Michael Rothfeld

Eligible employees who worked from home in 2023 will be required to use the Detailed Method to claim home office expenses. The temporary flat rate method does not apply to the 2023 tax year. As an employee, you may be able to claim certain home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses). This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability. Salaried employees can claim: Electricity, Heat, Water, some utilities, monthly Internet access or part of your rent. Commission employees can also claim: home insurance, property taxes and lease of a cell phone, computer and more. Review the CRA website for more. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses.html

Canadas federal Finance Minister tabled Budget 2024 on April 16th. Gross new spending measures were substantially higher than signalled ahead of budget day, with equally substantial taxation measures partially offsetting the net impact. The budget adds a near-term boost to growth with major new spending, but it introduces another twist as it gives with one hand while taking with the other. While net new spending amounts to 0.4% f GDP over the next two years, gross outlays to Canadians adds up to a much more substantial $22.5 bn (0.7%), while syphoning off $9.5 bn from drivers of growth. This is additive to the $44 bn incremental spending provinces have announced in recent weeks. The budget clearly makes the Bank of Canadas job more difficult. The soft inflation print released into the budget risks fanning complacency around the risk of a resurgence in inflationary pressure particularly with a housing market rebound waiting in the wings (and more potential buyers on the margin after this budget). New spending is hardly focused. A gross $56.8 bn is spread widely across a range of priorities. The new Housing Plan reflects just 1/6th of new outlays. Others were channeled aheadmilitary spending, AI investments, and pharmacarewhile new pledges were tabled towards Aboriginal investments, community spending, and a new disability benefit among others. New tax measures will yield a $21.9 bn offsetnotably a big increase to the capital gains inclusion rate from one-half to two-thirds for individuals and corporations later this Spring. The net cost of new measures in this budget lands at $34.8 bn over the planning horizon. Near-term economic momentum has provided additional offsets ($29.1 bn), leaving the fiscal path broadly similar to the Fall Update. The FY24 deficit comes in on the mark at $40 bn (1.4% of GDP) and is expected to descend softly to $20 bn (0.6%) by FY29. Debt remains largely on a similar path of modest declines as a share of GDP over the horizon. The fiscal plan could have delivered on critical priorities including the Housing Plan, along with AI and Indigenous spending, while still adhering to its fiscal anchors without resorting to substantial new taxation measures that will dampen confidence and introduce further distortions to Canadas competitive landscape. It wont likely trigger an election, but it is clearly a warm-up lap as Canadians brace for the polls within the next 1218 months. The taps are unlikely to be turned off any time soon. Source: https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.fiscal-policy.fiscal-pulse.federal.federal-budget-analysis-.canadian-federal--2024-25-budget--april-16--2024-.html

The Bank of Canada held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually. The US economy has again proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending. US GDP growth is expected to slow in the second half of this year, but remain stronger than forecast in January. The euro area is projected to gradually recover from current weak growth. Global oil prices have moved up, averaging about $5 higher than assumed in the January Monetary Policy Report (MPR). Since January, bond yields have increased but, with narrower corporate credit spreads and sharply higher equity markets, overall financial conditions have eased. The Bank has revised up its forecast for global GDP growth to 2% in 2024 and about 3% in 2025 and 2026. Inflation continues to slow across most advanced economies, although progress will likely be bumpy. Inflation rates are projected to reach central bank targets in 2025. In Canada, economic growth stalled in the second half of last year and the economy moved into excess supply. A broad range of indicators suggest that labour market conditions continue to ease. Employment has been growing more slowly than the working-age population and the unemployment rate has risen gradually, reaching 6.1% in March. There are some recent signs that wage pressures are moderating. Source:https://www.bankofcanada.ca/2024/04/fad-press-release-2024-04-10

Consumers believe inflation has slowed, but their expectations for inflation in the near term have barely changed. Consumers link their perceptions of slowing inflation with their own experiences of price changes for frequently purchased items, such as food and gas. Expectations for long-term inflation have increased, though they remain below their historical average. Relative to last quarter, consumers now think that factors contributing to high inflationparticularly high government spending and elevated home prices and rent costswill take longer to resolve. Canadians continue to feel the negative impacts of high inflation and high interest rates on their budgets, and nearly two-thirds are cutting or postponing spending in response. Although weak, consumer sentiment improved this quarter, with people expecting lower interest rates. As a result, consumers are less pessimistic about the future of the economy and their financial situation, and fewer think they will need to further cut or postpone spending. Improved sentiment is also evident in perceptions of the labour market, which have stabilized after easing over recent quarters. Workers continue to feel positive about the labour market and, with inflation expected to be high, they continue to anticipate stronger-than-average wage growth. Source: https://www.bankofcanada.ca/2024/04/canadian-survey-of-consumer-expectations-first-quarter-of-2024

Central bankers took the stage this week, but it was Canadian economic data that stole the show. A significant improvement in inflation for February and a weak reading on retail sales increased expectations for an earlier cut by the Bank of Canada (BoC). Adding to this was the release of the BoCs March deliberations that confirmed the Bank is preparing to cut rates later this year. While the exact timing of the first rate cut is still uncertain, market pricing has rallied around June/July, matching expectations on timing for other major central banks. The inflation reading this week showed a meaningful deceleration, with the headline measure remaining within the BoC 1% to 3% target band. But the big surprise was the heavy discounting on items like clothing, cell phone /internet plans, and food. For the latter, that was the first contraction in three years (seasonally adjusted)! As Deputy Governor Toni Gravelle said at a speech later in the week, this was very encouraging. What was even more promising was the progress on the BoCs preferred inflation metrics. While these have remained stubbornly high over the last few months, they too have started to ease and now sit just above the 3% band. These metrics are starting to follow other measures of inflation lower, including the Banks old preferred inflation measure, CPIX. This index excludes the eight most volatile inflation items such as mortgage interest costs. Importantly, this measure has now reached the BoCs 2% target. Source: TD Economics https://economics.td.com/ca-weekly-bottom-line

Canadian home prices as measured by the seasonally adjusted Aggregate Composite MLS Home Price Index (HPI) were flat on a month-over-month basis in February 2024, ending a streak of five declines that began last fall, according to the latest data from the Canadian Real Estate Association (CREA). The fact that prices were unchanged from January to February was noteworthy given they had dropped 1.3% from December to January. Considering how stable the seasonally adjusted MLS HPI tends to be, shifts this abrupt are exceedingly rare. There have only been three other times in the last 20 years that have shared a sudden improvement or increase in the month-over-month percentage change from one month to the next of this size; all at various points in the last four years when demand was coming off the sidelines. Its looking like February may end up being the last relatively uneventful month of the year as far as the 2024 housing story goes, said Shaun Cathcart, CREAs Senior Economist. With so much demand having piled up on the sidelines, the story will likely be less about the exact timing of interest rate cuts and more about how many homes come up for sale this year. Home sales activity recorded over Canadian MLS Systems dipped 3.1% between January and February 2024, giving back some of the cumulative 12.7% increase in activity recorded in December 2023 and January 2024. That said, the general trend has been somewhat higher levels of activity over the last three months compared to a quiet fall market in 2023. Source: https://stats.crea.ca/en-CA/

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. Global economic growth slowed in the fourth quarter. US GDP growth also slowed but remained surprisingly robust and broad-based, with solid contributions from consumption and exports. Euro area economic growth was flat at the end of the year after contracting in the third quarter. Inflation in the United States and the euro area continued to ease. Bond yields have increased since January while corporate credit spreads have narrowed. Equity markets have risen sharply. Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR). In Canada, the economy grew in the fourth quarter by more than expected, although the pace remained weak and below potential. Real GDP expanded by 1% after contracting 0.5% in the third quarter. Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment. A strong increase in exports boosted growth. Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing. Overall, the data point to an economy in modest excess supply. Source: https://www.bankofcanada.ca/2024/03/fad-press-release-2024-03-06/

The deadline for submitting new or updated applications for the First-Time Home Buyer Incentive is March 21, 2024, at midnight ET. No new approvals will be granted after March 31, 2024. Initially designed to alleviate the burden of monthly mortgage payments for first-time buyers, the program involved the government acquiring partial ownership of a property. Under the program, the government provided a loan of up to 10 percent of the purchase price, which could be put towards a larger down payment, thereby reducing monthly payments. However, homeowners were required to repay the incentive after 25 years or upon selling the property, with the repayment amount adjusted to reflect changes in the propertys value. Source:https://www.cmhc-schl.gc.ca/consumers/home-buying/first-time-home-buyer-incentive

From National Bank of Canada The fourth quarter of 2023 witnessed a second consecutive deterioration for housing affordability in Canada. The degradation was widespread with every single market experiencing an increase in their mortgage payment as a percentage of income (MPPI) due to both higher interest rates and rising home prices. This worsening has practically eliminated recent improvements in affordability and our index at the national level is almost back to its worst affordability since the 1980s. That said, the headline index dissimulates a more worrisome picture. Indeed, the condo sub-index has reached its highest level of unaffordability in at least two decades. In other words, it would take nearly half of pre-tax median household income to service the median condo mortgage. With the condo market typically being the entry point for first-time homebuyers it leaves the latter with few options. While homeownership is becoming untenable, the rental market offers little respite. Our rental affordability index has never been worse. It would take nearly one third of pre-tax household income to pay for the average rent of a two-bedroom condo. The outlook for the coming year is fraught with challenges. While mortgage interest rates are showing signs of waning in the face of expected rate cuts by the central bank, housing demand remains supported by unprecedented population growth. As a result, we expect some upside to prices in 2024. On the rental side, in a recently released report by the CMHC, Canada`s rental market vacancy stumbled to a record low of 1.5% which leaves little room for an improvement in rents. Supply for any segment of the market isn`t expected to pick up anytime soon as building permits in many Canadian cities has plummeted at the end of 2023. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf

Following a weak second half of 2023, home sales over the last two months are showing signs of recovery, according to the latest data from the Canadian Real Estate Association (CREA). Home sales activity recorded over Canadian MLS Systems rose 3.7% between December 2023 and January 2024, building on the 7.9% month-over-month increase recorded the month prior. While activity is now back on par with 2023s relatively stronger months recorded over the spring and summer, it begins 2024 about 9% below the 10-year average. Sales are up, market conditions have tightened quite a bit, and there has been anecdotal evidence of renewed competition among buyers; however, in areas where sales have shot up most over the last two months, prices are still trending lower. Taken together, these trends suggest a market that is starting to turn a corner but is still working through the weakness of the last two years, said Shaun Cathcart, CREAs Senior Economist. https://stats.crea.ca/en-CA/

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. Global economic growth continues to slow, with inflation easing gradually across most economies. While growth in the United States has been stronger than expected, it is anticipated to slow in 2024, with weakening consumer spending and business investment. In the euro area, the economy looks to be in a mild contraction. In China, low consumer confidence and policy uncertainty will likely restrain activity. Meanwhile, oil prices are about $10 per barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have eased, largely reversing the tightening that occurred last autumn. The Bank now forecasts global GDP growth of 2% in 2024 and 2% in 2025, following 2023s 3% pace. With softer growth this year, inflation rates in most advanced economies are expected to come down slowly, reaching central bank targets in 2025. In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024. Consumers have pulled back their spending in response to higher prices and interest rates, and business investment has contracted. With weak growth, supply has caught up with demand and the economy now looks to be operating in modest excess supply. Labour market conditions have eased, with job vacancies returning to near pre-pandemic levels and new jobs being created at a slower rate than population growth. However, wages are still rising around 4% to 5%. Source: https://www.bankofcanada.ca/2024/01/fad-press-release-2024-01-24/

Income inequality increased in the third quarter as the gap in the share of disposable income between households in the two highest income quintiles (top 40% of the income distribution) and two lowest income quintiles (bottom 40% of the income distribution) reached 44.9%, up 0.5 percentage points from the third quarter of 2022. The lowest income householdsthose in the bottom 20% of the income distributionwere the only income group to reduce their average disposable income in the third quarter of 2023 relative to the same quarter of 2022 (-1.2%). Gains in average wages and salaries for the lowest income households (+3.0%) were more than offset by reductions in net investment income (-43.4%). While higher interest rates can lead to increased borrowing costs for households, they can also lead to higher yields on saving and investment accounts. The lowest income households are more likely to have a limited capacity to take advantage of these higher returns, as on average they have fewer resources available for saving and investment. Higher interest rates weighed on average disposable income for the lowest income households in the third quarter. Along with a doubling of the Bank of Canadas policy interest rate from 2.5% in July 2022 to 5.0% as of July 2023, net investment income declined for the lowest income households in the third quarter of 2023 relative to a year earlier. The lowest income earners reduced their net investment income as increased interest payments, more than half of which was due to consumer credit, outweighed gains in investment earnings. Source: https://www150.statcan.gc.ca/n1/daily-quotidien/240122/dq240122a-eng.htm?HPA=1

Home sales activity recorded over Canadian MLS Systems rose 8.7% between November and December 2023, putting it on par with some of last years relatively stronger months recorded over the spring and summer. The actual (not seasonally adjusted) number of transactions came in 3.7% above December 2022, the largest year-over-year gain since August. On an annual basis, home sales totalled 443,511 units in 2023, a decline of 11.1% from 2022. It was technically the lowest annual level for national sales activity since 2008; although it was very close to levels recorded in each of the five years following the 2008 financial crisis, as well as the first year the uninsured stress test was implemented in 2018. While December did offer up a bit of a surprise in sales numbers to cap the year, the real test of the markets resilience will be in the spring, said Larry Cerqua, Chair of CREA. There are only a couple of months left until that gets underway. If youre looking to buy or sell a property in the 2024, youll want a game plan, so contact a REALTOR in your area today, continued Cerqua. Was the December bounce in home sales the start of the expected recovery in Canadian housing markets? Probably not just yet, said Shaun Cathcart, CREAs Senior Economist. It was more likely just some of the sellers and buyers that were holding onto unrealistic pricing expectations last fall finally coming together to get deals done before the end of the year. Were still forecasting a recovery in housing demand in 2024, but well have to wait a few more months to get a sense of what that ultimately looks like. Source: https://www.crea.ca/media-hub/news/canadian-home-sales-see-unexpected-surge-to-close-out-2023/

As we look back at the year that was, we can say 2023 was a year that tested the resilience of Canadian mortgage holders. And as we look forward, theres optimism that 2024 will be the year of rate relief. Building on the 400 basis points worth of rate hikes by the Bank of Canada in 2022, borrowers faced an additional three quarter-point hikes in 2023, raising payments for some variable-rate borrowers and those renewing their mortgage. While mortgage delinquency rates have risen slightly from their record lows, borrowers have largely proven resilient thus far. By the Bank of Canadas own estimation, roughly 40% of mortgage-holders have already seen their mortgage renew at a higher rate. The bulk of renewal pain, however, is coming up in the next several years. Analysts estimate about $251 billion in mortgages will come up for renewal in 2024, with another $352 billion worth in 2025. While the Bank of Canada expects that at least 8 in 10 mortgage holders will face a relatively large mortgage payment increase by the end of 2025, expected interest rate cuts in the years ahead should help ease that payment shock. Falling interest rates in 2024 are also expected to support a rebound in home sales and prices. But forecasters differ on what those growth rates could look like. For a look at what 2024 could hold in store for interest rates and the countrys housing market, weve compiled a selection of forecasts below Real Estate Market The Canadian Real Estate Association (CREA) 2024 home sales forecast: 490,257 (+9% year-over-year) National home sales are forecast to reboundas interest rates get closer to, and eventually start, trending down and housing markets make a turn back towards their long-term trends. This forecast would place activity close to the pre-pandemic 10-year average, below levels recorded in 2007, 2015, 2016, 2017, 2019, 2020, 2021, and 2022. 2024 home price forecast: $690,916 (+1.5%) Commentary: Despite a lot of monthly volatility, this forecast would actually mark the fourth year in a row that the annual national average price has remained in the $680,000-$700,000 rangePrices in Alberta are expected to outperform the rest of Canada in 2024, with a forecast gain of 4.8% compared to 2023. In contrast, Ontario is forecast to see virtually no growth in prices next year (+0.2%). Link Royal LePage 2024 aggregate house price forecast by Q4: $843,684 (+5% year-over-year) Commentary: We see 2024 as an important tipping point for the national economy as the majority of Canadians acknowledge that the ultra-low interest rate era is dead and gone, said Phil Soper, President and CEO, Royal LePage. We believe that the great adjustment to tolerable, mid-single-digit borrowing costs will have a firm grip on our collective consciousness after only modest rate cuts by the Bank of Canada. Link Re/Max 2024 national average price increase: +0.5% year-over-year Commentary: The slower market weve been experiencing across the country [earlier] this fall could be an early indicator of an active 2024, as reflected in the modest price increase and sales outlook for next year, and the balancing of conditions in several regions across the country, said Christopher Alexander, President of Re/Max Canada. Link RBC Economics 2024 home resales forecast: 496,000 (+9.4% year-over-year) Commentary: We expect home resale activity to stay especially quiet in Ontario and British Columbia until interest rates fall materially. And then, the recovery that will follow is likely to be gradual at first. Buyers in other markets may respond more quickly to easing rates. Those in the Prairies (including Calgary) still display strong confidence levels at this juncture. 2024 home price forecast by Q4: $799,900 (+1.9%) Commentary: The good news is the latest bout of housing affordability deterioration has likely run its course and the third quarter will prove to be the cyclical-worst point for RBCs affordability measure. We see the situation improving from now on as home prices drift lower or stabilize in the majority of markets, and household income continue to grow at a solid pace. Nonetheless, theres a very long way to go before affordability is meaningfully restored. Buyers in many of Canadas large markets will contend with extremely difficult conditions for some time. Link TD Economics 2024 home sales growth forecast: +5.2% 2024 home price growth forecast: +0.5% Commentary: A weaker-than-expected economy poses an important downside risk to the outlook for housing, as it would negatively impact demand and could also precipitate forced selling. Another key risk is that rates will remain higher than forecast, should inflation linger at levels that are higher than we expect. On the opposite end, Canadas population continues to grow strongly, meaning that housing shortages are likely to persist. This could push prices higher than we anticipate. Link 2024 interest rate forecasts As noted above, 2024 could be the year of interest rate relief. Bond markets are pricing roughly 15% odds of a rate cut as early as January. While thats unlikely, most economists do expect the first Bank of Canada rate cut to happen by mid-year. Forecasts from most of the Big 6 banks see the overnight target rate falling back to at least 4.00% by the end of 2024 from its current rate of 5.00%. Bond yields, which lead fixed mortgage rates, are also expected to have reached their peak. Since early October, the 5-year Government of Canada bond yield has now fallen more than a full percentage point, resulting in numerousfixed mortgage rate cutsby the big banks and other mortgage lenders across the country. The following are the latest interest rate and bond yield forecasts from the Big 6 banks, with any changes from their previous forecasts in parenthesis. Target Rate: Year-end 24 Target Rate: Year-end 25 5-Year BoC Bond Yield: Year-end 24 5-Year BoC Bond Yield: Year-end 25 BMO 4.00% (-50bps) NA 3.20% (-45bps) NA CIBC 3.50% 2.50% NA NA NBC 3.25% (-75 bps) 2.75% (-25bps) 2.60% (-75bps) 2.85% RBC 4.00% 3.00% 3.30% 3.20% Scotia 4.00% 3.25% 3.50% 3.50% TD 3.50% 2.25% 2.90% (-40bps) 2.60% Written by: Steven Huebl- Canadian Mortgage Trends

Higher borrowing costs are leaving a permanent mark on the Canadian families who by the end of 2024 would have to budget for a roughly 30% increase in their monthly mortgage payments, on average. On aggregate, mortgage payments growth is forecast to slow next year, remain relatively flat in 2025 but pick up again in 2026, even if Canadian economy falls into a mild recession in 2024. Elevated mortgage payments will create an enduring drag on consumption and broader economic growth. Despite this, a relatively more resilient job market and largely unspent excess deposits should provide enough support for an average Canadian family to manage an increased debt servicing cost. https://economics.td.com/ca-mortgage-tides-canada-households

Summary On a seasonally adjusted basis, home sales dropped 5.6% from September to October, a fourth monthly contraction in a row and the sharpest slowdown in sales since June 2022. On the supply side, new listings decreased 2.3% in October, a first decline in seven months. Active listing increased by 4.6%, a fourth monthly gain in a row. As a result the number of months of inventory (active-listings to sales) increased from 3.7 in September to 4.1 in October and is now roughly back in line with its pre-pandemic level. The market conditions loosened during the month but remained tighter than its historical average in 7 provinces, while market conditions were balanced in B.C. and Manitoba, and looser than average in Ontario. Housing starts rose 4.0K in October to a 4-month high of 274.7K (seasonally adjusted and annualized), a result comfortably above the median economist forecast calling for a 255.0K print. Urban starts advanced 6.1K (to 257.4K) on gains in both the multi-family (+2.1K to 209.9K) and the single-family segment (+4.0K to 47.5K). Starts decreased in Toronto (-13.9K to 44.6K), Montreal (-13.6K to 18.2K), and Calgary (-9.0K to 34.8K), while they increased in Vancouver (+9.0K to 34.8K). The Teranet-National Bank Composite National House Price Index decreased by 0.4% in October after seasonal adjustment. seven of the 11 markets in the composite index were still up during the month: Montreal (+3.7%), Halifax (+1.1%), Winnipeg (+1.0%), Quebec City (+0.9%), Calgary (+0.6%), Victoria (+0.3%) and Hamilton (+0.2%). Conversely, prices were down in Toronto (-1.6%), Edmonton (-1.2%), Vancouver (-1.1%) and Ottawa-Gatineau (-1.1%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. The global economy continues to slow and inflation has eased further. In the United States, growth has been stronger than expected, led by robust consumer spending, but is likely to weaken in the months ahead as past policy rate increases work their way through the economy. Growth in the euro area has weakened and, combined with lower energy prices, this has reduced inflationary pressures. Oil prices are about $10-per-barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have also eased, with long-term interest rates unwinding some of the sharp increases seen earlier in the autumn. The US dollar has weakened against most currencies, including Canadas. In Canada, economic growth stalled through the middle quarters of 2023. Real GDP contracted at a rate of 1.1% in the third quarter, following growth of 1.4% in the second quarter. Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year. Exports and inventory adjustment subtracted from GDP growth in the third quarter, while government spending and new home construction provided a boost. The labour market continues to ease: job creation has been slower than labour force growth, job vacancies have declined further, and the unemployment rate has risen modestly. Even so, wages are still rising by 4-5%. Overall, these data and indicators for the fourth quarter suggest the economy is no longer in excess demand.

Following the recovery of the residential housing market in recent months, the Teranet-National Bank composite HPI jumped 2.2% from May to June, marking the third consecutive monthly increase, but also the largest price rise in a single month since November 2006. After a cumulative decline of 8.7% since peaking in April 2022, recent rises in the composite index have erased part of this correction, which now stands at just 6.2%. This rebound is even more impressive given that 81% of cities covered in June saw an increase during the month, the best diffusion of growth since the composite index peaked last year. While prices could continue to be supported by strong demographic growth and the lack of supply of properties on the market, and continue to rise in the third quarter, the Bank of Canadas recent rate hikes and the economic weakness expected in subsequent quarters will represent a headwind for house prices thereafter. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index rose by 2.2% in June after seasonal adjustment. After seasonal adjustment, 9 of the 11 markets in the composite index were up during the month: Toronto (+2.9%), Vancouver (+2.6%), Quebec City (+2.6%), Halifax (+2.3%), Calgary (+2.1%), Victoria (+1.9%), Montreal (+1.4%). Ottawa-Gatineau (+1.0%) and Edmonton (+0.2%). Conversely, prices fell in Winnipeg (-0.2%), while remaining stable in Hamilton. From June 2022 to June 2023, the composite index fell by 5.1%, a smaller contraction than in the previous month. Price growth in Calgary (+6.5%). Quebec City (+5.2%) and Edmonton (+1.3%) was more than offset by declines in Montreal (-3.6%), Victoria (-3.8%), Vancouver (-5.0%). Halifax (-5.6%), Winnipeg (-5.7%). Toronto (-6.7%), Ottawa-Gatineau (-8.4%) and Hamilton (-13.4%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf

The Bank of Canada increased its target for the overnight rate to 5%, with the Bank Rate at 5% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening. Global inflation is easing, with lower energy prices and a decline in goods price inflation. However, robust demand and tight labour markets are causing persistent inflationary pressures in services. Economic growth has been stronger than expected, especially in the United States, where consumer and business spending has been surprisingly resilient. After a surge in early 2023, Chinas economic growth is softening, with slowing exports and ongoing weakness in its property sector. Growth in the euro area is effectively stalled: while the service sector continues to grow, manufacturing is contracting. Global financial conditions have tightened, with bond yields up in North America and Europe as major central banks signal further interest rate increases may be needed to combat inflation. The Banks July Monetary Policy Report (MPR) projects the global economy will grow by around 2.8% this year and 2.4% in 2024, followed by 2.7% growth in 2025. Canadas economy has been stronger than expected, with more momentum in demand. Consumption growth has been surprisingly strong at 5.8% in the first quarter. While the Bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy. In addition, the housing market has seen some pickup. New construction and real estate listings are lagging demand, which is adding pressure to prices. In the labour market, there are signs of more availability of workers, but conditions remain tight, and wage growth has been around 4-5%. Strong population growth from immigration is adding both demand and supply to the economy: newcomers are helping to ease the shortage of workers while also boosting consumer spending and adding to demand for housing. https://www.bankofcanada.ca/2023/07/fad-press-release-2023-07-12/

On a seasonally adjusted basis, home sales increased 5.1% from April to May, a fourth consecutive monthly increase. Sales growth continues to be widespread across the country again this month, with the biggest increases seen in P.E.I. (+22.3%), Saskatchewan (+9.2%) and Alberto (+8.0%). Conversely, Nova Scotia (+0.9%) and Manitoba (+1.0%) saw smaller increases. On the supply side, new listings jumped 6.8% in May, a second consecutive monthly increase. Overall, supply decreased in Canada as testified by the number of months of inventory (active-listings to sales) decreasing from 3.3 to 3.1 in May. This remains up from the trough of 1.7 reached in the pandemic but remains low on a historical basis. The active-listings to sales ratio is still tighter than its historical overage in the majority of Canadian provinces, with only Manitoba indicating a ratio above average. Housing starts in Canada decreased in May (-58.9K to 202.5K, seasonally adjusted and annualized), falling short of consensus expectations calling for a 240.0K print. This decline more than offset Aprils 47.8K increase and was the sharpest since December 2021. In urban areas, declines in housing starts were seen in Ontario (-43.1K to 67.7K), British Columbia (-20.1K to 38.2K), Quebec (-6.6K to 22.5K) and the Maritimes (-1.5K to 8.1K). Meanwhile, an increase was registered in the Prairies (+12.6K to 46.0K) on gains in Manitoba (+3.0K to 7.0K) and Alberta (+9.6K to 36.5K) while starts in Saskatchewan (+0.1K to 2.5K) remained essentially unchanged. The Teranet-National Bank Composite National House Price Index rose by 0.6% in May after seasonal adjustment. After seasonal adjustment, 8 of the 11 markets in the composite index were up during the month: Toronto (+1.6%), Winnipeg (+1.5%), Victoria (+1.3%), Edmonton (+1.3%). Quebec City (+1.2%), Montreal (+1.0%), Hamilton (+0.5%) and Calgary (+0.1%). Conversely, prices fell during the month in Halifax (-2.6%). Vancouver (-1.2%) and Ottawa-Gatineau (-0.3%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf

The Bank of Canada today increased its target for the overnight rate to 4%, with the Bank Rate at 5% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high. While economic growth around the world is softening in the face of higher interest rates, major central banks are signalling that interest rates may have to rise further to restore price stability. In the United States, the economy is slowing, although consumer spending remains surprisingly resilient and the labour market is still tight. Economic growth has essentially stalled in Europe but upward pressure on core prices is persisting. Growth in China is expected to slow after surging in the first quarter. Financial conditions have tightened back to those seen before the bank failures in the United States and Switzerland. Canadas economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.1%. Consumption growth was surprisingly strong and broad-based, even after accounting for the boost from population gains. Demand for services continued to rebound. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up. The labour market remains tight: higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour. Overall, excess demand in the economy looks to be more persistent than anticipated. CPI inflation ticked up in April to 4.4%, the first increase in 10 months, with prices for a broad range of goods and services coming in higher than expected. Goods price inflation increased, despite lower energy costs. Services price inflation remained elevated, reflecting strong demand and a tight labour market. The Bank continues to expect CPI inflation to ease to around 3% in the summer, as lower energy prices feed through and last years large price gains fall out of the yearly data. However, with three-month measures of core inflation running in the 3-4% range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the 2% target. https://www.bankofcanada.ca/2023/06/fad-press-release-2023-06-07/

From CMHC Key highlights from the 2023 release We expect house prices and supply in Canada to decrease between 2022 2023. Price declines are expected to end sometime in 2023 before increasing for the remainder of the forecast period. Our analysis forecasts a significant drop in housing starts in 2023 and we can see some recovery starting in 2023 to 2024 and onward. Rental affordability is also set to decline due to demand outstripping supply, especially in Vancouver and Toronto. Prairie provinces expect more positive housing market conditions due to interprovincial migration and affordable homeownership. Ontario, British Columbia and Qubec will see significant drops in housing starts compared to other regions. The Atlantic regions economy remains stable and moderate relative to other regions. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/housing-market-outlook/2023/housing-market-outlook-spring-2023-en.pdf?rev=5c29bc91-2310-435f-b2c9-b801866d0ede

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