Benjamin Tal -- CIBC's Deputy Chief Economist -- is seemingly everywhere. And earlier today, he was delivering an annual economic update at an online event hosted by Brattys LLP (our condo lawyers) in partnership with CIBC. Below are a handful of slides that I found interesting and that I tweeted out during the event.
All of our personal risk curves changed during this pandemic. When the first wave hit, we all had no idea how bad this was going to be and what to expect. And so we all stayed home and washed our hands and our groceries. That changed with each subsequent wave. And now we're all ready and anxious to be done with this.
Tal referred to this as one of the most unequal recessions we've ever seen. If you had a high paying job, you probably kept it. And after you stopped spending money on eating out, entertainment, travel, and watching the Leafs lose in person, you likely had a meaningfully higher savings rate. That has created some $100 billion of "excess cash" sitting on the sidelines.
This cash wants to be spent and I think we're going to see it flying out the door in the second half of this year. Much of it will also flow into services, which should help to prop up the hardest hit segments of the economy. So while there has been some real pain, many are expecting the economy to snap back pretty quickly. Get ready for some euphoria in the second half of this year.
This last slide is particularly relevant to the kind of things we often talk about on this blog. It is essentially showing the increased demand for housing outside of the city during this pandemic (as of Q4 2020).
A flatter line (Vancouver, Calgary) indicates that year-over-year price growth was less affected by "distance from the city center." On the other hand, a steeper line (Toronto, Ottawa) indicates that price growth was stronger the more you moved outward from the core. In the case of Toronto, it was nearly 20% YoY when you got about 60-70 kilometers out of the city.
But it's important to keep in mind that the core of Toronto still grew at about 5% year-over-year. About the same as in Vancouver. And in the case of Ottawa, the number looks to be about 17.5% in the city center. These are meaningful numbers and not the kind of symptoms you would expect to see from downtowns in the middle of a death spiral.
I would argue, as I have many times before, that this last chart is the result of short-term phenomena. I bet we'll see a number of these pitches reverse by the time Q4 2021 arrives.
https://youtu.be/i_PFn-1SFgY
CIBC Deputy Chief Economist Benjamin Tal was recently interviewed by Larysa Harapyn of the Financial Post about the state of the housing market in the Greater Toronto Area. The message he delivers is pretty clear: "If you think that Toronto is unaffordable now, you wait." The long-term fundamentals in this market remain strong. Demand is outstripping supply and will likely continue to do so, which is why Tal also stresses the importance of delivering more purpose-built rental housing. If you can't see the video above, click here. (And with that, I think it's time to switch topics for tomorrow's post. That's enough Toronto housing for one week.)
Last week was the Vancouver Real Estate Forum. Benjamin Tal (chief economist at CIBC) opened things up, as he usually does, and he was pretty candid about what might be coming this winter. Here is an excerpt from a recent Globe and Mail article summarizing the event:
“It’s reasonable to assume that the next six months will not be very pretty,” said Mr. Tal. “The honeymoon of the summer is basically over. Now we enter the winter months, and I think the next few months will be much more difficult. We will have a situation where we will clearly see a second wave, and it’s already starting. This second wave will overlap with the flu season, so everybody will be very confused. The fear factor will rise, and that’s something we have to take into account when we look at the trajectory of the economy.”
Indeed, today kind of feels like the official start of the second wave. Here in Toronto, indoor dining, gyms, and a bunch of other things were just shut down for the next 28 days.
But I think the more important takeaway from the article is this one here: the fundamentals around Canadian real estate remain incredibly strong. Another excerpt:
“Let’s visit the market in 2023: I suggest the market will show the same trend we have seen in as 2019. This is a pause, but the fundamentals of the real estate market in Canada are so strong that the demand factor will continue to be there and supply will be limited. I suggest that after a two- to three-year period of some sort of softness, despite the V-shaped recovery that we are seeing, I see continuation of the trend.”
As I've said before on the blog, it's easy to get caught up in shorter-term and ephemeral headlines. But if one can look through some of that to the other side of this health crisis, I think we would all be in a position to make better decisions.
As a general rule, I don't like making long-term real estate decisions based on what is expected to take place in the next 6 months.
Benjamin Tal -- CIBC's Deputy Chief Economist -- is seemingly everywhere. And earlier today, he was delivering an annual economic update at an online event hosted by Brattys LLP (our condo lawyers) in partnership with CIBC. Below are a handful of slides that I found interesting and that I tweeted out during the event.
All of our personal risk curves changed during this pandemic. When the first wave hit, we all had no idea how bad this was going to be and what to expect. And so we all stayed home and washed our hands and our groceries. That changed with each subsequent wave. And now we're all ready and anxious to be done with this.
Tal referred to this as one of the most unequal recessions we've ever seen. If you had a high paying job, you probably kept it. And after you stopped spending money on eating out, entertainment, travel, and watching the Leafs lose in person, you likely had a meaningfully higher savings rate. That has created some $100 billion of "excess cash" sitting on the sidelines.
This cash wants to be spent and I think we're going to see it flying out the door in the second half of this year. Much of it will also flow into services, which should help to prop up the hardest hit segments of the economy. So while there has been some real pain, many are expecting the economy to snap back pretty quickly. Get ready for some euphoria in the second half of this year.
This last slide is particularly relevant to the kind of things we often talk about on this blog. It is essentially showing the increased demand for housing outside of the city during this pandemic (as of Q4 2020).
A flatter line (Vancouver, Calgary) indicates that year-over-year price growth was less affected by "distance from the city center." On the other hand, a steeper line (Toronto, Ottawa) indicates that price growth was stronger the more you moved outward from the core. In the case of Toronto, it was nearly 20% YoY when you got about 60-70 kilometers out of the city.
But it's important to keep in mind that the core of Toronto still grew at about 5% year-over-year. About the same as in Vancouver. And in the case of Ottawa, the number looks to be about 17.5% in the city center. These are meaningful numbers and not the kind of symptoms you would expect to see from downtowns in the middle of a death spiral.
I would argue, as I have many times before, that this last chart is the result of short-term phenomena. I bet we'll see a number of these pitches reverse by the time Q4 2021 arrives.
https://youtu.be/i_PFn-1SFgY
CIBC Deputy Chief Economist Benjamin Tal was recently interviewed by Larysa Harapyn of the Financial Post about the state of the housing market in the Greater Toronto Area. The message he delivers is pretty clear: "If you think that Toronto is unaffordable now, you wait." The long-term fundamentals in this market remain strong. Demand is outstripping supply and will likely continue to do so, which is why Tal also stresses the importance of delivering more purpose-built rental housing. If you can't see the video above, click here. (And with that, I think it's time to switch topics for tomorrow's post. That's enough Toronto housing for one week.)
Last week was the Vancouver Real Estate Forum. Benjamin Tal (chief economist at CIBC) opened things up, as he usually does, and he was pretty candid about what might be coming this winter. Here is an excerpt from a recent Globe and Mail article summarizing the event:
“It’s reasonable to assume that the next six months will not be very pretty,” said Mr. Tal. “The honeymoon of the summer is basically over. Now we enter the winter months, and I think the next few months will be much more difficult. We will have a situation where we will clearly see a second wave, and it’s already starting. This second wave will overlap with the flu season, so everybody will be very confused. The fear factor will rise, and that’s something we have to take into account when we look at the trajectory of the economy.”
Indeed, today kind of feels like the official start of the second wave. Here in Toronto, indoor dining, gyms, and a bunch of other things were just shut down for the next 28 days.
But I think the more important takeaway from the article is this one here: the fundamentals around Canadian real estate remain incredibly strong. Another excerpt:
“Let’s visit the market in 2023: I suggest the market will show the same trend we have seen in as 2019. This is a pause, but the fundamentals of the real estate market in Canada are so strong that the demand factor will continue to be there and supply will be limited. I suggest that after a two- to three-year period of some sort of softness, despite the V-shaped recovery that we are seeing, I see continuation of the trend.”
As I've said before on the blog, it's easy to get caught up in shorter-term and ephemeral headlines. But if one can look through some of that to the other side of this health crisis, I think we would all be in a position to make better decisions.
As a general rule, I don't like making long-term real estate decisions based on what is expected to take place in the next 6 months.
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