Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Bank Of Canada Pumping Billions Into Mortgage Liquidity To Prop Up Real Estate
Canada’s central bank has pumped billions into the mortgage market, in attempt to prop it up. As of July 22, the Bank of Canada held $7.95 billion in Canada Mortgage Bonds, up $234 million from just one week before. The balance held is an increase of 1,450% from the same month last year. Originally the program was created to help absorb any excess in the market. Starting this year, the central bank begun driving demand, as institutional investors walked away.
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Canadian Real Estate Buyers Pay Steep Premiums To Own Vs Rent
Canadian real estate buyers are willing to pay a lot more to own instead of rent. In Canada, the house price-to-rent ratio reached 122.43% in 2019, meaning it costs 22.43% more to buy than rent. Overall, this is the 8th highest ratio in the world. Canada’s ratio is more in line with countries like Latvia and the Slovak Republic, than the US and Australia.
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US Federal Reserve: Canadian Real Estate Buyers Returned To Exuberance Before Pandemic
US Federal Reserve economists observed Canadians are buying with emotion over logic once again. The Reserve’s exuberance index reached 1.51 in Q1 2020 for Canada, up 25% from a quarter before. The new level breaches the critical threshold that determines if buyers are exuberant. Despite the climb, the market hasn’t become exuberant again. It’s most likely having a temporary relapse from its last massive exuberance spike. Downtrends are rarely straight lines.
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B.C. Continues Multi-Year Decline Of First-Time Homebuyers
British Columbia real estate continues to see fewer and fewer first-time buyers. There were 1,115 first-time buyers in June, down 15.1% from the same month last year. Year to date, there were 5,517 first-time buyers, down 8.5% compared to last year. First-time buyers in the province have been on the decline for at least 3 years now.
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Toronto Real Estate
Toronto Condo Prices Fall From Peak As Inventory Rises To Highest Level In Years
Toronto condo prices have made a substantial single-month decline, as inventory swells. TRREB reported 1,793 condo apartment sales in June, the lowest numbers for the month in at least a decade. It wasn’t due to a lack of inventory though, which reached 4,320 active listings, the highest level since 2016. Falling sales and rising inventory has led the market to shed over a point off prices in a single month.
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Greater Toronto New Home Sales Fall To Lowest Level In Over A Decade
Greater Toronto new home sales have fallen off a cliff, and show little signs of bouncing back soon. There were 1,934 new homes sold in June, the fewest for the month in at least a decade. Most of this was due to the drop in condo apartments that fell to just 774 sales, down 68% from last year. The number of sales for condo apartments mean just 8% of units are being absorbed.
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Vancouver Real Estate
Greater Vancouver Sees Biggest Single-Month Surge Of Inventory In Half A Decade
A lot of Greater Vancouver condo owners all had the same idea – now is the perfect time to sell. REBGV reports 1,105 condo apartment sales in June, up 17.4% from last year. Last year was a multi-decade low for June sales, at half 2016’s volume. New listings increased to 2,818 units, up 34.1% from the same time last year. The increase, twice the rate of sales, hasn’t seen this many units listed in a single month in over half a decade.
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Greater Vancouver Condo Pre-Sales Cut In Half, New Inventory Delayed
Greater Vancouver condo pre-sales are seeing slow market absorption, a trend that began last year. There were just 36 pre-sale units sold in June, down 50% from the same month last year. Inventory followed a similar number, when it came to new releases dropping by more than half. The number of units launched only followed a similar ratio due to the number being delayed. There’s actually more inventory lurking, but the units are likely being held until the market firms.
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BOC zero interest rate policies will cause significant problems as bank rates move higher in the future. BOC rate will be forced higher as Central banks continue to expand their economies with easy credit, which will eventually cause extreme levels of inflation and higher rates..
The price of houses will then be priced not on some equity value but by the financial cost of borrowed money.
As rates go higher house prices will be forced lower. It’s the NEW future which many are oblivious too.