Inflation.
The government says inflation is currently at 2.7%. See below for the June 2024 inflation rates for the individual items in the CPI ‘basket’. Food is only 2.1% higher today than a year ago?
See below for the weighted percentages of the basket items. As of June 24, 2024 the CPI basket weights have changed – that info is not yet available.
Estimates from economists regarding the Producers Price Index (PPI) say the cost to produce local goods has risen over 30% in the past 2 years. The PPI excludes imported goods and taxes on goods.
The Fraser Institute says the average Canadian spent more on taxes (43% of their income) than on food, clothing and shelter (35.6%)
Canadian Family pays 43% of Income on taxes.
It goes on to state that since 1961 the cost of shelter (average in Canada) has risen 2006%, food up 901% and clothing up 478%. In addition – as of 2019 the taxes the average Canadian household pays have gone up 1939%!
Further, StatsCan says the average family income in 1961 was $29,748 and in 2020 was $66,800 – an increase of 224%. Some sources quote 2024 average household income to be as high as $94,000 which would bring the income increase to 316% which is still a far cry from the increase in taxes – 1939%, shelter 2006%, food 901% etc.
In Vancouver, the cost of a single-family house in 1961 was $23,000. Today it is $2,057,000 – an 8900% increase. Typically seen as a hedge against inflation, an ounce of gold in 1961 was $47. Today it is $3240 – a 6800% increase.
The federal government has committed to bringing in 485,000 immigrants to Canada in 2024, and 500,000 in 2025 and 2026. There were 450,000 new Canadians in 2023.
Approximately 14% of the total move to British Columbia. Which means housing for 70,000 more people (not including temporary workers and foreign students) in addition to the housing demand from established Canadians and their offspring.
Andrew Chen of Epoch Times reported:
“Canada’s addition of 2.3 million new immigrants in recent years is driving up housing prices, increasing spending, and exacerbating inflation, a Bank of Canada report says.
The report highlighted three main areas impacted by increased immigration numbers: housing, labour markets, and consumption.
“Strong population growth in recent years has boosted demand for housing. This is adding to existing pressures on house prices and rents,” the bank said in its July 24 report, as first reported by Blacklock’s Reporter.
While newcomers increase demand for all types of housing, the report noted the largest impact is typically seen in the rental market, because most newcomers start out as renters. Immigrants aren’t likely to own a home until they’ve been living in Canada for 10 years, the report said.
The imbalance in consumption is identified as the third major effect of massive immigration. While it may take time for newcomers to contribute to aggregate supply, their impact on demand starts immediately, the Bank said.”
Housing Demand and Supply in BC:
Demand:
For 2023 and 2024 (to June) more Canadians are leaving BC than are coming to BC. More are dying than are being born in 2022 and 2023.
But our population has increased by 148,746 in 2022 and 181,618 in 2023 – which includes temporary workers and foreign students (referred to as Non-Permanent Residents)– and by 36,597 so far this year. Here we make an assumption that of the 150,000 new British Columbians each year, at least 2 will be living in the same residence. Therefore housing unit demand may be ½ of 150,000 or 75,000.
In addition to this, the number of younger Canadians that will require housing – assuming they will be moving out of the family home by the age of 20 amounts to 275,334 annually. (renting or buying).
With BC at 13.54% of the total population, a possible 37,300 residences were being sought by these offspring of established Canadians each year in BC. Bear in mind this is in no way an exact measure, but a general ‘ballpark’ estimate.
Adding the net immigration (70,000 / year – assuming 2 people per housing unit) to the 30,000 young ‘move-out’ British Columbians we have an annual demand of 100,000 housing units.
Supply:
Building new ; 40,000 to 50,000 new housing units
In Fill Housing – new basement suites.
There are approximately 1,013,000 detached homes in BC. Out of this number there are no stats available regarding;
- How many currently have basement suites
- How many have a design precluding the development of the basement (split levels, 2 storey homes with no basement, ranchers etc)
- How many home owners would never have a suite built.
Speculating, there may be a total of 10,000 rental suites built each year (10%?). This may be an over exaggeration but the point is that there is still a 40 – 50,000 housing unit shortfall each year.
This excess demand and under supply has served to keep BC housing prices (purchase prices and rental prices) high, but currently we are experiencing a reversal of this trend;
REBGV reports “The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 14,182, a 42 per cent increase compared to June 2023 (9,990). This total is 20.3 per cent above the 10-year seasonal average (11,790).”
And – “The Greater Vancouver REALTORS® (GVR) reports that residential sales in the region totalled 2,418 in June 2024, a 19.1 per cent decrease from the 2,988 sales recorded in June 2023. This was 23.6 per cent below the 10-year seasonal average (3,166).”
Even the Vancouver rental market has dipped.
Comparing June 2023 to June 2024 – 1 bdrm apartments are down 7.8% in asking rent, 2 bdrms down 5.0% and 3 bdrms down 12.6%. Here is how we stack up against the rest of the country.
| National Rent Rankings – July 2024 | |||||||||
| RANK** | CITY/AREA | 1 BED | M/M | Y/Y | 2 BED | M/M | Y/Y | ||
| 1 | Vancouver, BC | $2,724 | 2.0% | -7.5% | $3,648 | 0.5% | -5.6% | ||
| 2 | Burnaby, BC | $2,543 | -0.1% | -1.4% | $3,183 | -0.9% | -3.9% | ||
| 3 | Toronto, ON | $2,444 | -1.4% | -4.9% | $3,199 | -2.6% | -3.1% | ||
| 4 | Mississauga, ON | $2,371 | 1.4% | 0.4% | $2,778 | 2.8% | -1.5% | ||
| 5 | North York, ON | $2,263 | -1.1% | 1.6% | $2,663 | -1.2% | -1.6% | ||
| 6 | Etobicoke, ON | $2,215 | -0.6% | -2.1% | $2,894 | 0.4% | -0.7% | ||
| 7 | Burlington, ON | $2,196 | 0.0% | -0.9% | $2,605 | -0.4% | 1.2% | ||
| 8 | Victoria, BC | $2,178 | 0.4% | 5.2% | $2,859 | 0.5% | 7.4% | ||
| 9 | Brampton, ON | $2,122 | 0.3% | -1.2% | $2,440 | 1.1% | -1.8% | ||
| 10 | Barrie, ON | $2,057 | 4.5% | 5.9% | $2,258 | -1.7% | -8.1% | ||
| 11 | Guelph, ON | $2,043 | -0.5% | -4.2% | $2,445 | -0.5% | -0.3% | ||
| 12 | Kelowna, BC | $2,034 | 2.4% | 5.3% | $2,477 | 0.4% | -6.0% | ||
| 13 | Halifax, NS | $1,992 | 3.5% | 10.3% | $2,487 | -0.1% | 11.5% | ||
| 14 | Ottawa, ON | $1,986 | -0.4% | -0.5% | $2,477 | -0.9% | 1.8% | ||
| 15 | Oshawa, ON | $1,946 | 3.3% | 4.3% | $2,241 | 0.8% | 5.6% | ||
| 16 | Kitchener, ON | $1,935 | 0.0% | 2.5% | $2,327 | -0.9% | -0.5% | ||
| 17 | Kingston, ON | $1,827 | 1.6% | 10.7% | $2,249 | -0.5% | 14.0% | ||
| 18 | Nanaimo, BC | $1,784 | 0.4% | 2.6% | $2,207 | 1.5% | 3.2% | ||
| 19 | Hamilton, ON | $1,780 | -1.5% | -4.8% | $2,130 | -1.6% | -7.3% | ||
| 20 | London, ON | $1,772 | -0.6% | 1.0% | $2,158 | -0.5% | 3.4% | ||
| 21 | Gatineau, QC | $1,761 | -0.1% | -0.4% | $2,136 | -3.3% | 13.8% | ||
| 22 | Montreal, QC | $1,753 | -0.6% | 2.4% | $2,299 | -0.7% | 5.5% | ||
| 23 | Calgary, AB | $1,743 | 0.5% | 3.3% | $2,145 | 0.2% | 2.8% | ||
| 24 | St. Catharines, ON | $1,728 | 2.9% | 0.9% | $1,964 | 1.6% | -1.4% | ||
| 25 | Brantford, ON | $1,727 | -4.0% | -3.1% | $2,065 | 2.3% | 5.5% | ||
| 26 | Niagara Falls, ON | $1,649 | 2.1% | -8.4% | $2,013 | -0.7% | -1.9% | ||
| 27 | Laval, QC | $1,595 | 0.4% | -0.6% | $2,075 | 1.4% | 2.6% | ||
| 28 | Windsor, ON | $1,530 | -0.3% | -3.1% | $1,792 | 0.1% | -6.4% | ||
| 29 | Winnipeg, MB | $1,444 | 2.0% | 11.1% | $1,839 | 4.1% | 11.4% | ||
| 30 | Quebec City, QC | $1,431 | 5.7% | 17.4% | $1,708 | -1.8% | 8.8% | ||
| 31 | Edmonton, AB | $1,368 | 0.0% | 14.4% | $1,708 | 1.1% | 13.5% | ||
| 32 | Regina, SK | $1,320 | 4.9% | 20.5% | $1,537 | 1.4% | 14.6% | ||
| 33 | Fort McMurray, AB | $1,251 | 0.7% | 13.4% | $1,429 | -2.9% | 3.5% | ||
| 34 | Saskatoon, SK | $1,239 | -1.5% | 11.6% | $1,454 | -0.4% | 16.8% | ||
| 35 | St. John’s, NL | $980 | 2.7% | 5.8% | $1,216 | 5.8% | -6.6% | ||
| $1,849 | 0.8% | 3.1% | $2,260 | 0.1% | 2.6% | ||||
| Urbanation & Rentals.ca Network Research Data | |||||||||
| N/D = insufficient data | |||||||||
| *Figures represent previous month’s data | |||||||||
| **Rankings based on average rent price of vacant 1-bed units | |||||||||
| ***Average values encompass entire rental database including all property types | |||||||||
Other than constructing purpose-built buildings (i.e. rental only), private investors are more reluctant to buy investment properties given the recent changes to the Landlord Tenant Act and the change in Capital gains tax, which would mean that the supply of rental units is unlikely to change appreciably in the near future.
The state of the Economy
Forty-six percent of Canadians say they are $200 or less away from failing to meet all their financial obligations, according to the MNP Consumer Debt Index survey conducted by Ipsos and released July 22.
While that figure is consistent with the previous quarter, there is an increase among those who were close to insolvency and already not making enough to cover their bills, Ipsos said. Nearly one in three Canadians—29 percent—say they already can’t cover their bills and debt payments, and those who say they are $1 to $200 away from insolvency increased by 3 points.
The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians.
Now in its twenty-ninth wave, the Index decreased to 85 points, down six points since last quarter. Visit MNPdebt.ca/CDI to learn more.
The data was compiled by Ipsos on behalf of MNP LTD between June 6 and June 11, 2024. For this survey, a sample of 2,000 Canadians aged 18 years and over was interviewed.
Consistent with last quarter, nearly half (46%) of Canadians are $200 or less away from failing to meet all their financial obligations. Three in 10 (29%, -2 pts) say they already can’t cover their bills and debt payments. Among those who feel overwhelmed by debt and doubt the effectiveness of lower interest rates, three in five (62%) are either insolvent or on the brink of insolvency.
The recent drops in the Bank of Canada overnight rate may have been a move to forestall mortgage disaster as one quarter of Canadians (23%) are renewing their mortgage in 2024, and 50% will within two years.
The Fraser Institute reported that Canadians are suffering the worst standard of living in 40 years. Fraser Institute & Armstrong Economics
Opportunities in a Down Economy
- Entrepreneurship: A down economy can create opportunities for entrepreneurs to start new businesses or pivot existing ones to meet changing market demands.
- Innovation: Economic downturns can drive innovation as companies and individuals seek to find new ways to reduce costs and increase efficiency.
- Investment in Education and Skills: A down economy can be an opportunity to invest in education and skills training, preparing workers for future job markets and industries.
- Small Business and Local Economies: Smaller, local businesses and communities can thrive in a down economy by focusing on niche markets and providing unique services and products.
- Social Entrepreneurship: A down economy can create opportunities for social entrepreneurs to develop innovative solutions to address social and environmental challenges.
Regarding real estate specifically, does one sell now at a relatively high time in the market? Or ride the prices down? One’s specific circumstance would certainly dictate the best course of action however, debt reduction appears to be the first order of business.