Asset TV Canada’s Post

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Joining us now with the outlook for the Canadian housing market is Kim Ingles with Raymond James. Well, Kim, first, how will interest rates impact Canadian homeowners? Yeah. So interest rates have already been impacting a lot of homeowners. If you're a variable rate mortgage holder, you've definitely already been experiencing that. If you're fixed, fixed rate and mortgage holder, then you know, you're probably only just starting to to feel that as the renewals come up. It's estimated that 80% of of outstanding mortgage holders will be renewing by the end of next year, end of 2020. Five. So most everyone will start to feel that and it's anticipated that the median monthly mortgage payment between when just before Bank of Canada started raising rates, so in February of 2022 to the end of 2027 that the median payment will go up about 34%. What about home buyers? How old interest rates impact them? Yeah. So there tends to be an inverse relationship between interest rates and and home prices. So, you know, typically if interest rates go down, then mortgage rates also come down, which makes it more attractive to buy home. So you tend to see home prices go up. Of course, Bank of Canada is not too keen on seeing house prices go up right now because of the housing affordability issues in Canada right now and building up of that. Kim, what are some of those housing affordability issues? Yeah. So it's it's deemed to be actually the worst it's ever been for housing affordability in Canada. RBC put out a report recently that estimated that the median household has to spend just over 63% of their annual income on on their mortgage, which is a pretty significant amount. If you compare that to the housing bubble in the 1990s, that number was about 57% if you look at other. Areas in Canada, it's significantly more. If you're in Vancouver, that's 100 and 6%. If you're in Toronto, that's 85%, which is a huge amount. You know, as a general rule of thumb, you're not supposed to spend more than 30 to 32% of your annual income on that. So it's, it's, it's quite a bit out of whack there. How many people does this impact? Yeah. So it's estimated that about 23% of Canadians own homes, but they don't have mortgages. So obviously they would not be impacted by by this. However, there's about 3036% of people that own homes and do have mortgages. So within those that that selection of people, of course there will be some that will have that wiggle room to deal with higher mortgage payments and then others that that will not. So they will definitely be impacted. And then of course there's the other 41% of the population and they rent. But just because they they rent doesn't mean that they won't be impacted because of course, typically you see landlords passing on, you know, any higher costs that they have down to their renters. So it will impact a a fair number of people. And how could this impact the Canadian economy? Yeah. So if you look at the household debt to disposable income for Canadians, it's estimated to be about 180% right now. By way of comparison in the US, it's about 100. So you know the way you can look at that as essentially Canadians don't have a lot of wiggle room. So if they're having to spend a lot more money on their shelter costs, they they won't have as much to spend on discretionary items and that that sort of thing. So of course. That could trickle down into the Canadian economy. Does this mean that housing prices will go down then or? It's actually anticipated that housing prices will not go down, and that's largely because of all of the supply demand out there. On the supply side of things, you know, housing starts have pretty much dropped off a Cliff in Canada and you see a lot of home builders, they're impacted by higher construction costs, higher borrowing costs. You've seen a number of them go into receivership. And so just generally they're not starting new, new projects. On the supply side of things or sorry, on the demand side of things, that's that's going pretty strong and that's largely because Canada has seen really rapid strong growth in population largely driven by temporary residents, immigrants that sort of thing. So the numbers are, are pretty consistently above forecast. So that supply demand will, will, will keep prices up quite likely finally. And given everything we've discussed, what's your outlook for the Canadian housing market? Yeah. So I think, you know, given the supply and demand, I think that it's likely that we will see home prices on average across Canada continue to rise. If you look at some of the reports out there, Royal Royal LePage came out with wine and they forecast that on average across Canada, you'd see about 9% growth versus last year. Their forecast prior to that had been 5 1/2, so they've upped that and also. It's it's estimated that Vancouver, while it's pretty consistently been the most expensive place to live in Canada, that that will be surpassed by Toronto this year. Toronto is expected to grow about 10% year over year. So I think that housing prices will will likely go up this year. Will Kim really appreciate you being with us? Thank you. Thanks for having me and thank you to everyone watching. Once again, that was Kim Ingles with Raymond James and I'm Jenna Dagenhart. With Asset TV.