Posthaste: Why the housing market rally might not be all that it seems – Yahoo Canada Finance

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Canada’s biggest real estate market “woke from its slumber” to end the year, with home sales spiking 21 per cent in December from the month before.

The surge in the Greater Toronto Area, likely driven by a dip in bond and mortgage rates, brought to mind the rally seen last spring when the Bank of Canada first paused interest rates, and led some to predict a rebound is on its way.


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“It’s understandable that people would see these signs and expect a redux of frothy market conditions in The Big Smoke,” said Marc Desormeaux, principal economist at Desjardins.

“But a closer look at the situation shows more caution is warranted.”

Sales were not nearly as strong as the headline implies when you look deeper into the numbers, Desormeaux said in a note Friday.

Seasonal adjustments to Toronto home sales have historically been larger in December, the slowest month of the year, and so the gain should be taken “with a grain of salt,” he said.

Sales in this market still remain well below levels seen in the decade before the pandemic and are even weaker on a per capita basis.

DesjardinsDesjardins

Desjardins

Most important, however, is though the highly rate-sensitive housing market has responded to rising borrowing costs, the broader economy has not yet felt the full impact, he said.

Desjardins believes what will drive the housing market in months to come is the health of the labour market, and in Ontario, especially, that looks less promising.

The economists predict that Canada’s GDP will fall and unemployment will rise in the first half of this year, as the effect of higher interest rates continues to impact the economy.

“We also expect Ontario to feel that downturn more acutely than most provinces,” said Desormeaux.

The province has experienced job losses for three straight months and the job vacancy rate is falling more quickly in Ontario than elsewhere in Canada.

As interest rates come down later this year, Toronto’s housing market will be subject to both tailwinds and headwinds, said Desormeaux.

On the plus side, a wave of millennials, now of the age to buy their own homes, will support housing demand. The Bank of Canada’s latest consumer survey showed that an increasing share of renters intend to buy a home in the next 12 months.

“But many households also indicated that despite the possibility of some borrowing cost relief this year, previous interest rate hikes had only begun to impact their financial position,” said Desormeaux.

The December rally in Toronto’s housing market remains a “double-edged sword” because it will further limit affordability, said the economists.

And Desjardins’ own studies have shown that the number of young people moving out of higher-priced cities like Toronto is rising.

“As we start 2024, it’s too soon to tell whether Canada’s largest housing market is headed for a resurgence or a relapse,” said Desormeaux.

“What is clear at this stage is that affordability issues are still very much on the minds of Canadians, and likely will be for years to come.”

Economists at the Royal Bank of Canada also caution against reading too much into the year-end rally.

“Whether the bottom has been reached or not, Canada’s housing market remains soft in most regions at this stage with many potential buyers struggling to afford a purchase,” said economists Robert Hogue and Rachel Battaglia.

RBC expects that softness to continue through the first half of the year with a market recovery coming in the second half as Bank of Canada interest rate cuts accumulate.

“That said, any price recovery will be restrained by lingering affordability issues,” they said.

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Bloomberg/BofA Global ResearchBloomberg/BofA Global Research

Bloomberg/BofA Global Research

Here’s a metal you don’t hear about too often — tin. Yet the “forgotten commodity” has fared better than most other industrial metals in 2023, rallying up to 30 per cent during the year to a high of US$32,262 a ton, says BofA Global Research’s commodities team.

In fact, tin prices have been trending higher since 2000, when it was trading at around $4,000 a ton.

Analysts believe there are two reasons for the price surge. Tin is considered a MIFT, a metal important for future technologies, and no “blue chip” miner has taken a strategic interest in the metal, which has kept production down.

  • A Vancouver court will decide today whether to approve a settlement of up to $14.4 million that Apple has offered after being accused of having performance mitigation features in its iOS software and defects in some iPhones.

  • The Canadian Club of Ottawa hosts an event in Ottawa entitled: Innovation, Sustainability, and the Future of Work.

  • The Canadian Chamber of Commerce hosts an online event entitled “The State of Small Businesses in Canada: Navigating Click-and-Mortar Opportunities.”




The Toronto Stock Exchange only has a few large technology companies — notably Shopify Inc., Constellation Software Inc. and CGI Inc. — but the sector is of growing importance to both Canada’s current and future economy as well as investors. Equity analyst Sharon Wang outlines what investors should look for in this market’s small-to-mid-cap universe. Get more at FP Investing


Today’s Posthaste was written by Pamela Heaven, @pamheaven, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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