Show notes
Dive into the complexities of the Canadian housing market with our latest episode of "Smart Advice," where we explore the challenging landscape of real estate affordability, market dynamics, and government policies. In this episode, CIBC’s Deputy Chief Economist, Benjamin Tal dissects the ongoing affordability crisis, stagnating market trends, and the anticipated impacts of governmental and economic shifts on both buyers and investors. Whether you're a homeowner, potential buyer, or investor, this episode offers invaluable insights into navigating the uncertainties of the Canadian housing market and preparing for upcoming financial challenges and opportunities.Tune in to gain expert advice and stay informed about the future of real estate in Canada.Here are three reasons why you should listen to this episode:Gain insights through an in-depth analysis of the Canadian housing market from CIBC’s Deputy Chief Economist Benjamin TalFind out what’s to come in the real estate market for 2024 and 2025Learn more about mortgage renewal strategies for homeowners in the current interest rate environmentResourcesRead more from Benjamin Tal in CIBC’s 2024 Canadian housing outlookVisit CIBC’s Capital Markets Insights Hub For more information on applying for, renewing or switching you mortgage visit CIBC.com Episode HighlightsCanadian housing market affordability crisisDespite recent market cooling, prices are still 38% higher than pre-pandemic levels.The affordability gap fosters potential social unrest and fuels anti-immigrant sentiments.[04:09] Benjamin: “This is not a mild recession. This is a major crisis when it comes to affordability.“A significant portion of Canadians find homeownership unattainable, with saving for a down payment being a formidable barrier.Canadian real estate market dynamicsThe slowdown has neither stimulated buyer nor seller activity, creating a stagnant market environment.Short-term softening of the market is expected due to high supply and low demand.However a future rebound may occur as investor interest revives post rate cuts.[06:46] Benjamin: “We have to realize that we need much more supply of rental units in order to tackle this affordability crisis that we're facing.”High interest rates and negative cash flows deter investor participation, affecting overall market dynamics.[10:25] Benjamin: “With no demand and supply still in the market, I see the condo space relatively soft. After that we get to see it's starting to go down and no supply in the market, you will see investors going back into the market, but that will be a year from now, two years from now.”Government policies on the Canadian housing marketGovernment measures are seen as inadequate to tackle the severe affordability crisis effectively.Experts call for an emergency-level response to increase housing supply and address market imbalances.There may be an increase in dissatisfaction among Canadians towards the government's handling of the housing situation.Canadian economy and real estate investmentsProposed increases in capital gains tax may discourage new investments and dampen economic vitality.[12:59] Benjamin: “It seems that the Bank of Canada is overshooting by design. They want to make sure that inflation is dead before they cut interest rates and there are very good signs when it comes to inflation.”Potential rate cuts by the Bank of Canada could rejuvenate the market but depend heavily on several other economic factors.The Canadian economy's performance and U.S. economic trends heavily impact investor decisions and market forecasts.Mortgage renewal and interest rates in CanadaUpcoming mortgage renewals at higher interest rates pose significant financial challenges for homeowners.Many Canadians will be renewing their mortgages soon, making it important to plan strategically and consult with financial advisors.Financial institutions are preparing for increased delinquencies by adjusting funds and renegotiating terms with affected homeowners.[20:59] Benjamin: “So what do you want to do? Well, it depends on your situation, of course, depends on your risk appetite. But in general, it would be not a bad idea to try to buy time to take a short term mortgage, namely one, maybe two years mortgages by the time and then ride the variable rate mortgages later and take advantage of the fact that the trajectory would be downward as opposed to upward.”About Benjamin TalBenjamin Tal is a prominent Canadian economist and the Deputy Chief Economist at CIBC, one of Canada's leading banks. With years of experience in economic analysis and financial forecasting, Benjamin is widely recognized for his expertise in analyzing macroeconomic trends and their implications for the global and Canadian economies.At CIBC, he plays a crucial role in advising both the bank and its clients on economic developments and investment strategies. His analytical skills and deep understanding of economic intricacies make him a respected figure in the financial community.Learn more about Benjamin through CIBC. 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