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[music] >> Hello I'm Greg Bonnell and welcome to MoneyTalk Live brought to you by TD Direct Investing. Every day I'll be joined by guests from across TD some of whom you will only see here. We we'll take you through your questions about investing.
Coming up on today show, we will discuss the housing market as interest rates continue elevated levels. TV economist Rishi Sondhi as our guest. In today's WebBroker education segment Jason Hnatyk will show us how you can research real estate investment trust using the platform. Here's how you can get in touch with us. Just email moneytalklive@td.com.
You can fill out that your response box under the video player in WebBroker. Now before we get to our guest of the day let's get you an update on the markets. We will start here at home with the TSX Composite Index. Seeing some of the energy names get in today. The Christ of the price of crude has been firming. It had us in positive territory earlier but we are sliding. Seeing some of the tech names way down the TSX. They seem to be winning the battle right now. Down a pretty modest 21 points we will call it. 1/10 of a percent.
Among the most actively traded names on the TSX are those energy plays.
I want to see how they're holding up because we were modestly positive earlier in the session. You have Suncor at 4331, up about 3%.
Sort of holding out its highs of the session.
Crescent point energy, most actively traded names happens to be energy names today.
Crescent point, 11 bucks and $0.21 a share, up about 1 1/2%. South of the border, bit of a subdued picture. We have those Fed minutes yesterday afternoon.
There really wasn't much in there to get the market all that excited.
We pretty much heard what we heard from the actual meeting itself last month out of the data and if it doesn't turn around my more hikes might be necessary under the US Federal Reserve.
So the S&P 500 right now down a very modest 2 1/2 points, six ticks. Let's check out the NASDAQ. A bit more pressure there just like here at home.
Some of the tech stocks down south of the border.
Down about, we will call it a little less than half a percent. Also want to take a look at CVS Health.
Fairly sizable setback for the name today down almost 10%.
Losing a big customer. Blue Shield of California is taking a big part of its business with competitors including Amazon.
And that's your market update.
Canada's housing market appeared to be on the rebound earlier this year. Within the Bank of Canada resumed hiking interest rates and that's weighed on activity.
Joining us now to discuss the health of the housing market and where things may go from here is Rishi Sondhi, an economist with TD. Rishi, great to have you on the program.
>> Thanks for having me great.
>> So things have changed.
Since the last time you were on we were on pause at the Bank of Canada. People took that as a sign of that perhaps it's time to come off the sidelines and get out of the housing market. We have at hikes since then.
How you're reading this market?
>> We've had a couple of months of hikes in June or July we've had housing in June and July.
I would say there is some resilience in demand that we are seeing. Sales were actually up a little bit over that time period. Across Canada.
You are seeing sales rise in almost all the provinces across country over the time period. With the exception of Ontario and New Brunswick where sales are down.
Sort of hiking rates.
I would say there is sort of an element of resilience that we've seen come through in response to the rate hikes.
We are seeing that in sales.
Average prices are down but those can be influenced by the type of home in the living month.
Benchmark prices which are give an indication of an underlying trend or up over those two months.
The market is still quite tight when you look at measures of the months by inventory and the like. So again, resilience I would say is an underlying theme that comes with the data.
>> The Canadian Real Estate Association came in with a put report earlier this week. Putting it all together for us in one picture. It was notable that there were several markets Calgary, Edmonton… Others that were actually showing some robust activity and Toronto was weighing down the overall sales number. Is that a function of the fact that Toronto is already a very expensive market?
Maybe a little more sensitive and interest rates?
>> I would say that's for sure the case.
You know, we are seeing the intended impact of hikes really in Toronto's market sales. Down about 15% since May. Prices are down for 2 Straight Months in Toronto.
In the GTA market. So you know, that's really where the negative impact of the rate hikes looks like they're coming through. But as you say, Calgary is sort of on the opposite end of the spectrum right?
With respect to house performing. Sales are actually up 10% since the Bank of Canada started hiking rates and, you know, there are a couple of things I will point to the sort of explain that. One, they are having this robust interprovincial migration of people coming from primarily Ontario into Alberta in this boosting of the market and you have to remember that heading into the pandemic, prices were falling in Alberta and they did not go up over the course of the pandemic. They do not go up by as much in Alberta and Calgary as they did in other jurisdictions. So the market is still relatively well-positioned to handle higher interest rates and we are certainly saying that come through.
>>(…) We are really breaking ground on a significant amount of properties near multi-decade highs of prospective buildings so I would say that perhaps on the margin it's having an impact but builders are still doing their thing with respect to breaking ground on projects.
Part of that, I think, has to do with the fact of the price level. The level of prices so high. At the bottom line is getting insulated to a degree by the fact that prices are so high.
>> I know you co-authored a report with some your colleagues at TD Economics that came up to the end of July. Talking about the robust population growth we are seeing in the country.
On the headline a lot of people worry about what that means for housing demand.
If it supports the housing market but where do we get the units from?
I found it fascinating.
You really started digging into the demand side of it.
More people in the country are going to pull some demand out of the economy. It might mean that interest rates up to stay higher for longer.
If that's what happens, what does the housing market look like longer-term? The question get from a lot of people when I do some stuff outside of the show is, when in the cuts coming? I say "I don't know".
>> You hit the nail on the head. If population growth continues to be robust like last year, over a million people coming into the country, population growth continues to be strong with that, you know, just obviously the impact will be felt in housing. We estimate that sort of our baseline scenario will be short 200,000 units or so.
200 and 250,000 units for the next three years. That never gets,, 500,000, the population growth is extremely robust.
That's one impact on housing and with prospective interest rates, yes.
Population growth is as the report call sort of a textbook demand shock. That is putting upward pressure on demand and in an environment of robust population growth versus a situation where population growth is closer to a slow stronger average, interest rates enough to be higher.
Weighing against that demand and keeping inflation in check.
>> Almost takes us to a place where there is a higher, neutral rate.
Where they say they are not stimulating and timing trying to tamp down the economy. People have an idea in their head of what they're looking for in the past 10 or 20 years were interest rates will settle out and maybe that's not the reality going forward?
>> I would say so. As I mentioned before, if it were to be maintained, again, interest rates and a free higher.
You know, then relative to the situation where we saw population growth more limit historical norms. I would say our neutral forecast, I believe is around 2 1/2, I would have to check but I believe around two and half percent.
We think the policy rate in the long run could settle around that. And again, that is boosted by the fact that population levels and numbers have been strong.
>> A lot of things to take a look at as we sadly, in the next couple of weeks, several weeks, say goodbye to Summer and headed to the fall season. What is the housing market look like?
Is it all depending with the Bank of Canada just now?
>> The Bank but also more broadly bond yields right? So that is function of Federal Reserve. Economic outlooks. Lots of things with bonds. You know, Bank of Canada of course, they have hiked rates.
They have done their 50 basis points.
Those hikes are sort of baked into the system.
Prior to this demand was quite robust and it has teetered out a little bit. So certainly we are seeing some impacts.
We've also seen bond yields I'm higher and that's likely to put some upward pressure on mortgage rates which of course is slow demand.
So in our forecast we have in the second half of the year sales falling a little bit.
The prices sort of flattening out overall.
At least the GTA for example.
In actually dropping a little in the fourth quarter.
Across Canada we see average prices falling in both the third and fourth quarter. Of this year. So sort of the neutral mode and we think this will have some impact on the market.
>> Great insights from Rishi.
I love talking real estate. I know the audience is interested as well. We will get your questions about real estate for Rishi Sondhi in just a moment's time.
I remind her of course that you can get in touch with us at any time by emailing moneytalklive@td.com. Or follow that your response box under the video player in WebBroker.
Now let's get you updated and some of the top stories in the world of business and take a look at how the markets are trading.
Strong grocery sales helped Walmart deliver an earnings beat in its most recent quarter. The retail giant is lifting its full-year sales and profit forecasts as both the grocery and online segments benefit from cash-strapped households shifting spending toward essentials while they hunt for deals.
Walmart says more customers visited stores at its website purchasing more items when they did. Interesting reaction of the stock. It had been indicating to the upside earlier but as the trade wears on it sliding a little, about 2% at this hour.
>> Taking a look at shares of Cisco Systems. In the spotlight today. The Network Equipment maker is touting its opportunities in artificial intelligence saying it's poised to become a leading supplier of networking components or the technology. Investors seem to be more focused on that opportunity at Cisco, not with the shares about 4%, a little less on the weaker than expected sales forecast came out with their earnings report.
Also want to check and check in on the shares of TECK Ressources getting a boost of the open today.
Right now still up to the tune of almost 5%. This is all amid unconfirmed reports that India's JS W steel is considering a bid for majority stake in tech steelmaking coal business. If an offer does emerge, it would be in competition with Glenn cores $8 billion US bid for those assets.
A quick check in on the market, starting here in pastry with the TSX Composite Index sliding into negative territory and modestly positive earlier on the strength of some energy names with technology fewer sectors are weighing against that.
Seem to be winning that battle right now down 1/10 of a percent. The S&P 500, a day after the Fed minutes I really did not give the market all that much to get excited about down very modestly, just 1/10 of a percent.
Back with Rishi Sondhi taking your questions about real estate so let's get to them. Here's an interesting one. About housing demand in Canada.
People wondering what the viewers want to know how big of an impact is housing demand from international students? This is coming into the conversation really.
>> Yeah and rightfully so. I mentioned population growth which is huge. About 600,000 of those people were what we call "non-permanent residence". The international students.
Typically, not a lot of mortgages are issued to these people that come into the country because they are presumably only temporary. But they do have a huge impact on rental demand and we've seen read skyrocket.
We have seen stories in the media about student housing shortages and the like. So they are having a big impact on the market and it's a bit of an unfortunate story in some respects and so far some of the students can't find adequate housing. That is an issue.
The most direct impact on the market comes for rents. Which are again, skyrocketing.
Like the GTA for example.
There is sort of a second-order impact of ownership, for the fact that rents go up.
Some rents go up.
They makes owning a unit more attractive for investors.
So there is sort of a second-order impact on ownership demand.
That sort of comes through so there is a big impact. But particularly the impulse from this cohort, it is so robust.
>> It strikes me when the story started becoming discussed more broadly about how complicated I guess some of the solutions are.
If you say "we don't have enough housing Sollecito this level of government?
We play a bit of a role but it's really this level.
But now people are saying the roles of universities are bringing in students. It seems the complex puzzle try to solve which the country is try to solve.
>> Yes for sure. There has been some headway. At the municipal and provincial and federal level with respect to trying to solve the problem so to fix and federal policies.
Rental construction financial initiative which offers low-cost financing.
Purchaser rental products, that's interesting.
The housing accelerator fund that they will be rolling out that will give municipalities to or give financial incentive to municipalities to speak of approvals. City of Toronto recently approved a policy change to allow more gentle density and pockets of Toronto.
Obviously in Ontario, trying.
They have more homes built faster acts which sets out a bunch of stipulations around town or improve supply.
Rental progress for example Allen more gentle density and things of that nature.
They are responding to the pressures in the marketplace and we are seeing some movement in that regard. But overall, the remains quite strange.
We have not yet seen the full impact of the measures.
In fact it will take some time to do so just by the nature of lags in construction, implements of policy, homebuilding picks up and it takes a while for something to go from a lot that sold two started to under construction and finally completed. So you know, even as they're doing these things will still take some time for them to sort of manifest.
>> I think a lot of people think of their own communities.
Saying "they will build townhomes there" and then "look they put a fence around their and will they mow the grass around their?" The lifecycle of real estate.
Another question (Greg reads) >> When you look at the stats they are telling you the amount of people moving from Ontario to Alberta is as high as it's been since the 80s.
So many years and we have not seen migration from Ontario to Alberta of such a scale in many, many years. Of course with those people looking for? Obviously they want to move if they have jobs.
Alberta's economy is holding up pretty well.
Relatively well, I should say. But, they are also looking for affordable housing.
They are looking for the type housing that they want.
Maybe they want to single detached home.
In Ontario they can only afford a condo or townhome or SME. They are looking for a certain type of home and they're looking to at least be able to afford a home in the first place right? So affordability.
Also affordability and vanished Alberta certainly being a draw. Attracting people from Ontario.
>> On the other end of that is people leave Ontario which is become a very expensive market and during the pandemic, fascinating that it was not just the GTA.
Around the economic of Toronto but you're getting here and going down to so home prices are sort of shock and compared with the use to be. Is there any pressure relieve by people leaving Ontario to seek out those less expensive homes in Alberta?
Or the numbers just not great enough?
> The numbers are not great enough.
We are still having massive affordability challenges in Toronto. So it's only providing the offset right?
Part of it has to do with the fact that the type of population growth that we are seeing into Ontario. Not just now but years ago.
So since 2015, 2016, federal immigration target's raised and we are seeing very strong population growth overall.
With the exception of the pandemic period.
But overall very strong population growth.
We do know it takes time for immigrant homeownership rates to rise and match that of the national population but it does happen.
It has happened historically. So we are talking about people like maybe coming to the country in 2016, 2017, there are a lot of people that are looking for ownership housing now.
So it's, yes we are seeing an outflow to places like Alberta but it is not really enough to make a dent in the backdrop unfortunately for Ontario.
>> Okay and a question here from the audience.
A viewer wants to know if you're seeing any signs of forced home sales due to higher interest rates? This is something that comes up every once in a while right?
Paying a higher mortgagor or at some point you can afford the home you're in.
>> Right. There is rumblings of that in the preconstruction space. You bought a home several years ago and now you have to close at a much higher interest rate and there are some reports that at some rumblings within that industry that is a big problem. Unfortunately we don't have data the tracks that because those homes are not listed.
Homes listed on the MLS you know, for selling, it's probably part of what's going on but it probably happens absent higher interest rates anyways for a variety of reasons. But more broadly, in the resale market listings, new listings are still increasing as one would expect.
Because we saw sales and prices increase for several months and listings responding with a bit of a lag. But the level is still quite low.
Even if there is some forceful taking place, it's not really swamping the markets.
It will put negative pressure on prices sort of in the aggregate.
>> I think the sort of general rule of Canadian really does always been, I haven't seen fresh numbers with the five-year fix was the most popular mortgage product.
So if you're in a fixed product in a lower rate, you have not been hit by these interest rate hikes yet and by the time we do get to some of those mortgages having to be renewed, maybe the Bank of Canada can cut rates a few times.
>> Yes that's definitely a possibility.
There is a big chunk of mortgages that are going to be renewing from 2024 through 2026 right?
Particularly in 2026 because 2021 was such a hot.
For the market. A lot of people took out fixed mortgages at a time, only one variable and fixed, whatever the case may be.
So little we a lot of renewables.
And you're right, are forecasted to space of the Bank of Canada will start to cut rates in the second quarter next year. So with we think they're going to, this is condition on inflation behaving which we think it will… And an economic slump which we think it will. So once you're getting in the 2024, 2025, we think it will be on the down. So these people renewing will be renewing into an environment that is probably different than the one were seeing now.
>> Always great stuff. As always at home make sure you do your own research before you make any investment decisions.
We'll get back to your questions for Rishi Sondhi on real estate in just moments time.
From rider of course and get in touch with us anytime, just email moneytalklive@td.com.
Now it's good to educational segment of the day.
>> If you want to do some research on real estate investment trusts, WebBroker can help.
Jason Hnatyk, Senior Client Education Instructor TD Direct Investing joins us now with more.
Jason great to see you again. Let's talk about WebBroker and getting some information about REITs.
>> Agreed to back as always Greg. We've talked a lot about diversification on this program and where can I take a little bit of intriguing twist here and show how investors can get some exposure to the real estate market right in their investment accounts and WebBroker.
So real estate investment trust, more commonly known as rates REITs rather are entities that are going to be owning, operating and sometimes financing in producing properties with the goal of collecting rents and leases so they can put past those incomes onto their investors. They are going to be owning things such as apartment buildings, office complex, warehouses, shopping sinners and things like that.
So lots of diversification there. One quick thing before we jump and WebBroker is to understand that REITs, as investments, are required to hold a minimum of 75% of their assets in real estate and they are going to be required to return at least 90% of their income back to their individual shareholders. So let's jump in and find out where we can locate these interesting investments within the platform. So from WebBroker, organist of the research tab at the top of the page.
I'm to bring us into the markets tab. We will start off in sectors and industries.
Here's we get a really idea of top-down research.
A bit of a funnel.
Looking at all the major sectors here that are affecting the market and economy as a whole. You'll notice in the top right-hand corner, we have the ability to search between both Canadian and US geographical locations.
Scrolling down on the left-hand side, I want to point out that we've got all the sectors listed here. REITs can be found in the financial sector. Once we are in the financial sector, working to get a similar overview of a graphic of how things are performing.
If we scroll down in the financial sector, the REITs are going to be able to be identified at the very bottom of the list.
Once we are in the REITs specific area here's where we can really uncover a lot of information.
If you're new to REITs, there's a description of what they're looking to accomplish on the right-hand side.
We get a really broad cross-section, all the REITs here in the Canadian marketplace under overview.
We also have an opportunity to scan and compare the performances of these REITs right from this one location.
And we get to look for REITs specific news happening in the market as the market moves. It's available for you here. here.
page is off the right hand side.
We have some almost essentially smaller prebuilt screens right so you can scan the REIT marketplace and identify REITs that have high dividends, higher earnings-per-share as well as an understanding of their cost of the book.
So lots of great information to begin uncovering what could be a new investment opportunity for yourself.
> Okay. You did mention the yield there.
So some people, investing sort of lens they're going through, they have different criteria whether it's yield or country exposure. How do you narrow that down and WebBroker?
> You're right. We can throw a dart at the dartboard and find something or we can really find something that is specific to your own individual investing needs.
So let's jump back and WebBroker.
Really use a screener to find some REITs that will be appropriate for you.
Create a pretty basic generic screen but once again, the nice thing with the screeners this you get to put in the criteria it is most important to you.
We will go to research once again at the top of the page.
This time under "tools" screeners. We've been to this page before.
Here we have the opportunity to screen for stocks, technical events as well as mutual funds ETF's.
With a start within the stocks section.
From here, you mentioned geographical location.
We can identify right here at the top.
Let's maybe just focusing on the Canadian marketplace. We got the particular exchange of country. We can get this going to cooperate with us and go from here.
We've selected Canada.
Let's go ahead and added a couple things.
Let's add in yield.
We also want to isolate the REITs as an investment opportunity.
So we will go ahead and choose the more criteria button.
Once again, just like we did before we will start with sectors and industry.
Here, all the different sectors that are available for us. Let's clear out because they're all selected this point.
Real estate is its own sector in this particular street here. here. here. here.
dividend yields see to make sure make that we were expecting to get his enemy worth the squeeze.
Let's go and add an additional criteria and we can isolate the dividend yield in this opportunity.
Once diskettes loaded tour screen will give that a moment to update.
We got the sliding scale where you can choose her type in the boxes.
Bringing to move the slider over to 5%.
And the now got that filter just the way we want.
So filter for Canada, filtered for REITs in a minimum 5% yield. Here's all of our REITs available for us.
We can see how they rate against each other and do more research. The select button on the right will allow us to jump in and do more research really get right into a buy ticket >> Great stuff as always Jason.
That was the use definitely being where the squeeze.
>> Absolutely.
>> I'll still outline for you at some point.
Our thanks to Jason Hnatyk, Senior Client Education Instructor TD Direct Investing.
Make sure to check out the Learning Center WebBroker for live videos upcoming master classes and webinars.
Now before your questions about real estate with Rishi Sondhi, a reminder of how you can get in touch with us.
Get a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind.
So send us your questions.
There are two ways to get in touch with us: you can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send.
We will see if one of our guests can get you the answer right here, at MoneyTalk Live.
>> Okay we are back with Rishi Sondhi taking your questions about real estate.
This would just came in the past couple of seconds.
We talked about the Bank of Canada and where they might be in the next little while and start cutting out the show.
What a viewer wants to know what your prediction or forecast is going forward and when do you think they're gonna start ^...
¸>> We think of you to be on hold.
Through the first quarter of next year it will start cutting rates in the second quarter of next year.
We think they will take their policy rate down by 150 basis points by the end of next year.
Going to 5% to 3 1/2%.
A recap of the people just joining us on the program.
Next question here is about federal government's role in all this. Is there anything the federal government can actually do to address Canada's housing issue?
>> They can work if they feel so inclined to potentially perhaps a line immigration and non-permanent residents into policy with respect to the needs of the housing.
So that is something that they acknowledge that they will take a look at.
So that is one big leave that they can pull.
Immigration policy.
Working with universities for example in how to structure and manage the nonpermanent residents to come into the country.
That's one big letter. On the supply side they can unlock surplus lands. The government has lands that they can, and buildings, that they have better surplus to the needs. They can unlock those surplus lands or for construction. That's sort of something immediate that they can do.
They do control where they can sort of help with respect to affordability and the like. They have done some interesting things, I would say, as I mentioned before, they have implemented financial-ish finance initiative which is, you know, providing cost financing for personal rentals, personal rental construction has been on the rise recently just like in Toronto in Canada more broadly.
It can help keep that going.
The housing, as I mentioned before. So there are some things definitely that the federal government can do. But probably most notably, centred around their policies with respect to immigration.
And nonpermanent residents enter the country.
>> Are they and a hard place when it comes to the nonpermanent residents with the immigration number overall?
Because we do know that aging population, retiring, we need people for the economy to keep humming but at the same time you have the housing.
Does that make the jump a little harder?
>> 100% it doesn't that's kind of the impetus for them doing what they're doing right now.
So many years ago economists were warning about the facts the population is aging will put strain on the working age population is the retired population got older and to their credit, governments listened and said "okay we need to bring more people into the country" and they are doing that.
The question now becomes "we have the infrastructure in Canada, social and economic"?
So there's nothing wrong with immigration of course it's a good thing.
It's just fighting that level.
Maybe some opportunities for discussion in that regard.
There is also some other things that can be done.
You know in public or private sector working together sort of unlocking or removing barriers to labour market entry, for example, for people already in the country right?
So for example, the construction industry.
You have to work 9000 hours roughly to get your certification right?
Is 9000 hours really the right amount of hours?
There can be some work done around that.
If it's less than that, it's more opportunity for people quicker. There are things that can be done within the country you know, to service the existing workforce better placed in occupations that take advantage of their full potential.
>> Okay.
This next question is one that was on the minds of a lot of people.
Looking for affordability. What would it actually take for prices to come down to reasonable levels?
>> Supply, supply and more supply.
The outlook for affordability unfortunately is not great. I would say we anticipate very little improvement in affordability over the next few years or so.
Part of that has to do with the fact that we see industries rather interest rates going down.
Accompanied by increased prices which allow probably offset that gain so you're not releasing too much.
Also we think economic growth is slow.
Right?
So when you think of affordability it's really payment related to income.
If income is going really strongly, affordability is improving. But because economic growth is slowing, you don't think income growth will be as robust as it has been.
Particularly if governments scale back on some of the belief that they've been providing right?
So that's not going to really help with respect with respect to Fort ability.
So on demand side it's a little tough.
On the supply side, that's really were you sort of have to see significant improvements to really make headway perspective to affordability.
Several months ago, they were saying that over and above their base case scenario there had to be an additional 3 million homes built across Canada over 10 years to get affordability back to the goal that it was in 2002, 2003.
Do not forget affordability all the way down there right?
But you know, somewhere in the middle.
So I guess the long and the short of it is there has to be more homebuilding relative to what we expect there will be moving forward.
And again, to their credit, governments are recognizing this.
There sort of making steps in the right direction to unlock more potential for homebuilding but it really, in our mind, the answer it comes to supply.
>> Is that another rock and a hard place for policymakers in the sense that you bring supply that restores affordability but you don't erode the values that the voting boomers arty have in their homes?
>> Sometimes there seems to be competing interest rates each other. 100%.
But I would say, Greg, I don't think it's far-fetched to call it somewhat of a crisis.
Our affordability metric points to a jurisdiction like Ontario, affordability being the worst it's been since at least the late 80s.
Which is how far back our we are still in the worst position we are now.
You know, a bunch of people priced out of the market. Rents are skyrocketing.
Part of that is because people can afford ownership housing so it is being shoved into the rental market. Newcomers the coming of the country, how long will they stay?
You know, if the word gets out that housing is really affordable, for example, a whole host of longer-term issues that can kind of arise.
So I would say that addressing this is of course important and it could come at the cost of homeowners.
But, let's call a spade a spade.
I mean, if you bought, say, 2005 and you held onto your home, you've made a killing right? Just in the pandemic below the price appreciated a huge amount.
Plus in 2017 prices appreciated a huge amount.
Jurisdictions like Ontario for example.
There's been sort of very robust price jurisdictions over that same time period.
Calgary, BC. Homeowners have done well right?
And I don't think.
I think there's probably a social responsibility to make sure that younger people can easily get into the housing aligned.
So, yeah.
You're caught between a rock and a hard place but I think something is to be done.
>> I use boomers as an example there. I could just as easily use Jen X homeowners because I bought the place I borrowed now in 2007 so we will get on that boat with you boomers and Gen Xers.
Let's look at the mortgage market.
Mortgage demand seems to be weakening in the US. Should we be concerned?
>> Well to answer this question will harken back to our forecast.
We do expect home sales and prices to cool.
Across Canada average home prices before all of the second half of this year in sales to fall.
So that would naturally translate into some profit.
However the amount of the decline is not so severe in our forecast right?
So we are expecting yes, simple backward not enough where we really can shock people.
It's not like a 20% drop in decline and you know… Early on when the market was correct.
So some pullback but not much.
So that indicates an resilience on the part of housing demand to interest rates and the like.
So I would say I wouldn't see much reason to be overly concerned simply because we think that whatever headwinds are choppy waters that they housing market goes through a kind of dissipate by 2024 and 2024, will be on the rise again.
>> Back to your question Sunday on real estate interest is always you do your own research before you make any investment decisions.
Now let's get markets on We are having a look at TD's advanced dashboard available through TD Direct Investing.
Malfunctioning. A nice pixel topic.
Lots of ways you can sleep through. Taking a look at the TSX 60. Taking a look at Christ's and volume. You can see the energy names going with crude getting a bit of a boost today. Still getting a bit of a boost as well whether it's a name like Suncor is of almost 3%, or, I think the next-door neighbour might be to Novus energy there. Definitely CBE or even where is Cameco. That is the uranium play of course. The weakness is been holding back the headline number has been Teck on both sides of the board.
You can see on our screen, the technology space with a name like Shopify. Down to the tune of a little more than 2.6%.
A number of screens on the heat map.
We ca take a look at what's happening south of the border in the S&P 100. They give us a bit of a snapshot.
What seems to be working here with a name like Cisco. We are seem investors excited about the AI, artificial intelligence potential for their company. Of course they make hardware for networks. Then you get a name like CVS Health, earlier in the screen, losing a pretty big customer and Blue Shield upon you. Taking the bulk of its business apparently some of CBS's competitors. You can find more information on TD events dashboard by visiting td.com/advanced dashboard.
We are back now with TD economist Wendy talking real estate. Lots of questions coming in.
Our Canadian a hot topic. This one is a Canada's housing market working in a province by province basis.
Are some areas stronger than others?
>> Yeah sure. So I think you can going on and housing markets with the three time frames.
The correction timeframe when the Bank of Canada was hiking interest rates, we saw sales fall across all provinces.
Kind of a uniform decline but relatively steep declines. BC in Ontario.
Big drop in Alberta actually.
With these sales levels in Alberta were still quite elevated. So there is volume from ultra-elevated to just not as elevated.
So the big corrections in BC and Ontario.
There we had said of this phase for the Bank of Canada was on pause and activity returned en masse right? That was also consistent pretty much all provinces in terms of home sales some pretty similar gains in and around 20% from their trough to about May of this year.
One big stand that was BC. See sales when up about 50% or so right? So was a big big dance in BC's market.
Since May, which is like a month rate for the Bank of Canada started hiking rates, we have seen, as I mentioned before, resilience sales going up pretty much all provinces with the exception of Ontario and New Brunswick. The provinces that really stood out with respect to sales have been those where affordability isn't a strain. So we've seen a wealth of strong sales go up in Alberta, Saskatchewan, Manitoba to a lesser extent, new for down Labrador. Marketers in the forest and say Ontario in BC for example.
And even in the event regions have gone up and not buy as much. You have to remember affordability is still quite good relative to say Ontario. But to its own history, affordability in that region is quite significant. So that's a bit of a lay of the land there.
>> Nicely in the land indeed. Another question here but these higher rates that we are now living with.
Have higher rates dampened activity among real estate investment home flippers is that as lucrative as it used to be?
>> Unfortunately we don't have a great line of perspective for that vis-à-vis data.
We are pretty good one. The Bank of Canada publishes data on investors and I say it's not great currently because the data that they have goes only till the end of 2022 right? But we can see what happened in 2022. Which is sailing for this question that because that's when the bulk of the tightening took place.
The data I'm talking about is the share point originated to investors versus first-time homebuyers versus repeat buyers. That share actually when up in 2022.
Forgetting some resilience on the part of investors who were indebted.
But some resilience on the part of investors to higher interest rates at least last year. You know, this year, again, we don't have data that singles out investors as a class but we look at condo sales, investors are big players in the condo market. Resale condo sales are actually outperforming angle cash units.
So far this year.
Particularly in the last three months or so. So in so far as investors are in that market, that would be a positive signal for investor demand and perhaps suggest some resilience on the part of investors.
With respect to flippers, the Bank of Canada has data on that as well.
One thing I will say, I guess a couple of important points. They're not a big portion of the market but you will see maybe 1 to 1 1/2% of people bought homes and have been sold within within six months or so which is how they kind of define this right? So it's not a picture of the market. It has been coming off as interest rates have gone up.
As one would expect, interest rates go up, the froth that was in the market, has been shaken off. So it's just not as profitable to kind of do that.
Like that's just… So we've seen that trend come down.
Again, it's not a picture of the market.
It never really got up to where it was in 2017 in terms of flipping activity in Canada.
The 2017 was more, I would say, if one wants to conflate that with a bubble, it was more bubbly than what we saw in the course the pandemic your 2022 and a 2023.
>> Rishi, always love the insights. Really great having you and looking forward to the next time.
> Thanks so much.
>> Our thanks to Rishi Sondhi, TD Senior Economist. Always do your own research before making investment decisions and stay tuned for tomorrow's shows for an update on the markets and some of our best videos a week.
And on Monday, Bryan Rogers, Senior Client Education Instructor with TD Direct Investing will help you look into the WebBroker platform. Always a popular segment and show. Get those questions in advance. Just email moneytalklive@td.com.
That's all the time we have the show today. Thanks for watching and see you tomorrow.
[music]
[music] >> Hello I'm Greg Bonnell and welcome to MoneyTalk Live brought to you by TD Direct Investing. Every day I'll be joined by guests from across TD some of whom you will only see here. We we'll take you through your questions about investing.
Coming up on today show, we will discuss the housing market as interest rates continue elevated levels. TV economist Rishi Sondhi as our guest. In today's WebBroker education segment Jason Hnatyk will show us how you can research real estate investment trust using the platform. Here's how you can get in touch with us. Just email moneytalklive@td.com.
You can fill out that your response box under the video player in WebBroker. Now before we get to our guest of the day let's get you an update on the markets. We will start here at home with the TSX Composite Index. Seeing some of the energy names get in today. The Christ of the price of crude has been firming. It had us in positive territory earlier but we are sliding. Seeing some of the tech names way down the TSX. They seem to be winning the battle right now. Down a pretty modest 21 points we will call it. 1/10 of a percent.
Among the most actively traded names on the TSX are those energy plays.
I want to see how they're holding up because we were modestly positive earlier in the session. You have Suncor at 4331, up about 3%.
Sort of holding out its highs of the session.
Crescent point energy, most actively traded names happens to be energy names today.
Crescent point, 11 bucks and $0.21 a share, up about 1 1/2%. South of the border, bit of a subdued picture. We have those Fed minutes yesterday afternoon.
There really wasn't much in there to get the market all that excited.
We pretty much heard what we heard from the actual meeting itself last month out of the data and if it doesn't turn around my more hikes might be necessary under the US Federal Reserve.
So the S&P 500 right now down a very modest 2 1/2 points, six ticks. Let's check out the NASDAQ. A bit more pressure there just like here at home.
Some of the tech stocks down south of the border.
Down about, we will call it a little less than half a percent. Also want to take a look at CVS Health.
Fairly sizable setback for the name today down almost 10%.
Losing a big customer. Blue Shield of California is taking a big part of its business with competitors including Amazon.
And that's your market update.
Canada's housing market appeared to be on the rebound earlier this year. Within the Bank of Canada resumed hiking interest rates and that's weighed on activity.
Joining us now to discuss the health of the housing market and where things may go from here is Rishi Sondhi, an economist with TD. Rishi, great to have you on the program.
>> Thanks for having me great.
>> So things have changed.
Since the last time you were on we were on pause at the Bank of Canada. People took that as a sign of that perhaps it's time to come off the sidelines and get out of the housing market. We have at hikes since then.
How you're reading this market?
>> We've had a couple of months of hikes in June or July we've had housing in June and July.
I would say there is some resilience in demand that we are seeing. Sales were actually up a little bit over that time period. Across Canada.
You are seeing sales rise in almost all the provinces across country over the time period. With the exception of Ontario and New Brunswick where sales are down.
Sort of hiking rates.
I would say there is sort of an element of resilience that we've seen come through in response to the rate hikes.
We are seeing that in sales.
Average prices are down but those can be influenced by the type of home in the living month.
Benchmark prices which are give an indication of an underlying trend or up over those two months.
The market is still quite tight when you look at measures of the months by inventory and the like. So again, resilience I would say is an underlying theme that comes with the data.
>> The Canadian Real Estate Association came in with a put report earlier this week. Putting it all together for us in one picture. It was notable that there were several markets Calgary, Edmonton… Others that were actually showing some robust activity and Toronto was weighing down the overall sales number. Is that a function of the fact that Toronto is already a very expensive market?
Maybe a little more sensitive and interest rates?
>> I would say that's for sure the case.
You know, we are seeing the intended impact of hikes really in Toronto's market sales. Down about 15% since May. Prices are down for 2 Straight Months in Toronto.
In the GTA market. So you know, that's really where the negative impact of the rate hikes looks like they're coming through. But as you say, Calgary is sort of on the opposite end of the spectrum right?
With respect to house performing. Sales are actually up 10% since the Bank of Canada started hiking rates and, you know, there are a couple of things I will point to the sort of explain that. One, they are having this robust interprovincial migration of people coming from primarily Ontario into Alberta in this boosting of the market and you have to remember that heading into the pandemic, prices were falling in Alberta and they did not go up over the course of the pandemic. They do not go up by as much in Alberta and Calgary as they did in other jurisdictions. So the market is still relatively well-positioned to handle higher interest rates and we are certainly saying that come through.
>>(…) We are really breaking ground on a significant amount of properties near multi-decade highs of prospective buildings so I would say that perhaps on the margin it's having an impact but builders are still doing their thing with respect to breaking ground on projects.
Part of that, I think, has to do with the fact of the price level. The level of prices so high. At the bottom line is getting insulated to a degree by the fact that prices are so high.
>> I know you co-authored a report with some your colleagues at TD Economics that came up to the end of July. Talking about the robust population growth we are seeing in the country.
On the headline a lot of people worry about what that means for housing demand.
If it supports the housing market but where do we get the units from?
I found it fascinating.
You really started digging into the demand side of it.
More people in the country are going to pull some demand out of the economy. It might mean that interest rates up to stay higher for longer.
If that's what happens, what does the housing market look like longer-term? The question get from a lot of people when I do some stuff outside of the show is, when in the cuts coming? I say "I don't know".
>> You hit the nail on the head. If population growth continues to be robust like last year, over a million people coming into the country, population growth continues to be strong with that, you know, just obviously the impact will be felt in housing. We estimate that sort of our baseline scenario will be short 200,000 units or so.
200 and 250,000 units for the next three years. That never gets,, 500,000, the population growth is extremely robust.
That's one impact on housing and with prospective interest rates, yes.
Population growth is as the report call sort of a textbook demand shock. That is putting upward pressure on demand and in an environment of robust population growth versus a situation where population growth is closer to a slow stronger average, interest rates enough to be higher.
Weighing against that demand and keeping inflation in check.
>> Almost takes us to a place where there is a higher, neutral rate.
Where they say they are not stimulating and timing trying to tamp down the economy. People have an idea in their head of what they're looking for in the past 10 or 20 years were interest rates will settle out and maybe that's not the reality going forward?
>> I would say so. As I mentioned before, if it were to be maintained, again, interest rates and a free higher.
You know, then relative to the situation where we saw population growth more limit historical norms. I would say our neutral forecast, I believe is around 2 1/2, I would have to check but I believe around two and half percent.
We think the policy rate in the long run could settle around that. And again, that is boosted by the fact that population levels and numbers have been strong.
>> A lot of things to take a look at as we sadly, in the next couple of weeks, several weeks, say goodbye to Summer and headed to the fall season. What is the housing market look like?
Is it all depending with the Bank of Canada just now?
>> The Bank but also more broadly bond yields right? So that is function of Federal Reserve. Economic outlooks. Lots of things with bonds. You know, Bank of Canada of course, they have hiked rates.
They have done their 50 basis points.
Those hikes are sort of baked into the system.
Prior to this demand was quite robust and it has teetered out a little bit. So certainly we are seeing some impacts.
We've also seen bond yields I'm higher and that's likely to put some upward pressure on mortgage rates which of course is slow demand.
So in our forecast we have in the second half of the year sales falling a little bit.
The prices sort of flattening out overall.
At least the GTA for example.
In actually dropping a little in the fourth quarter.
Across Canada we see average prices falling in both the third and fourth quarter. Of this year. So sort of the neutral mode and we think this will have some impact on the market.
>> Great insights from Rishi.
I love talking real estate. I know the audience is interested as well. We will get your questions about real estate for Rishi Sondhi in just a moment's time.
I remind her of course that you can get in touch with us at any time by emailing moneytalklive@td.com. Or follow that your response box under the video player in WebBroker.
Now let's get you updated and some of the top stories in the world of business and take a look at how the markets are trading.
Strong grocery sales helped Walmart deliver an earnings beat in its most recent quarter. The retail giant is lifting its full-year sales and profit forecasts as both the grocery and online segments benefit from cash-strapped households shifting spending toward essentials while they hunt for deals.
Walmart says more customers visited stores at its website purchasing more items when they did. Interesting reaction of the stock. It had been indicating to the upside earlier but as the trade wears on it sliding a little, about 2% at this hour.
>> Taking a look at shares of Cisco Systems. In the spotlight today. The Network Equipment maker is touting its opportunities in artificial intelligence saying it's poised to become a leading supplier of networking components or the technology. Investors seem to be more focused on that opportunity at Cisco, not with the shares about 4%, a little less on the weaker than expected sales forecast came out with their earnings report.
Also want to check and check in on the shares of TECK Ressources getting a boost of the open today.
Right now still up to the tune of almost 5%. This is all amid unconfirmed reports that India's JS W steel is considering a bid for majority stake in tech steelmaking coal business. If an offer does emerge, it would be in competition with Glenn cores $8 billion US bid for those assets.
A quick check in on the market, starting here in pastry with the TSX Composite Index sliding into negative territory and modestly positive earlier on the strength of some energy names with technology fewer sectors are weighing against that.
Seem to be winning that battle right now down 1/10 of a percent. The S&P 500, a day after the Fed minutes I really did not give the market all that much to get excited about down very modestly, just 1/10 of a percent.
Back with Rishi Sondhi taking your questions about real estate so let's get to them. Here's an interesting one. About housing demand in Canada.
People wondering what the viewers want to know how big of an impact is housing demand from international students? This is coming into the conversation really.
>> Yeah and rightfully so. I mentioned population growth which is huge. About 600,000 of those people were what we call "non-permanent residence". The international students.
Typically, not a lot of mortgages are issued to these people that come into the country because they are presumably only temporary. But they do have a huge impact on rental demand and we've seen read skyrocket.
We have seen stories in the media about student housing shortages and the like. So they are having a big impact on the market and it's a bit of an unfortunate story in some respects and so far some of the students can't find adequate housing. That is an issue.
The most direct impact on the market comes for rents. Which are again, skyrocketing.
Like the GTA for example.
There is sort of a second-order impact of ownership, for the fact that rents go up.
Some rents go up.
They makes owning a unit more attractive for investors.
So there is sort of a second-order impact on ownership demand.
That sort of comes through so there is a big impact. But particularly the impulse from this cohort, it is so robust.
>> It strikes me when the story started becoming discussed more broadly about how complicated I guess some of the solutions are.
If you say "we don't have enough housing Sollecito this level of government?
We play a bit of a role but it's really this level.
But now people are saying the roles of universities are bringing in students. It seems the complex puzzle try to solve which the country is try to solve.
>> Yes for sure. There has been some headway. At the municipal and provincial and federal level with respect to trying to solve the problem so to fix and federal policies.
Rental construction financial initiative which offers low-cost financing.
Purchaser rental products, that's interesting.
The housing accelerator fund that they will be rolling out that will give municipalities to or give financial incentive to municipalities to speak of approvals. City of Toronto recently approved a policy change to allow more gentle density and pockets of Toronto.
Obviously in Ontario, trying.
They have more homes built faster acts which sets out a bunch of stipulations around town or improve supply.
Rental progress for example Allen more gentle density and things of that nature.
They are responding to the pressures in the marketplace and we are seeing some movement in that regard. But overall, the remains quite strange.
We have not yet seen the full impact of the measures.
In fact it will take some time to do so just by the nature of lags in construction, implements of policy, homebuilding picks up and it takes a while for something to go from a lot that sold two started to under construction and finally completed. So you know, even as they're doing these things will still take some time for them to sort of manifest.
>> I think a lot of people think of their own communities.
Saying "they will build townhomes there" and then "look they put a fence around their and will they mow the grass around their?" The lifecycle of real estate.
Another question (Greg reads) >> When you look at the stats they are telling you the amount of people moving from Ontario to Alberta is as high as it's been since the 80s.
So many years and we have not seen migration from Ontario to Alberta of such a scale in many, many years. Of course with those people looking for? Obviously they want to move if they have jobs.
Alberta's economy is holding up pretty well.
Relatively well, I should say. But, they are also looking for affordable housing.
They are looking for the type housing that they want.
Maybe they want to single detached home.
In Ontario they can only afford a condo or townhome or SME. They are looking for a certain type of home and they're looking to at least be able to afford a home in the first place right? So affordability.
Also affordability and vanished Alberta certainly being a draw. Attracting people from Ontario.
>> On the other end of that is people leave Ontario which is become a very expensive market and during the pandemic, fascinating that it was not just the GTA.
Around the economic of Toronto but you're getting here and going down to so home prices are sort of shock and compared with the use to be. Is there any pressure relieve by people leaving Ontario to seek out those less expensive homes in Alberta?
Or the numbers just not great enough?
> The numbers are not great enough.
We are still having massive affordability challenges in Toronto. So it's only providing the offset right?
Part of it has to do with the fact that the type of population growth that we are seeing into Ontario. Not just now but years ago.
So since 2015, 2016, federal immigration target's raised and we are seeing very strong population growth overall.
With the exception of the pandemic period.
But overall very strong population growth.
We do know it takes time for immigrant homeownership rates to rise and match that of the national population but it does happen.
It has happened historically. So we are talking about people like maybe coming to the country in 2016, 2017, there are a lot of people that are looking for ownership housing now.
So it's, yes we are seeing an outflow to places like Alberta but it is not really enough to make a dent in the backdrop unfortunately for Ontario.
>> Okay and a question here from the audience.
A viewer wants to know if you're seeing any signs of forced home sales due to higher interest rates? This is something that comes up every once in a while right?
Paying a higher mortgagor or at some point you can afford the home you're in.
>> Right. There is rumblings of that in the preconstruction space. You bought a home several years ago and now you have to close at a much higher interest rate and there are some reports that at some rumblings within that industry that is a big problem. Unfortunately we don't have data the tracks that because those homes are not listed.
Homes listed on the MLS you know, for selling, it's probably part of what's going on but it probably happens absent higher interest rates anyways for a variety of reasons. But more broadly, in the resale market listings, new listings are still increasing as one would expect.
Because we saw sales and prices increase for several months and listings responding with a bit of a lag. But the level is still quite low.
Even if there is some forceful taking place, it's not really swamping the markets.
It will put negative pressure on prices sort of in the aggregate.
>> I think the sort of general rule of Canadian really does always been, I haven't seen fresh numbers with the five-year fix was the most popular mortgage product.
So if you're in a fixed product in a lower rate, you have not been hit by these interest rate hikes yet and by the time we do get to some of those mortgages having to be renewed, maybe the Bank of Canada can cut rates a few times.
>> Yes that's definitely a possibility.
There is a big chunk of mortgages that are going to be renewing from 2024 through 2026 right?
Particularly in 2026 because 2021 was such a hot.
For the market. A lot of people took out fixed mortgages at a time, only one variable and fixed, whatever the case may be.
So little we a lot of renewables.
And you're right, are forecasted to space of the Bank of Canada will start to cut rates in the second quarter next year. So with we think they're going to, this is condition on inflation behaving which we think it will… And an economic slump which we think it will. So once you're getting in the 2024, 2025, we think it will be on the down. So these people renewing will be renewing into an environment that is probably different than the one were seeing now.
>> Always great stuff. As always at home make sure you do your own research before you make any investment decisions.
We'll get back to your questions for Rishi Sondhi on real estate in just moments time.
From rider of course and get in touch with us anytime, just email moneytalklive@td.com.
Now it's good to educational segment of the day.
>> If you want to do some research on real estate investment trusts, WebBroker can help.
Jason Hnatyk, Senior Client Education Instructor TD Direct Investing joins us now with more.
Jason great to see you again. Let's talk about WebBroker and getting some information about REITs.
>> Agreed to back as always Greg. We've talked a lot about diversification on this program and where can I take a little bit of intriguing twist here and show how investors can get some exposure to the real estate market right in their investment accounts and WebBroker.
So real estate investment trust, more commonly known as rates REITs rather are entities that are going to be owning, operating and sometimes financing in producing properties with the goal of collecting rents and leases so they can put past those incomes onto their investors. They are going to be owning things such as apartment buildings, office complex, warehouses, shopping sinners and things like that.
So lots of diversification there. One quick thing before we jump and WebBroker is to understand that REITs, as investments, are required to hold a minimum of 75% of their assets in real estate and they are going to be required to return at least 90% of their income back to their individual shareholders. So let's jump in and find out where we can locate these interesting investments within the platform. So from WebBroker, organist of the research tab at the top of the page.
I'm to bring us into the markets tab. We will start off in sectors and industries.
Here's we get a really idea of top-down research.
A bit of a funnel.
Looking at all the major sectors here that are affecting the market and economy as a whole. You'll notice in the top right-hand corner, we have the ability to search between both Canadian and US geographical locations.
Scrolling down on the left-hand side, I want to point out that we've got all the sectors listed here. REITs can be found in the financial sector. Once we are in the financial sector, working to get a similar overview of a graphic of how things are performing.
If we scroll down in the financial sector, the REITs are going to be able to be identified at the very bottom of the list.
Once we are in the REITs specific area here's where we can really uncover a lot of information.
If you're new to REITs, there's a description of what they're looking to accomplish on the right-hand side.
We get a really broad cross-section, all the REITs here in the Canadian marketplace under overview.
We also have an opportunity to scan and compare the performances of these REITs right from this one location.
And we get to look for REITs specific news happening in the market as the market moves. It's available for you here. here.
page is off the right hand side.
We have some almost essentially smaller prebuilt screens right so you can scan the REIT marketplace and identify REITs that have high dividends, higher earnings-per-share as well as an understanding of their cost of the book.
So lots of great information to begin uncovering what could be a new investment opportunity for yourself.
> Okay. You did mention the yield there.
So some people, investing sort of lens they're going through, they have different criteria whether it's yield or country exposure. How do you narrow that down and WebBroker?
> You're right. We can throw a dart at the dartboard and find something or we can really find something that is specific to your own individual investing needs.
So let's jump back and WebBroker.
Really use a screener to find some REITs that will be appropriate for you.
Create a pretty basic generic screen but once again, the nice thing with the screeners this you get to put in the criteria it is most important to you.
We will go to research once again at the top of the page.
This time under "tools" screeners. We've been to this page before.
Here we have the opportunity to screen for stocks, technical events as well as mutual funds ETF's.
With a start within the stocks section.
From here, you mentioned geographical location.
We can identify right here at the top.
Let's maybe just focusing on the Canadian marketplace. We got the particular exchange of country. We can get this going to cooperate with us and go from here.
We've selected Canada.
Let's go ahead and added a couple things.
Let's add in yield.
We also want to isolate the REITs as an investment opportunity.
So we will go ahead and choose the more criteria button.
Once again, just like we did before we will start with sectors and industry.
Here, all the different sectors that are available for us. Let's clear out because they're all selected this point.
Real estate is its own sector in this particular street here. here. here. here.
dividend yields see to make sure make that we were expecting to get his enemy worth the squeeze.
Let's go and add an additional criteria and we can isolate the dividend yield in this opportunity.
Once diskettes loaded tour screen will give that a moment to update.
We got the sliding scale where you can choose her type in the boxes.
Bringing to move the slider over to 5%.
And the now got that filter just the way we want.
So filter for Canada, filtered for REITs in a minimum 5% yield. Here's all of our REITs available for us.
We can see how they rate against each other and do more research. The select button on the right will allow us to jump in and do more research really get right into a buy ticket >> Great stuff as always Jason.
That was the use definitely being where the squeeze.
>> Absolutely.
>> I'll still outline for you at some point.
Our thanks to Jason Hnatyk, Senior Client Education Instructor TD Direct Investing.
Make sure to check out the Learning Center WebBroker for live videos upcoming master classes and webinars.
Now before your questions about real estate with Rishi Sondhi, a reminder of how you can get in touch with us.
Get a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind.
So send us your questions.
There are two ways to get in touch with us: you can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send.
We will see if one of our guests can get you the answer right here, at MoneyTalk Live.
>> Okay we are back with Rishi Sondhi taking your questions about real estate.
This would just came in the past couple of seconds.
We talked about the Bank of Canada and where they might be in the next little while and start cutting out the show.
What a viewer wants to know what your prediction or forecast is going forward and when do you think they're gonna start ^...
¸>> We think of you to be on hold.
Through the first quarter of next year it will start cutting rates in the second quarter of next year.
We think they will take their policy rate down by 150 basis points by the end of next year.
Going to 5% to 3 1/2%.
A recap of the people just joining us on the program.
Next question here is about federal government's role in all this. Is there anything the federal government can actually do to address Canada's housing issue?
>> They can work if they feel so inclined to potentially perhaps a line immigration and non-permanent residents into policy with respect to the needs of the housing.
So that is something that they acknowledge that they will take a look at.
So that is one big leave that they can pull.
Immigration policy.
Working with universities for example in how to structure and manage the nonpermanent residents to come into the country.
That's one big letter. On the supply side they can unlock surplus lands. The government has lands that they can, and buildings, that they have better surplus to the needs. They can unlock those surplus lands or for construction. That's sort of something immediate that they can do.
They do control where they can sort of help with respect to affordability and the like. They have done some interesting things, I would say, as I mentioned before, they have implemented financial-ish finance initiative which is, you know, providing cost financing for personal rentals, personal rental construction has been on the rise recently just like in Toronto in Canada more broadly.
It can help keep that going.
The housing, as I mentioned before. So there are some things definitely that the federal government can do. But probably most notably, centred around their policies with respect to immigration.
And nonpermanent residents enter the country.
>> Are they and a hard place when it comes to the nonpermanent residents with the immigration number overall?
Because we do know that aging population, retiring, we need people for the economy to keep humming but at the same time you have the housing.
Does that make the jump a little harder?
>> 100% it doesn't that's kind of the impetus for them doing what they're doing right now.
So many years ago economists were warning about the facts the population is aging will put strain on the working age population is the retired population got older and to their credit, governments listened and said "okay we need to bring more people into the country" and they are doing that.
The question now becomes "we have the infrastructure in Canada, social and economic"?
So there's nothing wrong with immigration of course it's a good thing.
It's just fighting that level.
Maybe some opportunities for discussion in that regard.
There is also some other things that can be done.
You know in public or private sector working together sort of unlocking or removing barriers to labour market entry, for example, for people already in the country right?
So for example, the construction industry.
You have to work 9000 hours roughly to get your certification right?
Is 9000 hours really the right amount of hours?
There can be some work done around that.
If it's less than that, it's more opportunity for people quicker. There are things that can be done within the country you know, to service the existing workforce better placed in occupations that take advantage of their full potential.
>> Okay.
This next question is one that was on the minds of a lot of people.
Looking for affordability. What would it actually take for prices to come down to reasonable levels?
>> Supply, supply and more supply.
The outlook for affordability unfortunately is not great. I would say we anticipate very little improvement in affordability over the next few years or so.
Part of that has to do with the fact that we see industries rather interest rates going down.
Accompanied by increased prices which allow probably offset that gain so you're not releasing too much.
Also we think economic growth is slow.
Right?
So when you think of affordability it's really payment related to income.
If income is going really strongly, affordability is improving. But because economic growth is slowing, you don't think income growth will be as robust as it has been.
Particularly if governments scale back on some of the belief that they've been providing right?
So that's not going to really help with respect with respect to Fort ability.
So on demand side it's a little tough.
On the supply side, that's really were you sort of have to see significant improvements to really make headway perspective to affordability.
Several months ago, they were saying that over and above their base case scenario there had to be an additional 3 million homes built across Canada over 10 years to get affordability back to the goal that it was in 2002, 2003.
Do not forget affordability all the way down there right?
But you know, somewhere in the middle.
So I guess the long and the short of it is there has to be more homebuilding relative to what we expect there will be moving forward.
And again, to their credit, governments are recognizing this.
There sort of making steps in the right direction to unlock more potential for homebuilding but it really, in our mind, the answer it comes to supply.
>> Is that another rock and a hard place for policymakers in the sense that you bring supply that restores affordability but you don't erode the values that the voting boomers arty have in their homes?
>> Sometimes there seems to be competing interest rates each other. 100%.
But I would say, Greg, I don't think it's far-fetched to call it somewhat of a crisis.
Our affordability metric points to a jurisdiction like Ontario, affordability being the worst it's been since at least the late 80s.
Which is how far back our we are still in the worst position we are now.
You know, a bunch of people priced out of the market. Rents are skyrocketing.
Part of that is because people can afford ownership housing so it is being shoved into the rental market. Newcomers the coming of the country, how long will they stay?
You know, if the word gets out that housing is really affordable, for example, a whole host of longer-term issues that can kind of arise.
So I would say that addressing this is of course important and it could come at the cost of homeowners.
But, let's call a spade a spade.
I mean, if you bought, say, 2005 and you held onto your home, you've made a killing right? Just in the pandemic below the price appreciated a huge amount.
Plus in 2017 prices appreciated a huge amount.
Jurisdictions like Ontario for example.
There's been sort of very robust price jurisdictions over that same time period.
Calgary, BC. Homeowners have done well right?
And I don't think.
I think there's probably a social responsibility to make sure that younger people can easily get into the housing aligned.
So, yeah.
You're caught between a rock and a hard place but I think something is to be done.
>> I use boomers as an example there. I could just as easily use Jen X homeowners because I bought the place I borrowed now in 2007 so we will get on that boat with you boomers and Gen Xers.
Let's look at the mortgage market.
Mortgage demand seems to be weakening in the US. Should we be concerned?
>> Well to answer this question will harken back to our forecast.
We do expect home sales and prices to cool.
Across Canada average home prices before all of the second half of this year in sales to fall.
So that would naturally translate into some profit.
However the amount of the decline is not so severe in our forecast right?
So we are expecting yes, simple backward not enough where we really can shock people.
It's not like a 20% drop in decline and you know… Early on when the market was correct.
So some pullback but not much.
So that indicates an resilience on the part of housing demand to interest rates and the like.
So I would say I wouldn't see much reason to be overly concerned simply because we think that whatever headwinds are choppy waters that they housing market goes through a kind of dissipate by 2024 and 2024, will be on the rise again.
>> Back to your question Sunday on real estate interest is always you do your own research before you make any investment decisions.
Now let's get markets on We are having a look at TD's advanced dashboard available through TD Direct Investing.
Malfunctioning. A nice pixel topic.
Lots of ways you can sleep through. Taking a look at the TSX 60. Taking a look at Christ's and volume. You can see the energy names going with crude getting a bit of a boost today. Still getting a bit of a boost as well whether it's a name like Suncor is of almost 3%, or, I think the next-door neighbour might be to Novus energy there. Definitely CBE or even where is Cameco. That is the uranium play of course. The weakness is been holding back the headline number has been Teck on both sides of the board.
You can see on our screen, the technology space with a name like Shopify. Down to the tune of a little more than 2.6%.
A number of screens on the heat map.
We ca take a look at what's happening south of the border in the S&P 100. They give us a bit of a snapshot.
What seems to be working here with a name like Cisco. We are seem investors excited about the AI, artificial intelligence potential for their company. Of course they make hardware for networks. Then you get a name like CVS Health, earlier in the screen, losing a pretty big customer and Blue Shield upon you. Taking the bulk of its business apparently some of CBS's competitors. You can find more information on TD events dashboard by visiting td.com/advanced dashboard.
We are back now with TD economist Wendy talking real estate. Lots of questions coming in.
Our Canadian a hot topic. This one is a Canada's housing market working in a province by province basis.
Are some areas stronger than others?
>> Yeah sure. So I think you can going on and housing markets with the three time frames.
The correction timeframe when the Bank of Canada was hiking interest rates, we saw sales fall across all provinces.
Kind of a uniform decline but relatively steep declines. BC in Ontario.
Big drop in Alberta actually.
With these sales levels in Alberta were still quite elevated. So there is volume from ultra-elevated to just not as elevated.
So the big corrections in BC and Ontario.
There we had said of this phase for the Bank of Canada was on pause and activity returned en masse right? That was also consistent pretty much all provinces in terms of home sales some pretty similar gains in and around 20% from their trough to about May of this year.
One big stand that was BC. See sales when up about 50% or so right? So was a big big dance in BC's market.
Since May, which is like a month rate for the Bank of Canada started hiking rates, we have seen, as I mentioned before, resilience sales going up pretty much all provinces with the exception of Ontario and New Brunswick. The provinces that really stood out with respect to sales have been those where affordability isn't a strain. So we've seen a wealth of strong sales go up in Alberta, Saskatchewan, Manitoba to a lesser extent, new for down Labrador. Marketers in the forest and say Ontario in BC for example.
And even in the event regions have gone up and not buy as much. You have to remember affordability is still quite good relative to say Ontario. But to its own history, affordability in that region is quite significant. So that's a bit of a lay of the land there.
>> Nicely in the land indeed. Another question here but these higher rates that we are now living with.
Have higher rates dampened activity among real estate investment home flippers is that as lucrative as it used to be?
>> Unfortunately we don't have a great line of perspective for that vis-à-vis data.
We are pretty good one. The Bank of Canada publishes data on investors and I say it's not great currently because the data that they have goes only till the end of 2022 right? But we can see what happened in 2022. Which is sailing for this question that because that's when the bulk of the tightening took place.
The data I'm talking about is the share point originated to investors versus first-time homebuyers versus repeat buyers. That share actually when up in 2022.
Forgetting some resilience on the part of investors who were indebted.
But some resilience on the part of investors to higher interest rates at least last year. You know, this year, again, we don't have data that singles out investors as a class but we look at condo sales, investors are big players in the condo market. Resale condo sales are actually outperforming angle cash units.
So far this year.
Particularly in the last three months or so. So in so far as investors are in that market, that would be a positive signal for investor demand and perhaps suggest some resilience on the part of investors.
With respect to flippers, the Bank of Canada has data on that as well.
One thing I will say, I guess a couple of important points. They're not a big portion of the market but you will see maybe 1 to 1 1/2% of people bought homes and have been sold within within six months or so which is how they kind of define this right? So it's not a picture of the market. It has been coming off as interest rates have gone up.
As one would expect, interest rates go up, the froth that was in the market, has been shaken off. So it's just not as profitable to kind of do that.
Like that's just… So we've seen that trend come down.
Again, it's not a picture of the market.
It never really got up to where it was in 2017 in terms of flipping activity in Canada.
The 2017 was more, I would say, if one wants to conflate that with a bubble, it was more bubbly than what we saw in the course the pandemic your 2022 and a 2023.
>> Rishi, always love the insights. Really great having you and looking forward to the next time.
> Thanks so much.
>> Our thanks to Rishi Sondhi, TD Senior Economist. Always do your own research before making investment decisions and stay tuned for tomorrow's shows for an update on the markets and some of our best videos a week.
And on Monday, Bryan Rogers, Senior Client Education Instructor with TD Direct Investing will help you look into the WebBroker platform. Always a popular segment and show. Get those questions in advance. Just email moneytalklive@td.com.
That's all the time we have the show today. Thanks for watching and see you tomorrow.
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