This week’s headline: Canada’s real estate laundering problem and growing population won’t protect prices

It’s time for your cheat sheet on this week’s top stories.

Canadian real estate

Canadian real estate has a problem with money laundering and fraud: intelligence report

Canadian real estate is an excellent money laundering tool, according to the CICA. The Canadian intelligence agency has released a report on how organized crime launders. They discovered that organized crime engaged in housing in several ways, including document fraud and turnaround. Using homes for laundering creates excess demand and distorts prices, which ultimately drives prices up.

Canada’s housing bubble will not be protected by population growth, says BMO

A booming population will protect Canadian real estate from a downturn? Not exactly, warns BMO. The bank’s chief economist presented data showing no correlation between price and population. In fact, the biggest drop in prices in the early 1990s occurred with stronger population growth. They explain that interest rates trump population when it comes to house prices.

Ontario real estate prices have jumped up to 111% since 2020

Most Canadian real estate markets have soared since the big rate cuts of 2020, but not like Ontario. Home prices in the province have risen 111.1% since the start of 2020. Even the slowest growing market has seen 60% growth, a frothy amount for anywhere in the world. Never mind the small towns that most people have never heard of.

Demand for new mortgages in Canada falls to its lowest level since February 2020

In a very un-Canadian scenario, households abruptly slowed their new mortgage borrowing. Data from the Bank of Canada (BoC) shows that lenders made just $35.6 billion in new loans in February, down 13.7% from a year ago. Lenders haven’t advanced fewer dollars for new mortgages since February 2020. We’ve already gone back to rate cut numbers before and rates haven’t even returned to pre-March 2020 levels.

Unemployment in Canada fell to a record low, but soared in Toronto and Vancouver

Jobs in Canada are hot — except in two of the country’s largest cities. The unemployment rate fell by 0.1 point to 5.1% in April, its lowest level ever. Over the same period, the rate rose 0.2 points in Toronto (6.4%) and Vancouver (5.6%), respectively. Both cities have seen the rate rise as employment is above the national average.

Canadian inflation is the highest since the mid-1980s if mortgages are excluded

Excluding mortgage interest costs from inflation sends an even higher multi-decade high. Annual CPI growth reached 6.7% in March, about 3 times more than last year. It happens to be the highest rate in 31 years. Excluding mortgage interest charges, the CPI rose 0.5 points to 7.2% – the highest level since at least the mid-1980s.

Canada has never seen real mortgage rates this low and it’s fueling the bubble

Canadian mortgage rates are rising, but they are still well below inflation. Interest on conventional 5-year fixed rate mortgages reached 3.77% in March. It was the highest since June 2020, so quite low by historical standards. However, headline inflation is 6.7%, which means real mortgage rates are -2.9%, the lowest on record. Not surprisingly, investors borrowed as much as possible. Lenders received less in repayment than they had lent in real terms.

[VIDEO] Reports of suspicious transactions in Canada have increased

Real Estate in Toronto

GTA home prices plummet $22,000 in just days

Real estate prices in the Greater Toronto Area fell sharply last month. The composite fell $22,000 in April, leading to a sharp drop in year-over-year growth. It’s only been a few weeks since interest rates climbed and the market is already adjusting.

Crater in Toronto new home sales, single-family home prices drop and condos rise

GTA new home sales plummet as interest rates climb. There were just 4,115 new homes sold in March, down 21% from a year earlier. The market showed a mixed reaction, with single-family home prices falling while condo prices were climbing. Single-family homes have a very tight inventory, but even that hasn’t been enough to stop it.

Housing construction in Toronto halts as union battles inflation

A strike by the Greater Toronto Real Estate Union halted construction on the ground. Toronto’s LiUNA Local 183, representing various construction trades, has launched a legal strike. Skyrocketing inflation is forcing workers to demand better adjustments to the cost of living. Fears that the strike could drag on are unfounded since workers are limited to 6 weeks in Ontario. After that point, they can be mandated to return to work and have mediation negotiations.

Real Estate Vancouver

Metro Vancouver real estate sales fall 30% and enter a balanced market

Greater Vancouver real estate sales have plummeted, helping to create a healthier market. Sales fell 30% in April, a much bigger drop compared to inventories. This relieved the pressure on stocks and restored a balanced market.

American real estate

US Federal Reserve makes biggest rate hike in 20 years, lending conditions tighten

The US Federal Reserve is battling the highest inflation in 40 years with the biggest rate hike in 20 years. The fed funds rate was raised 50 basis points last week, bringing the range to 0.75% to 1.00%. This was the largest increase since 2000 and the Fed hinted that at least 2 more similar increases were likely to follow.

U.S. 30-year fixed-rate mortgages now top 5%, highest since 2009

Mortgage rates in the United States have reached their highest level in more than a decade. The average 30-year fixed-rate mortgage reached 5.27% last week, up 2.31 points from a year earlier. From the lowest rate in history to the highest rate since 2009, all in less than a year.

Real estate in New Zealand

New Zealand property plummets, ‘outlook remains pessimistic’: CoreLogic

Property prices in New Zealand are falling with a pessimistic outlook. That was the view of real estate analytics giant CoreLogic, showing price drops. House prices in Dunedin (-2.9%) and Wellington (-2.0%) have seen the biggest falls since the global financial crisis (GFC). So far, that has been no consolation, with home prices still up 18.8% nationally. However, higher rates and various cooling measures will reduce recent gains.

Central Bank of New Zealand warns real estate correction is possible

The central bank of New Zealand warns that a sharp correction in house prices is possible. The RBNZ estimates that the price has fallen 4.3% since the peak in November 2021. This comes after a 48% increase in the previous two years, so no one is sweating. However, rates are expected to continue to rise and strangle demand going forward. The RBNZ wants a gradual correction in “unsustainable” house prices, but warns that a major correction is possible.

Real estate in Australia

Australia raises interest rates for the first time since 2010 as real estate slows

The Reserve Bank of Australia (RBA) raised interest rates by 0.25 basis points this week. The central bank is trying to curb inflation, which reached 5.7% annual growth in March. It’s the biggest jump since 2001, hit by the biggest interest rate hike since 2010. The RBA still forecasts higher inflation even with rate hikes.