Canada's Housing Mirage: Faulty Data, Dubious Forecasts
Adrian C. Spitters FCSI?, CFP?, CEA? President, Author, Private Wealth Advisor
I Execute Tax-Efficient Investment Portfolio Solutions So That Your Business, Family, And Estate Assets Are De-Risked And Protected Against Financial Risk, Economic Threats, Inflation And Higher Taxes.
CMHC's Rosy Predictions Crumble Under Scrutiny
The Canada Mortgage and Housing Corporation (CMHC) has painted an overly optimistic picture of Canada's housing market, forecasting a staggering 20.1% surge in existing home prices by the end of 2026. However, a closer look at their predictions reveals a concerning disconnect from economic realities, raising serious doubts about the reliability of the underlying data.
Population Growth vs. Market Realities
At the core of CMHC's forecast lies the assumption that Canada's rising population will fuel an insatiable demand for housing, outpacing the supply of new homes. Yet, this narrative contradicts current market conditions, where home prices have stagnated, delinquencies are on the rise, and rental vacancies on overpriced residential housing stock owned by amateur investors are climbing in major metropolitan areas like Greater Toronto.
Questionable Assumptions on Pandemic Effects and Credit
The agency's assertion that delayed home purchases due to the pandemic will materialize next year fails to account for the glut of overpriced vacant rental units in the residential housing stock. This disconnect raises serious questions about Canada's ability to accurately track population outflows, a crucial factor in assessing real housing demand.
Moreover, the CMHC's reliance on cheaper credit as the primary driver of the projected housing boom is a precarious assumption in the current economic climate. While their forecast predicts a modest decline in mortgage rates, with the 5-year fixed rate shedding just 0.3 percentage points to 5.7% by 2026, this scenario appears increasingly unlikely. Central banks around the world, including the Bank of Canada, have signalled a firm commitment to combating stubborn inflation, even at the risk of triggering a recession. Consequently, mortgage rates may remain elevated for an extended period, further undermining the CMHC's projections and dampening housing demand across the country.
Economic Outlook and Job Growth
Compounding these concerns is the agency's questionable economic outlook, which foresees real GDP growth of a mere 4.7% over the three-year period, with zero growth expected for the current year. Even their more optimistic projections for 2025 (1.9% growth) and 2026 (2.8% growth) pale in comparison to historical population growth rates, suggesting a decline in real GDP per capita and worsening economic prosperity for Canadians. Furthermore, the CMHC's employment forecast paints a bleak picture, with job growth expected to lag behind population growth by a significant margin. This divergence from historical trends not only contradicts the narrative of robust housing demand but also raises concerns about rising unemployment, a scenario that typically exerts downward pressure on home prices.
As the cracks in the CMHC's forecasts widen, it becomes increasingly apparent that their projections are built on shaky foundations and questionable assumptions. The agency's reliance on faulty data, coupled with its failure to account for broader economic headwinds and potential policy shifts, casts a dark shadow over the credibility of its predictions.
Shift in Housing Trends
While the owner-occupied residential housing market faces uncertainty due to the suspect CMHC data, purpose-built multifamily rental apartments are experiencing a positive trend. This trend is fueled by rental shortages resulting from Canada's robust immigration and potential homeowners being priced out of the market due to persistently high-interest rates.
Unlike the owner-occupied market, which is often driven by speculative forces and the fear of missing out, purpose-built multifamily properties are valued based on their net return on invested capital or capitalization (CAP) rates. This fundamental metric provides a more stable and predictable valuation model, insulating the multifamily sector from the volatility and uncertainty plaguing the owner-occupied housing market.
领英推荐
Call for Critical Examination
As the housing landscape shifts, it's crucial for Canadians, policymakers, and industry stakeholders to stay informed and adapt to the changing dynamics. Instead of blindly accepting the CMHC's rosy forecasts, a critical examination of the underlying data and assumptions is crucial to ensure a sustainable and affordable housing market that serves the needs of all Canadians rather than perpetuating a housing mirage built on faulty foundations.
In light of these developments, I'm pleased to invite you to our upcoming webinar:
Exploring Alberta's Rental Market:
Join Us for a Complimentary In-Person Event in Vancouver
As Alberta's population growth reshapes the housing landscape, our upcoming in-person event will delve into the intricacies of navigating this dynamic rental market. Join me, Adrian C. Spitters, and esteemed industry experts on Wednesday, June 19th, 2024, at The Terminal City Club in Vancouver, BC.
This event will provide information on navigating cash flow in Western Canada's Real Estate market, highlight key demand drivers, and offer expert insights on the real estate and private capital market in Western Canada. Attendees will have the chance to network and gain valuable knowledge to stay ahead of the curve in their real estate investments.
Register & Secure Your Spot: HERE
Don't miss out on this opportunity to make informed decisions and explore potential solutions to the housing crisis.
To continue receiving my posts, please follow Adrian C. Spitters FCSI?, CFP?, CEA?, then click on the NOTIFICATION BELL below my profile picture to ensure you do not miss any of my posts, and finally sign up for my LinkedIn Newsletter, Lasting Financial Security?.
Please also check out and join my new group, The Counter Narrative .
Do you find value in the articles I write? Please subscribe to my weekly newsletter, which summarises my best stories of the week: SUBSCRIBE .
#CanadianHousing #RealEstate #Mortgage #EconomicForecasting #PopulationGrowth #AffordableHousing #CMHC #DataReliability #HousingBubble #RentalMarket #MultifamilyHousing