Top Spot in Canada’s Real Estate Market
Top Spot in Canada’s Real Estate Investment Market
by Steve Saretsky, July 29, 2019
Happy Monday Morning!
Following the slight easing of the mortgage stress test last week which brought the qualifying rate down from 5.34% to 5.19%, increasing borrowing power by a mere 1%, RBC’s CEO David McKay is calling for more. A once vocal supporter of the B-20 Mortgage stress test, McKay took a more neutral stance on real estate investment market policy in a recent interview with BNN Bloomberg.
“When we didn’t have the monetary policy to slow the housing market down, we needed to look at prudent regulatory policy. And I think vetting consumers for a higher interest rate environment was prudent.
Adding, “But like every policy, it’s not static, as things slow down, maybe you have to re-look at parts of it and tweak it. But from a structural perspective, it’s prudent regulatory policy. We continue to monitor all the supply and demand signals coming out of the housing market – by market,” McKay said. “And I would characterize us still in well-balanced territory.”
Balance might be deemed appropriate out East but is certainly not welcoming verbiage in the West. Curtis Strange, The chief executive of Alberta-based bank ATB Financial is calling on the federal government to revisit controversial mortgage rules introduced in January 2018, saying the regulations are holding back some Canadians from buying homes. “We believe the federal government and regulators still need to listen Canadians broadly and continue to look especially at the component of the 200-basis point stress test.”
The comments come just a month after the release of ATB’s rather dismal fiscal earnings performance for the year ended March 31st. ATB’s provision for loan losses jumped to C$338 million, more than triple the C$105 million logged in 2018. The increase in bad debt led directly to a 50% drop in net income following a continued slump in the Alberta economy and housing markets.
Meanwhile out East, market activity continues to hum along. The city of Toronto, Canada’s largest metro, is frantically building new homes at a record pace. In July Toronto once again topped the RLB Crane Index, with 120 cranes deployed for real estate development. That was more than double the next closest North American cities of Seattle and Los Angeles.
The Ontario Government, however, isn’t stopping there. Determined to maintain their top spot on the RLB Crane Index survey, the Ontario Government released a policy statement saying they will be cutting the red tape that is slowing down the process of building more homes that people need and can afford. “Seniors are looking to down-size and young families don’t see a path to homeownership. That’s why we are proposing changes to provincial policies that would spur and speed up the construction of more and different types of housing that can meet the needs of people in different stages of life,” said Steve Clark, Minister of Municipal Affairs and Housing. “I encourage Ontarians to provide their feedback directly to my ministry during this 90-day consultation period.”
1. The city of Toronto sits atop the RLB Crane Index Survey.
2. Rental construction hits record highs in Vancouver, as developers fret over weak pre-sale conditions.
3. Per RBC, housing as a percentage of GDP is now decelerating.
