The Weekly 411:

Today we're covering

🙏 We're Expecting an Interest Rate Cut on July 24th

🏠 Canadian Homeowners Rush to Sell as Mortgages Renews

🏗️ New Home Construction Drops in Canada

👷🏽‍♂️ Labor Shortages Threaten Canada's Housing Supply

😖 Newcomers Pay Up to 12 Months' Rent to Secure Housing

🤔 WTF of The Week

Read Time: 4 minutes

🙏 We're Expecting a Rate Cut on July 24th

• Markets have increased bets on a Bank of Canada interest rate cut on July 24, suggesting a 92% chance of a 0.25% rate cut.

• Annual inflation rate cooled to 2.7% in June, slightly lower than the expected 2.8%

• The Canadian dollar dropped about 0.2 cents to 73 cents US following the June inflation report.

🏠 Canadian Homeowners Rush to Sell as Mortgages Renews

• Homeowners and investors who bought properties 5 years ago at low rates are now struggling with much higher renewal rates.

• Condo listings in Toronto have risen by almost 25% in Q1 2024 compared to the previous year, while sales only increased by 5.3%.

• Sales have not kept pace with the rise in listings, creating a "buyers' market with no buyers.

• Some owners are trying to sell to avoid defaulting, leading to increased supply in the market.

Why This Matters: It signals a shift to a buyer's market, potentially offering opportunities to acquire properties at lower prices. The surge in supply, especially in condos, could impact rental rates and overall returns on investment, requiring a reassessment of investment strategies. 

🏗️ New Home Construction Drops in Canada

• Toronto saw a 60% decline in housing starts compared to June 2023.

• Vancouver experienced a 55% drop in housing starts year-over-year.

• As of June 12, the City of Toronto had only reached 34% of its housing target for the year.

• There is a delay between permit issuance and project start for multi-unit housing.

• Developers are hesitant to start new projects due to expected slowing price growth and increased supply.

Why This Matters: The 60% decline in Toronto's housing starts signals a significant reduction in future housing supply, likely leading to a supply shortage by 2026-2027. Investors may find this an opportune time to acquire properties at more favorable prices, anticipating potential market tightening and price appreciation in the coming years due to the impending supply gap.

👷🏽‍♂️ Labor Shortages Threaten Canada's Housing Supply

• The federal government aims to build 3.9 million new homes by 2031 to address the housing crisis.

• 134,000 residential construction workers expected to retire by 2033, with only 117,000 projected to join

• Construction workforce would need to increase by 83% (half a million people) over the next decade

• 350,000 housing units currently under construction in metropolitan areas

• Productivity issues in the construction sector contribute to housing supply challenges

• Only 2.9% of permanent residents in 2023 intended to work in skilled trades

Why it Matters: Buyers may face potential risks with new construction due to labor shortages and productivity issues, leading to lower build quality and extended project timelines. These delays and increased costs can impact profitability and deter new investments in the market. 

😖 Newcomers Pay Up to 12 Months' Rent to Secure Housing

• Newcomers are paying up to 12 months' rent upfront to secure housing in Toronto due to a lack of credit scores and references.

• This practice is not illegal, but it leaves newcomers vulnerable to exploitation.

• Landlords can only legally request the first and last month's rent but can accept more if offered.

• Real estate agents suggest this practice to newcomers, and it's becoming the norm.

Why it Matters: Newcomers paying exorbitant rents in Toronto can drive up demand, distort the market, and reduce affordability, ultimately perpetuating the housing affordability crisis. This phenomenon sets a precedent for higher rents.

🤔 WTF of The Week

In 2021, a Toronto detached home on Yarrow Rd sold for $950k.

Once listed at $1M in 2023, it will now be sold in June 2024 for $742k. 

That's a $207k (21.8%) loss 🤯