TorontoRealtyBlog
Looking back on it, I suppose I didn’t “need” to write a thousand words or more about my holiday break in Thursday’s blog post, thereby extending the length of the blog and only allowing us to examine two of the ten discussion points for 2023.
But then again, I don’t really “need” my morning coffee.
It’s just that in both cases, it’s impossible not to act accordingly…
On Thursday, we looked at two huge topics of discussion for the 2023 real estate market: average home prices and a cornucopia of mortgage issues, specifically mortgage renewals, trigger rates, and interest rates.
Today, we’ll go through a few more of the “Top Ten” as I see them in my crystal ball, starting with something that relates back to Thursday’s conversation…
3) Mortage Delinquencies
Ah, yes! I told you in the previous section that we would return to this topic!
I’m not including this as a topic because I expect mortgage defaults to actually be a “thing” in 2023, but rather because I expect there will be more talk about mortgage defaults than in the previous decade.
Why?
Because negativity sells!
But just how common are defaults in Canada?
Exceptionally uncommon, it seems.
Here is every province and major metropolitan area’s Mortgage Delinquincy Rate in Canada from 2012 through 2022.
Canada-wide mortgage delinquencies rates were at 0.14% in Q3 of 2022.
Is that a lot?
Is that rhetorical?
Do I know what rhetorical means?
Let’s put that 0.14% from Q3 into context by looking at the Q3 of the previous five years:
Q3 of 2021: 0.20%
Q3 of 2020: 0.29%
Q3 of 2019: 0.29%
Q3 of 2018: 0.28%
Q3 of 2017: 0.30%
Alright, so you don’t have to be Albert Einstien to see that a delinquency rate of 0.14% is not only low, but historically and comparatively very low.
So if mortgage delinquency rates were to double this year, we’d still be below the average of delinquency rate in 2017 through 2020?
My holiday reading saw the words “default” and “delinquency” pass by my rods and cones many times, and I knew that in a week or more, I’d be sitting here in front of the computer, writing this section.
I know we talked above about how I’m going to try to be less cynical and pessimistic in 2023, but come on! You know we’re going to hear about this all year. It’s such a sexy topic!
Yet all the while, this should be the story:
It’s not the prettiest graph, but what more do you need to see?
Mortgage delinquency in Canada has done nothing but decline over the past decade, and we’re currently sitting at an all-time low.
Critics will suggest, “David, we also saw mortgage rates at an all-time low as well,” but even when rates were much higher, pre-pandemic, we still saw delinquency rates at less than a quarter of a percent!
There’s just no way to spin this, folks.
The market bears and the journalists that thrive on negativity can’t use this data. They just can’t.
What’s more, is that if they wanted to cherry-pick individual data points to make some areas look worse than others, they would be unsuccessful there as well.
Case in point: let’s look at mortgage delinquency rates by province:
Arguably the two “most important” provinces from a real estate perspective would be those with the largest populations and the largest two cities, notably Ontario and B.C..
Here we can see that while the prevailing Canada-wide mortgage delinquency rate over the past decade (by averaging each quarter) checks in at 0.30%, and the current mortgage delinquency rate checks in at 0.14%, the province of Ontario is merely half of that at 0.7%. Oh, and B.C. is only 0.10%.
So that’s that.
What about cities, you ask?
Let’s plot Toronto and Vancouver against the overall rate in Canada:
Uh-huh.
In Q3, 2022, Toronto saw a mere 0.06% mortgage delinquency rate, and Vancouver wasn’t far behind at 0.08%.
This compares to the 0.14% Canada-wide.
And for those wondering how this compares to the United States, the rate was 1.86% in Q3, 2022.
So if I see the word “default” or “delinquent” in another article about interest rates, mortgage rates, trigger raters, or personal finance, I’m going to know it’s merely for shock value and will represent the best in inventive news this year.
And now, thanks to our #3 discussion point, you’ll know too…
4) Inflation…..and Conversations Around It!
Can we simply end it here? Haven’t we talked about this enough?
I’ll be brief. Er, I mean, as brief as I have ever been…
When we discussed Inflation in our year-end posts, we noted that the November data hadn’t yet been released.
Well, now we have it!
6.8%
And boy, isn’t that anti-climactic!
With October inflation checking in at 6.9%, on the heels of 6.9% in September, we now bear witness to a “decline” in Canadian inflation, all the way down to 6.8%.
(womp womp)
The glass-half-full viewpoint would be to look at the month of June, where inflation was 8.1%, and suggest that we’re in a good spot.
But we could also look at our glass as half-empty, noting that inflation only 12 months prior was a mere 4.7%.
With a “final” interest rate hike expected in January, the expectation is that inflation will ease over the course of 2023.
But it’s not so much the actual rate of inflation that I wanted to discuss in this point, but rather the conversations around it.
For example, if I search “Canada inflation” in Google, this is what pops up:
We have a CBC news article about politicking, whereby Pierre Poilievre discusses his plans to replace Tiff Macklem as the governor of the Bank of Canada.
We have a rudimentary article from CTV News about how inflation leads to higher prices for gas and food, but likely not real estate in 2023.
Then we have an article about the pay of CEO’s, which seems to shame individuals for working hard, climbing the company ladder, achieving positions of influence and stature and then (gulp!) making lots of money.
Lastly, we have an article about immigration.
You heard it here first, folks: 2023 will be the year of misinformation about inflation, and everybody in the country is struggling to control the narrative.
I continue to read about the price of groceries and how it’s the fault of “greedy” grocery stories.
This is nonsense.
And yet, it’s pervasive across the media.
“Supermarkets Continue To Increase Profits On Back Of Inflation”
Toronto Star
December 23rd, 2022
I recognize, as with the article above about CEO compensation, that the definition of success is changing rapidly.
But I’m so tired of reading these articles about grocery prices.
Inflation is real, and it’s causing grocery prices to increase.
But what about the increased price of fertilizer, not to mention the Liberal government’s forced reduction of overall fertilizer use? What about climate change initiatives that have made farming more expensive?
What about the cost of labour for farmers – or the complete inability to find people who want to work, possibly because of the pervasiveness of financial assistance from the goverment?
What about the cost of gas for farmers, the interest rates on leased farm equipment, and the transportation of goods?
Here’s an article I read with glee over the holidays:
“Jagmeet Singh, Don’t Blame Capitalism For The Price Of Lettuce”
National Post
December 17th, 2022
Mr. Singh seems to believe that all businesses and individuals should operate as non-profits, or at the very least, an entity with a pre-approved and pre-determined levels of profit.
Then again, much of society has this view.
Somewhat related:
“Banks Charge More Than 6% On Loans, But Give Less Than 2% On Savings Accounts. Are We Being Gouged?”
No, you’re not being gouged.
Banks are in business, ya know, to make money.
They don’t take in money at 2% and then loan it at 2%.
And they have billions of dollars in expenses, including but not limited to their hundreds of thousands of employees, physical branches, marketing, operations, etc.
Geez.
When did society get this stupid?
This was a painful read, but I’m sure 90% of the people who saw the headline didn’t read the article. More importantly, this headline caused a large chunk of society to say, “He’s right, what the hell is going on here?”
Give a forum to people with this level of ignorance, naivety, and lack basic understanding of economics and commerce, and you’re going to fill the minds of readers with utter nonsense.
So in 2023, watch as society turns its angry gaze toward Loblaws, Sobeys, and Metro, blaming grocery stores for the price of good, which seems to blame them for inflation.
Who should be blamed for inflation, you ask?
Us.
All of us.
A basic understanding of inflation tells us that the two major causes are a demand-pull and a cost-push.
We might not be able to directly control increasing costs, but we sure as hell can control increasing demand!
Low interest rates were a direct cause of our increase in demand, so blame the Bank of Canada too.
But what would we have them do in the face of a worldwide pandemic in 2020, the likes of which the world has never seen?
Maybe we don’t give the Bank of Canada a pass here, since they could have started quantitative tightening in the fall of 2021, or even the summer. But even if inflation peaked at 6% rather than 8.1%, we’d still have seen rates increase.
There is, however, one more culprit for the cause of inflation, and this one won’t be liked by many of the readers.
It’s the government.
Specifically, the free-wheeling, high-spending, good-times-riding federal party at the controls.
Another article I enjoyed last month:
“Do-Nothing Liberals Hide Behind Tiff Macklem On Inflation”
National Post
December 12th, 2022
I love the entire article, so choosing an excerpt is like choosing a favourite child.
But here’s the point I want to make:
The current inflation situation is exacerbated by their poor energy policy, ineffective –– if not counterproductive –– housing policy, inability to boost Canada’s innovation and productivity, and acceptance of oligopolies and anti-competitive behaviour. It’s also made worse by continued high government spending and preference for sending out cheques rather than doing the hard policy work.
Unfortunately, from the Liberals’ perspective, to effectively act on many of these issues would require having tough conversations with, if not upsetting, key voter and donor groups. So rather than lead, they hide behind the BoC. This, much like how too-loose monetary policy grew systemic risk, increases the chances the bank will error and over-tighten into a large recession.
Over-relying on interest rate increases to fight inflation also ensures average workers and savers will pay the highest price for returning to two per cent inflation. Some pain is inevitable at this point, but to burden the working class with so much of it is a choice.
This is what I’ve been saying all along.
I know that we had a federal election last year and no party and no politician would have been elected on a platform of, “Cut government spending, cut public sector jobs, encourage individuals to manage their finances better, spend within or below their means, and forego luxuries they can’t afford,” but a guy can dream, right?
It felt as though every week in 2022, we were hearing one body of government talk about increasing interest rates to combat inflation while another body was talking about another forty billion dollars of new public spending.
You can’t have it both ways.
Inflation is where it is in our country because consumers can’t control their spending and because the government can’t either.
Grocery stores??? Are you kidding me?
Is now a good time to talk about windfall taxes, or should we save that for another day?
A reader emailed me over the holidays and said, “David, a word of advice: stick to writing about real estate. Leave politics out of your blog.”
But I can’t. It’s impossible.
The price of real estate is related to interest rates, which is related to inflation, which is related to public policy, which is related to politics.
If you want simplistic and inane real estate information, there are all kinds of well-known Toronto websites and blogs that show pretty pictures of houses and condos, complete with snide comments from “writers,” and even more snide comments from readers who feel that all Toronto real estate is over-priced by 80%.
On this blog, we’re better than that.
And we sure as hell don’t shy away from tough discussions, even if they can be divisive, as my comments above could be.
I don’t know that a different political party would have done anything differently. Politics is all about staying in power, and elections are primarily purchased through promises and spending. So this isn’t just a Liberal problem; it’s a political problem.
But if the government keeps spending in 2023 and injects more and more money into the economy, inflation won’t decrease. And this isn’t something you’re going to see in a headline this fall.
Ugh, grocery stores. I still can’t believe it.
If you see the word “inflation” in a headline in 2023, get ready for a load of bullshit…
5) Building On The Greenbelt
How can something so specific be so high on our list of real estate topics for the year ahead?
Well, for starters, because it’s going to be talked about a lot!
But secondly, because there are so many implications here.
Building on the Greenbelt affects our conversations about development, home prices, politics, urban sprawl, net migration, immigration, and more.
But there are also going to be two very different conversations about building on the Greenbelt:
1) Building on the Greenbelt.
2) Whether or not developers, speculators, and so-called “buddies of Doug Ford” were tipped off about the plans.
Geez, where to start?
How about back in 2018.
How about when Doug Ford suggested that developing the Greenbelt would help with our housing crisis in the GTA, only to backtrack on that one day later?
Look at the titles and dates of these two articles:
“Doug Ford Promises ‘Big Chunk’ Of Ontario’s Greenbelt To Developers”
The Globe & Mail
April 30th, 2018
“Doug Ford Recants Vow To Allow Greenbelt Development”
The Globe & Mail
May 1st, 2018
Okay.
So when we heard in 2022 that now, we’re going to see building on the Greenbelt, who’s to blame:
a) People for thinking this was never going to happen
b) Doug Ford for “lying”
He said this in 2018. Does that make him a liar? Or did he change his mind after another four years of increasing real estate prices, demand-pull, and a massive increase in immigration planned for the country?
For those not familiar with the Greenbelt, or who have heard the word a thousand times, but don’t know what we’re talking about, here’s a map of the Greenbelt as established in 2005:
As you can see, it’s a lot of space!
In fact, it’s 2,000,000 acres of land, including 721,000 acres of protected wetlands, grasslands, and forests.
The amazing part about the Greenbelt, in my opinion, is that it was established in a bipartisan way of sorts.
The Mike Harris government (Conservatives) established the Oak Ridges Moraine Conservation Plan in 2001, which paved the way for Dalton McGuinty’s government (Liberals) to establish the world’s largest greenbelt in 2005.
It took only thirteen short years for a government to suggest we allow the Greenbelt to be developed, as Doug Ford did in 2018, and only seventeen years before a government (again, Doug Ford) actually did go ahead and allow it to be developed.
And despite massive opposition, it looks like at least some of the Greenbelt will, in fact, be developed.
So what’s the story here, folks?
Do we all get a vote? In theory, maybe. But do we all have an opinion? And for the “average” person out there, what is his or her opinion based on?
Any guesses on where I stand here?
To nobody’s surprise, I’m open to the idea of building on the Greenbelt. But every single one of us will have his or her perspective shaped by age, occupation, lifestyle, political views, and where we all live.
I happen to be a real estate broker who sees a housing crisis up close, but I’m also a realist who sees a plan to bring 500,000 people to Canada every year with no plan on how and where to house them.
I’m not saying that we need to build on all of the Greenbelt, but I think the idea that this land would be protected for thousands of years became impossible when the government decided to promise “housing affordability” to the masses and increase immigration targets to never-before-seen heights.
I’m not the only one with this view…
“Like It Or Not, Building Houses On The Greenbelt Is Necessary”
National Post
November 21st, 2022
From the article:
Unless someone is going to invent a time machine and make different housing choices, we’re going to have to take an all-of-the-above approach to housing development. All Ontario political parties agree that we need to roughly double housing starts over the next 10 years to tackle this crisis. So we’re going to have to make hard choices, both in existing neighbourhoods and on the urban fringe.
The crazy thing is: the government proposed to remove 7,400 acres from the edge of the Greenbelt.
Out of 2,000,000 acres.
And, they’re going to further protect an additional 9,400 acres! So “building on the Greenbelt” in this case nets out at 50,000 new homes plus another 2,000 acres of protected lands.
Again, I point to the people in society that are against the idea of building on the Greenbelt, but won’t look past the headlines. We’re talking about 7,400 acres out of 2 Million.
But the larger story in 2023 could be the idea that Doug Ford “tipped off” developers.
There’s no shortage of coverage on this.
“Ford Denies Claims That His Government Tipped Off Developers On Greenbelt Changes”
The Globe & Mail
December 1st, 2022
I’m telling you, this is going to be a huge theme in 2023, whether it’s true or not, doesn’t matter.
People want to believe that it’s true!
“Doug Ford is in bed with developers,” we’ll see and here. And worse, I’m sure.
It already started last year:
“Prominent Developer Family Linked To More Greenbelt Properties Slated For Housing”
CBC News
November 22nd, 2022
This article is about the De Gasperis family, who are one of the largest land-owners in the Province. When I first read the article, I laughed. Imagine the people who own the most land in the Province being taken to task…………..for owning land?
The article notes that much of the land was purchased before the Greenbelt was created.
But does that matter?
Probably not to many headline-readers and those who have their minds made up already.
Tell me you won’t read this article because it’s in the Toronto Sun, but you just have to:
“Ford’s Opponents Call For OPP Probe Over Greenbelt Changes Based On Lies”
Toronto Sun
December 15th, 2022
From the article:
Have you heard the story about the wealthy developer family that took out a $100-million loan at 21% interest to buy a property just before the Ford government announced they would allow some 7,400 acres of Greenbelt land to be developed for housing?
That would be a juicy story if true and might hint at someone getting the inside scoop in time to snap up some soon-to-be-valuable land. It’s even been cited as people call for the Ontario Provincial Police to launch an investigation into possible wrongdoing.It’s not true though.In May 2021, TACC Developments, controlled by the DeGasperis family, purchased a 107-acre parcel of land off Pine Valley Drive north of Teston Road in Vaughan. They bought the land because there were 27 acres of development land included in the parcel and most of the land actually remains in the Greenbelt even after changes by the Ford government.The land is also next to another 200-acre parcel TACC owns that has long been zoned for housing development.Also, the 107-acre parcel wasn’t purchased for $100 million but for $50 million. TACC took out a $30-million loan to finance the purchase with an option to increase the loan to $100 million if needed to finance development costs.
As for the interest rate, it wasn’t 21% but was set at prime plus 75 basis points.
The original story, published in November by the Globe and Mail, didn’t confirm the facts before putting the story out in the world.
Since then, there has been no end to the politicians and activists willing to comment on this wildly fake claim. The online insinuation from critics of the Ford government is that this is obvious corruption by the premier, while the DeGasperis family have been subject to racist slurs as a result.
I can’t wait for somebody to disregard this because it’s from the Sun, or it’s too convenient, or “just because.”
Those who have their minds made up about Doug Ford, the Greenbelt, developers, or all of the above don’t want to hear any of this.
But the reality is: we’re talking about building on 0.37% of the Greenbelt while adding more protected lands than that which we’re we’re taking out.
This story might be the one that bothers me the most in 2023 since it shouldn’t be a story at all…
Phew!
Five down, five to go!
The next five will be served in more digestible quantities, I promise!
Until then, have your say below!
The post Top Ten Topics Of Discussion For 2023! (pt2) appeared first on Toronto Realty Blog.
