Benjamin Tal

Benjaman Tal. Deputy Chief Economist with CIBC World Markets Inc.

Saturday Jun 23rd, 2018

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HERE ARE SOME OF THE MAIN POINTS

  1. Canada’s real estate boom in 2016 was driven demographics, low supply big demand and immigration policies

 

  1. The Fair Housing Plan in Ontario was a government policy to out first-time home buyers from the market.

 

 

  1. The plan drove rental prices higher and lowered the number of first-time buyers.

 

  1. Rent controls are the best way to destroy a city.

 

 

  1. Condos have been a stabilizing force in the Toronto real estate market and we are not

overbuilding. The lack of supply will get worse.

 

 

  1. We are experiencing the demise of the middle class. Canada is one of the most educated countries yet many of the most educated live in conditions of poverty.

 

  1. 47% of condo sales are to investors yet ½ of those investments are in a negative cash flow.

 

  1. Look for interest rates to hold or go up minimally as employment goes up.

 

  1. This is a demographic story. Aging population is working longer but less hours. Wages are not increasing because older employees are happy to keep their jobs and work less.

 

  1. American tax cuts will affect Canada. Trump is deregulating companies, lowering tax rates for corporations, increasing deductions on equipment, eliminating carbon taxes. The USA will likely pay heavily for these initiatives down the road In terms of a greater debt. For the time being, however, companies may move to the USA.

 

  1. With 170% debt to income ratios, the Bank of Canada may try to keep rates low so that people don’t get stretched to far.
  2. The B.C. foreign buyer tax and the Ontario’s NRST were just the cost of doing business, but the real slowdown came from the domestic buyers waiting to see what happened next.

 

  1. Don’t expect the typical crash. Lots of people suffering bubble fatigue and with any bad news, gravity can sometimes take over.

 

  1. Expect a small recession in 2020 and 2021 with the caveat that when it happens you should buy more real estate because you think its expensive now, just wait.

 

  1. Every fix is temporary when you don’t tackle the main problem: supply.

Sent by A.E. Adamusiak

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