The Canadian economy is heading for a cliff
Canadians wealth will suffer. Trudeau is to blame
Canada’s economy is driven by real estate more than oil & gas or mining, or even financial services. Housing comprises the primary asset of most households and housing costs are among the largest components of the cost of living, typically at least 30% of income in good times and higher today.
Trudeau’s relentless deficit spending, embrace of anti-energy “climate policies”, and wasteful increases in the size of the government deficit have spawned rising inflation, temporarily easing owing to lower world oil prices with little to do with government actions. But the rise in rates has a dark side - the cost of housing is not only out of reach for most Canadians today, but also about to rise even further. Canadians penchant for variable rate mortgages and typical policies limiting the term of mortgages to five year renewals if not variable rate will see dramatic increases in housing expenses over the next five years. How dramatic? Let’s review that.
Here are data from Scotia iTrade on mortgage renewals. The data are reliable even if iTrade’s analysts can’t spell “cumulative”. Virtually all outstanding mortgages will be subject to payment increases by the end of 2026.
By 2026, the iTrade report (based on data from Bank of Canada) projects that by 2026 the average payment increase suffered by Canadian mortgage holders rises by between 20% and 45%. If incomes fail to rise and home buyers are constrained by their income and allowable leverage, home prices are likely to fall between 25% and 50%. The wealth of Canadians (of which ~60% comprises real estate) will take it on the chin and fall quite dramatically.
Canadians wealth is projected to fall by $1 trillion during 2023 with large declines in their investments in stocks and bonds and the decline in the price of their homes.
This disaster is the direct result of Liberal party policies under Justin Trudeau. Next election ask yourself, was his presence in Parliament worth $1 trillion?
I absolutely love reading your articles. Insightful, packed with decades of experience and practically free to all who listen. I wish there was a way to help get the message spread far and wide.
Interesting (and worrying) analysis. A large component of the current inflation rate is actually made up of the increase in housing costs driven by BoC (and consequent bank) rate increases. We're screwed if we pop to $100+ oil, and then the BoC decides it can bring the situation under control through yet more rate increases. Exacerbating the issue is the impact of immigration on housing costs: we already have a supply problem (certainly an "affordable" supply problem), which will be made worse by poorly managed and ill-thought through immigration policies.