landscape presents formidable obstacles to their successful implementation. From housing supply deficits to escalating debt levels and external economic factors, the road ahead is fraught with challenges that must be carefully navigated to achieve meaningful progress in the Canadian housing market.

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

The Consumer Price Index (CPI) for March revealed a 2.9% year-on-year increase, slightly up from February's 2.8%, primarily driven by surging gasoline prices. However, the report unveiled a concerning trend in the Bank of Canada's preferred measures of core inflation. Both CPI median and CPI trim not only declined on a 12-month basis but also fell well below 2% when measured over three and six months. This decline in core inflation underscores the dominance of shelter costs in driving overall inflation, with mortgage interest expenses rising by 25.4% and rent by 8.5%. Excluding shelter costs, consumer prices rose by a modest 1.5% year over year.


This data adds weight to arguments favoring a rate cut by the Bank of Canada in June, as lower rates could effectively address the rising shelter-driven inflation. However, the potential impact of such a cut might not be as significant as previously anticipated, given the approaching slower season and the likely modest reduction of only 0.25%. Yet, sentiment in the housing market remains buoyant, with recent months witnessing an increase in home prices, largely driven by optimistic sentiment.


In parallel, the Federal Budget 2024 places a significant emphasis on housing, earmarking $8.5 billion of the $53 billion total spending over the next five years for this sector. The government aims to address the affordability crisis by unlocking 3.87 million new homes by 2031, predominantly through initiatives focused on increasing supply - we'll see how realistic this is as there's an awful lot of skepticism arising around the feasibility of this ambitious target, as it necessitates a substantial increase in annual home constructions, potentially straining resources and exacerbating construction material costs.


The budget introduces various measures to incentivize housing supply, including the Housing Accelerator Fund, Apartment Construction Loan Program, and Affordable Housing Fund. Additionally, initiatives like leveraging federal land for housing development and investing in infrastructure aim to facilitate the creation of new homes. However, concerns are raised regarding the effectiveness of these measures, particularly in light of challenges such as a shortage of construction trades and logistical hurdles in implementing zoning reforms and building approvals.


Furthermore, changes in capital gains tax regulations, notably raising the tax rate for gains over $250,000 from 50% to 67%, could have profound implications for the housing market. Investors may expedite selling off assets to avoid the higher tax rate, potentially impacting market dynamics in the short term. Additionally, the budget's deficit spending raises concerns about future economic stability, as it may exacerbate inflationary pressures and hinder the ability to navigate future downturns or unprecedented events effectively causing potentially greater or deeper pain in future recessions


While the budget demonstrates a commitment to addressing housing affordability, questions persist regarding the feasibility and long-term implications of the proposed measures (think trades, speed, investment and cost) especially amidst broader economic uncertainties and challenges.

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

In a landscape of economic uncertainty and shifting market expectations, the Bank of Canada's decision to maintain its overnight rate at 5% on Wednesday marks the sixth consecutive hold. This is solidifying a rate that has remained unchanged since July, now spanning nine months. With the next announcement slated for June 5th, Canadians are hoping to find relief but a level of uncertainty still remains and expectations continue to be on the move. With that said, there has been extended period of stability over the last
year and possibly lasting until at least 2025 when the Bank projects inflation to finally reach its 2% target.

Despite indications of excess supply in the Canadian economy, the Bank anticipates growth in the coming years, albeit amidst lingering inflationary pressures, particularly in the housing sector. Financial markets, however, foresee a departure from this status quo, anticipating a series of rate cuts starting in June. This speculation is fueled by mounting evidence of economic strain, including a recent uptick in unemployment, signaling potential challenges ahead.

Meanwhile, south of the border, the US economy continues to outperform expectations, buoyed by robust consumer spending and resilient business activity, albeit accompanied by stubborn inflationary pressures. However, recent data suggests that the Federal Reserve may postpone rate cuts until September, as consumer prices continue to rise, prompting concerns about how that could impact the upcoming presidential election.

The juxtaposition of economic indicators paints a complex picture, leaving analysts and policymakers grappling with the question of whether inflation can be tempered without triggering a recession. With each passing day, new data points emerge, fueling speculation and uncertainty about the future trajectory of interest rates and the possibility of recession.

In Canada's largest city, Toronto, the real estate market faces mixed signals, with declining home sales but resilient prices, especially in the condo segment. Conversely, Calgary and Edmonton experience surging demand and dwindling inventory, driving substantial price appreciation and highlighting migration patterns influenced by affordability.

Amidst these economic fluctuations, one thing remains clear: the road ahead is uncertain, and stakeholders must navigate a landscape fraught with both challenges and opportunities, as they await further developments in the months to come.

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

In March 2024, the Canadian housing market experienced another notable increase in home prices, particularly in the condominium segment, which reached a new all-time high. This surge in prices reflects ongoing trends in the housing market, characterized by persistent demand and limited supply. The condominium market's resilience, despite broader economic conditions and rising interest rates, underscores the segment's attractiveness to buyers seeking relatively more affordable options in an increasingly expensive market.

More and more we are hearing about rising mortgage delinquencies and When you consider the March 2024 statistics an analysis of Mortgage Delinquencies. Despite concerns about a potential mortgage renewal crisis, the data reveals that Canada's mortgage delinquency rate remains relatively low, especially compared to other countries like the UK and USA. The comparison offers insights into the robustness of Canada's housing market and its ability to weather economic fluctuations.

Moreover, we explore the impact of inflation on mortgage interest costs, a significant factor influencing housing affordability. In Canada, where mortgage interest costs are included in the Consumer Price Index (not the case in most countries), the surge in these costs contributes to inflationary pressures, affecting overall affordability for homeowners.

We also delve into the new 'Renters Bill of Rights' and its implications for rental housing providers. The government's initiatives to regulate the rental housing market are raising concerns among landlords, potentially affecting their profitability, usability
and investment incentives for would be housing providers. This regulatory environment may lead to a slowdown in rental property development, exacerbating existing supply shortages in rental housing.

Furthermore, the announcement of a $6 billion federal housing program aimed at funding provincial housing infrastructure signals government intervention to address housing affordability and supply issues, or at least attempt to. By incentivizing municipalities to adopt policies that promote housing development, the program aims to alleviate supply constraints and stimulate construction activity - such as putting a freeze on development costs for the next 3 years.

February 2024 housing stats are also out and we delve into them in detail on this week's podcast, providing additional insights into market dynamics, including sales volumes, new listings, inventory levels, and the sales-to-active ratio. Despite fluctuations in these indicators, largely to the upside, the overarching trend reflects a market that is skewed towards sellers, with limited inventory and high demand contributing to rising home prices.

Looking ahead, the housing market remains a hot topic amidst tight inventory and rising prices despite lending conditions. Anticipated adjustments in response to potential interest rate movements underscore the market's sensitivity to economic factors, policy changes and of course, affordability.

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

The recent announcement by the Immigration Minister to cap growth targets in Canada underscores the profound impact of immigration on the nation's demographic landscape. Over the past two years, Canada has experienced significant population growth, largely attributed to the influx of temporary workers and foreign students, which has exerted immense pressure on the rental market. This surge has seen rental rates skyrocket to unprecedented levels, with an annual increase of 8% and a staggering 30% surge since the pre-pandemic era.

Notably, there exists a striking correlation between the influx of non-permanent residents and the escalating rental rates, highlighting the crucial role played by this demographic segment in driving housing demand. The surge in non-permanent residents, which has risen from comprising a mere 0.5% of Canada's population in 1975 to a current level of 6%, reflects a trend that is deemed unsustainable.

In response to these challenges, the government has announced plans to reduce the population of non-permanent residents by 20% over the next three years, aiming to alleviate the strain on the rental market and moderate population growth. However, concerns linger regarding the timeliness and effectiveness of this measure, given the significant downturn in permanent residency applications observed in recent months.

The anticipated decline in population growth is expected to have far-reaching implications for Canada's economic trajectory, with projected annual growth rates dropping to just 0.8% by the following year and further tapering to 0.7% by 2027. This represents a stark departure from the pre-pandemic years and presents substantial headwinds to economic expansion.

In tandem with these immigration-related developments, the government has unveiled a comprehensive Renters' Bill of Rights aimed at safeguarding tenant interests and ensuring fairness in the rental market. However outside of providing Renters with an opportunity to improve their credit score, it's really lip service by the federal government in an attempt to gain popularity among Gen Z & Millennials.

Additionally, out east our friends in Toronto are dealing with a very strange announcement - Mayor Olivia Chow is pushing a new initiative that proposes taxing stormwater to address "environmental concerns" while generating dedicated funding for stormwater management. In
other words, they are going to tax the rain water that falls on your home.

However, amidst these policy "interventions" or whatever you want to call them, challenges persist in the housing supply landscape, particularly for single-family homes. Housing starts have plummeted to a 34-year low, exacerbating existing shortages and further complicating efforts to address affordability concerns. Although condominium construction remains buoyant, with starts nearing all-time highs, the discrepancy between demand and supply continues to pose a formidable challenge.

In light of these multifaceted challenges, uncertainties abound regarding the efficacy of policy responses and their ability to address the underlying issues plaguing Canada's housing market and demographic dynamics. As stakeholders grapple with the intricacies of trying to create economic growth, affordability, and environmental sustainability, the path forward remains complex and fraught with uncertainties.

_________________________________

Contact Us To Book Your Private Consultation:

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

This week's economic and real estate roundup unveils a surprising twist in inflation rates, dipping to 2.8% from the previous month's 2.9%, and landing well below the anticipated 3.1%. This unexpected shift marks a pivotal moment, with grocery prices rising a modest 2.4%—the smallest increment since July 2021, signaling a potential easing of living cost pressures that have burdened households across the nation.

Moreover, the landscape of housing finance is witnessing a noteworthy adjustment. Mortgage interest costs, following a late 2023 peak, have begun to show signs of a downturn as rates soften and base effects take hold. This development hints at a broader recalibration within the economy, suggesting that the Bank of Canada's (BOC) rigorous monetary policy is gradually manifesting in the inflation metrics, raising debates around the timing and necessity of interest rate adjustments.

As the BOC eyes back-to-back declines in the inflation rate, with a drop from 3.4% just two announcements ago to now 2.8%, analysts and homeowners alike are keenly observing the central bank's next move. With the next interest rate decision slated for April 10, the prevailing sentiment veers towards maintaining the status quo, though speculation about a June rate cut has surged to a 75% likelihood, stirring conversations about the future trajectory of Canada's economic policy.

Transitioning to the real estate sector, a recent report from The Vancouver Sun highlights the tribulations faced by developers in today's volatile market. A notable case involves a developer owing over $37 million, with daily interest accruing at $16,555, underscoring the harsh realities of surging interest rates and financial overextension. This scenario not only sheds light on the precarious nature of real estate development but also serves as a cautionary tale for investors navigating the complexities of the market.

In the United States, a landmark settlement with the National Association of Realtors (NAR) has stirred the pot in the real estate commissions debate. The NAR's agreement to a $418 million payout to settle claims of artificially inflated commissions, along with the decision to eliminate the standard 6% commission, marks a significant shift in the industry's pricing structure, potentially setting a precedent for similar actions in Canada and beyond.

Finally, a broader look at Canada's housing market reveals a mixed picture of recovery and challenge. National home prices remain 14% below their 2022 peak, with variations across provinces reflecting the uneven impact of economic policies and market forces. Particularly in British Columbia and the Greater Vancouver Regional District, price dynamics exhibit resilience, with median prices inching towards an all-time high despite significantly higher interest rates compared to the near-zero environment of 2022.

This detailed exploration into the current state of inflation, monetary policy, and the real estate market offers a layered understanding of the forces shaping our economic and living environments. As we move forward, these developments will undoubtedly influence consumer confidence, investment strategies, and policy decisions, framing the narrative of economic recovery and sustainability in the face of uncertainty.

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

Today's episode is a little different as we decided to take opposing views of the current economic landscape and we discussed both the positive and the negative elements that are currently affecting the real estate market in Canada. We touch on 5 broad subjects and dive into the current economic climate that has presented a world of challenges including our declining GDP alongside rising unemployment and corporate bankruptcies. Will this get better or will it continue to worsen? While uncertainties persist about the long-term effects of COVID-19 decisions, the potential onset of a recession could lead to interest rate cuts, offering hope for a quicker recovery. Though with sticky inflation, rates could also stay higher for longer. Which camp do you find yourself in?

We touch on interest rates specifically and whether lowering interest rates is necessarily the right course of action. Certainly by doing so it will stimulate economic growth by encouraging borrowing and spending which can lead to increased investment, asset prices, and ultimately, a reduction in unemployment. However, careful management is required to balance these benefits with potential inflation concerns.

Immigration and population have been a really hot topic, especially considering the eye watering numbers we've become accustom to seeing over the last few years. While slowing population growth can alleviate strains on resources, improve labor market stability, and enhance social cohesion, we could also hamper any strong recovery by not having enough skilled people in the workforce to handle a growing economy.

We also dive into the introduction of the Plex Plan and weather it will transform the real estate landscape, particularly in transit-oriented development areas. While its impact may initially be limited, it has the potential to slow price escalation and increase housing supply, especially with supportive immigration policies. But what about the single-family home market? How will it be affected?

Lastly, we touch on inventory. Challenges have persisted in creating sufficient housing supply over the last decade despite initiatives like the housing accelerator fund and other government initiatives. However, policies such as the Plex Plan and Transit-Oriented Development offer hope for densification and new inventory. Middle housing and family-oriented condo designs could further address housing needs as we look to find solutions to our ever shrinking supply of homes in Canada.

_________________________________

Contact Us To Book Your Private Consultation:

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com

In this episode, we unpack the latest developments in Vancouver's real estate market and the broader economic landscape. Home prices in Vancouver have experienced an unexpected surge, breaking a six-month downward trend. Despite this, the Bank of Canada (BOC) has maintained its interest rates at 5%, leading to alarming trends such as increased mortgage arrears and a shocking spike in corporate bankruptcies.

The BOC's decision to hold rates at 5% was expected, with the central bank highlighting slow economic growth and easing wage pressures. While there's a possibility of rate cuts in the future, some critical data points suggest the need for more aggressive action. Markets are pricing in three cuts this year, but the BOC's historical tendencies may result in a delayed response.

Insolvency data is revealing a concerning picture, with business insolvencies reaching levels not seen since 2006. Corporate bankruptcies are particularly alarming, hitting a monthly high of 570 in January, far surpassing the long-term average of 170. This downturn in the business sector is leading to a decline in private sector payrolls and a five-quarter negative trend in per capita GDP, signaling a potential recession...

Mortgage arrears are on the rise, reaching 0.18%, a 28% increase from the 2022 low. Although still below pre-pandemic levels, the 500-mortgages in arrears increase is the largest since 2020, indicating potential challenges ahead. However, the impact on the Vancouver housing market remains relatively muted, with residents not rushing to sell their homes despite the higher rates.

The local real estate market in February witnessed a 14% increase in total sales compared to the previous year, reaching 2,070 units—the highest since August 2023. However, this surge is still 23% below the 10-year average, suggesting a selective hyperactivity driven by low inventory. New listings increased by 31% year-over-year, bringing total inventory up by 6% and shockingly, the active inventory is sitting 0.3% above the 10-year average, indicating a potentially sustained low-inventory environment.

The sales-to-active ratio experienced a significant 6% increase, reaching 23%! This marks a return to a sellers' market after five months. This trend is evident across property types, with detached, townhomes, and apartments all experiencing notable increases. Prices also rebounded after a six-month decline, showing a remarkable 1.9% increase in the HPI in February.

Despite economic challenges and sounding like a broken record, the Vancouver housing market remains resilient. Home prices are inching closer to peak 2022 levels, defying the two-year interest rate hike cycle. With a median price of $960,000 and average price of $1,279,000,
the market is showing signs of strength. However, warnings from market experts, suggest that broader economic issues might not be fully reflected in the BOC's decisions.

As the market forges ahead, we explore the implications of tightened inventory and the potential impact on buyers. Investment houses provide a cautionary perspective, hinting at larger economic problems than acknowledged by the BOC. With corporate insolvencies
rising and employment numbers under threat, the broader economic outlook remains uncertain and we urge you to consider a holistic view beyond central bank statements.

_________________________________

Contact Us To Book Your Private Consultation:

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Dan Wurtele, PREC, REIA

604.809.0834

dan@thevancouverlife.com

Ryan Dash PREC

778.898.0089
ryan@thevancouverlife.com

www.thevancouverlife.com