A 25k Tax To Leave Canada & When Are Rate Cuts Coming ?

[00:00:00] Welcome to the Canadian Real Estate Investor, where hosts Daniel Foch and Nick Hill navigate

[00:00:06] the market and provide the tools and insights to build your real estate portfolio.

[00:00:13] Hello and welcome back.

[00:00:15] In today's episode we are talking about news and I am your news anchor Ron Burgundy.

[00:00:21] I could have sworn your name was Nick Hill but…

[00:00:25] Well I mean I do have a mustache and I'm here to report the news so you know.

[00:00:30] Fair enough.

[00:00:31] I'm still just Nick Hill and I am Daniel Foch and yes Nick is right.

[00:00:36] We have a lot of news to go over on today's episode of the Canadian Real Estate Investor

[00:00:40] podcast.

[00:00:42] There is a lot happening in the market right now and we're going to break down a few

[00:00:45] key things that we feel you should be aware of.

[00:00:47] We like to do these news episodes relatively regularly to keep you on top of what's

[00:00:52] happening in Canadian real estate.

[00:00:54] We also look at what's happening so first we're going to look at inventory, that's

[00:00:58] a number of homes that are currently listed on the market.

[00:01:01] Then we're going to look at what's happening in the rental market and we touch on something

[00:01:05] that we actually haven't spoken about in a while which is rate cuts or rather

[00:01:09] the possibility of when we're going to see the first rate cut and what that means

[00:01:13] for Canadian real estate investors.

[00:01:15] Yeah exactly Dan and then finally if you want to leave Canada you're not alone.

[00:01:23] Over 4 million Canadians have left in less than the last decade and our current government

[00:01:30] wants to put a stop to that but the manner in which they have proposed to do so is

[00:01:36] getting some serious backlash online with an image circulating but is that even real?

[00:01:43] Stay tuned as we debunk that one at the end of the show.

[00:01:47] So lots of interesting articles and topics to cover as always but as recent tradition

[00:01:53] let's start things off with a review here Dan.

[00:01:56] Okay so this one says sorry it took me so long to review.

[00:02:00] I like that heading right away.

[00:02:03] Five stars I love this show for the Canada centric economic data.

[00:02:07] It is hard to find a realtor who isn't a permable so it's great to hear insights

[00:02:11] in real data as it pertains to the rapidly changing Canadian economic landscape.

[00:02:17] The banter and punny jokes are a bonus.

[00:02:19] Scottyboy130 via Apple podcast thank you very much we really appreciate that.

[00:02:24] No worries that it took you so long to review.

[00:02:26] I always find it funny when people think that our joke like we have jokes here

[00:02:30] because like I don't really consider myself all that funny.

[00:02:34] They must be talking about me then.

[00:02:36] I'm the funny guy you're the permable.

[00:02:38] It's classic.

[00:02:39] Okay thank you Scottyboy and always thank you to everyone who takes the time to leave

[00:02:44] us a review.

[00:02:45] Thank you so much for joining us.

[00:02:47] We're going to be talking about the rents and the

[00:02:49] things that we've been talking about a lot but it's time to get into the first

[00:02:54] conversation here Dan because we've got a lot to talk about.

[00:02:57] Rents are down.

[00:02:59] Down a little bit but still down and not across the country but we'll tell you

[00:03:05] where specifically as we unpack this one here.

[00:03:09] We're seeing for years now when rents across the country have been rapidly

[00:03:11] increasing and you know we were saying oh you should be modeling your NOI as

[00:03:15] increasing at these rates to a point and you know obviously had a rational

[00:03:22] fear that something like this could happen and now it is happening.

[00:03:25] So let's look at the first article from our friends at stories.

[00:03:28] It says GTHA condo rents are down 7% in the last six months.

[00:03:35] In a region notorious for its high living cost the first quarter of the

[00:03:38] year brought some relief for renters in the market for a condo in the greater

[00:03:43] Toronto Hamilton area GTHA according to new data from Urbanation Inc.

[00:03:49] Condo rents in the GTHA slipped 7.4% in Q1 2024 to an average of $27.32 or

[00:03:58] $3.89 per square foot.

[00:04:02] Yeah and this follows a record high of $4.20 per square foot or $2,929 for a

[00:04:11] 698 square foot condo so $3,000 in Q3 of 2023 and marks the largest six month

[00:04:22] decrease recorded during the past 15 years of data tracking outside of the

[00:04:27] pandemic period in the late 2020 early 2021.

[00:04:32] Now despite this decline average condo rents in the greater Toronto and

[00:04:36] Hamilton area increased 1.6% year over year in Q1 of this year 2024 to $3.89

[00:04:46] per square feet.

[00:04:48] Outside of the rent declines experienced during the COVID-19 pandemic

[00:04:52] this represented the slowest annual pace of rent growth in nine years and a

[00:04:58] substantial deceleration compared to the 13.3 annual increase recorded a year

[00:05:04] ago back in Q1 of 2023.

[00:05:08] Remember those days rent going up by double digits every quarter that was

[00:05:11] that was scary times.

[00:05:14] Unprecedented some may have said back then.

[00:05:16] Now prospective renters have investors to thank well fingers have long pointed to

[00:05:23] investors for causing high housing prices.

[00:05:26] The reality is that they're adding much needed rental stock to that region

[00:05:33] and that region being the greater Toronto and Hamilton area probably the

[00:05:37] most populous region most dense region in all of our great country here.

[00:05:42] It's kind of funny because I think people really like it's easy to demonize

[00:05:47] investors and say oh they're taking units away but they're also providing

[00:05:51] units especially like when we're talking about condos or you know from

[00:05:54] the same urban nation who came out with this they had this article a while

[00:05:58] ago that like 50% of condo investors were cash flow negative.

[00:06:02] So if a condo investor is cash flow negative like they're literally doing

[00:06:06] you a favor right.

[00:06:07] They're losing money for you to be able to rent that unit at a lower

[00:06:11] cost than it would cost for you to own that unit.

[00:06:13] Well and not only that but think about the difference between like this no one

[00:06:18] likes when the rent goes up.

[00:06:19] I rent I don't like how much I'm paying rent right now it's kind of crazy.

[00:06:23] But think about the costs of homeownership that have gone up as well

[00:06:27] not only the obvious one with mortgage rates that have gone up

[00:06:31] drastically but think about insurance that's gone up thinking about the

[00:06:36] maintenance the landlord has to pay the condo fees that a landlord has to

[00:06:40] pay.

[00:06:40] So there are a lot it is very expensive to own a home let alone buy one it's

[00:06:46] very expensive to maintain one as well which we're seeing with all the losses

[00:06:51] experienced by these condo owners.

[00:06:53] Yeah I think I mean everything every other input cost in being a

[00:06:58] landlord is inflationary right now and rents are deflationary.

[00:07:02] And so I mean like you know tenants get to benefit while the people who

[00:07:08] are owning it are suffering and you know in a large part they should like people

[00:07:13] who own it should.

[00:07:14] Like I don't weep for people who.

[00:07:15] Yeah we're not saying no they're suffering poor them but yeah.

[00:07:19] Yeah like you took a risk with an investment and it was realized.

[00:07:23] So yeah I guess that's it right.

[00:07:25] So the article goes on to say the deceleration in rent prices comes as

[00:07:28] condo completions.

[00:07:31] Those launched before interest rates and construction costs skyrocketed

[00:07:34] reach a record high.

[00:07:35] So we're going to have record condo completions in Toronto last year 2023 and

[00:07:39] this year 2024 because these are all those projects that were done in 2020 2021.

[00:07:44] They sold during that period of time.

[00:07:46] The interesting part is like what happens you know you and I were just

[00:07:49] talking before this about contractors looking for work and stuff like that.

[00:07:52] What happens when those projects are finished and now there's no work nobody

[00:07:57] building houses.

[00:07:57] So that's the scary part economically from my perspective same problem we have

[00:08:01] now in another three to five years.

[00:08:04] Yeah so this influx of supply from newly completed condos has made a

[00:08:08] significant impact on the GTHA rental market.

[00:08:11] According to Urban Nation a total of twenty three thousand new condos were

[00:08:14] registered in the region over the past four quarters a 21 percent increase

[00:08:18] over the same period ending in Q1 2023.

[00:08:21] So 20 the year of 2022 basically which was nine nineteen thousand and

[00:08:25] marking the third highest four quarter total ever recorded.

[00:08:30] Now while the market remains expensive with rents 15 percent higher than two

[00:08:36] years ago renters waiting for some reprieve in the market have found it

[00:08:41] thanks to temporary supply infusion from condo investors and that was said

[00:08:47] by Sean Hildebrand president over at Urban Nation which puts out a lot of

[00:08:51] great data and research.

[00:08:53] He goes on to say that this isn't expected to last too long though and

[00:08:55] rents should continue rising as construction falls short of demand and

[00:09:00] that's exactly what we were just saying Dan right like this if you pause

[00:09:04] construction we might not feel that it's a lagging data point but we will

[00:09:10] go on to feel that pain in the coming years.

[00:09:14] Yeah for sure I think you know the reality is this could like there's a

[00:09:19] relief in the short term but this is probably a long-term problem like

[00:09:23] we just talked about if you like if you end up it's a big machine just

[00:09:27] like to restart right it's like starting an old diesel truck I sound

[00:09:30] like a farmer with that analogy you know what I mean like once it's running it's

[00:09:33] great yeah you don't want to shut them down yeah but but but you know like

[00:09:38] when it's been sitting in a field for a little bit it's a lot to get it

[00:09:40] going old tractor same thing right an old excavator like they're diesels

[00:09:44] man they'll run but they're not easy to get get going again and so you

[00:09:48] know you don't want this like we were just talking about I was sitting

[00:09:51] with you know one of the biggest industrial contractors in the country

[00:09:54] the other day they're talking about how people who are in the concrete

[00:09:57] space who would typically be on these types of projects on high-rise

[00:10:00] projects are looking for retail worker industrial worker whatever because the

[00:10:04] high-rise pipelines drying up I've sat with some some huge people in the

[00:10:08] finance space saying you know literally this time last year I

[00:10:11] couldn't get somebody to bid on my project and now I have four people

[00:10:16] asking me to bid on my project and it's crazy how quickly it happened

[00:10:20] but I think that nobody's really like really really thinking about the

[00:10:23] second or third order effects of this where you know some of these high-rise

[00:10:28] projects like their six-year projects and you know a six-year project okay all

[00:10:32] those trades will be gainfully employed until those units are delivered

[00:10:37] and then then what is the big question exactly I mean that the

[00:10:41] trickle-down effect yeah is is massive right just as you said guys

[00:10:45] that would usually be working on the high-rise stuff are now taking away

[00:10:50] jobs from guys that would usually be working on the retail stuff so

[00:10:53] those guys now go and take away stuff that we working you know it's smaller

[00:10:56] and smaller and smaller and this is where we start to see people go to

[00:11:00] business companies fail projects stop it's a kind of scary yeah I mean like

[00:11:08] it is you know in the US you had like this phenomena of overbuilding you

[00:11:12] know the Great Depression was led into by over building of houses China right

[00:11:16] now right 20 and 2008 we don't really have that because our population is

[00:11:19] growing so fast but the challenge with this is that we if we don't have like

[00:11:24] it's not economical for people to create supply they're just not gonna

[00:11:27] create supply then what you know like and and now we so you you have a

[00:11:33] problem where you still have demands not slowing right I guess it'll slow

[00:11:35] by comparison to last year if they're it sounds like they're trying to get

[00:11:38] non-permanent residents down to you know like 400,000 and immigration

[00:11:43] will stay at 400,000 so but our population would still grow by 800,000

[00:11:47] not 1.6 million or whatever it did last year so you know 50% reduction in

[00:11:52] population growth but that's not like that it's not left it's not a negative

[00:11:57] demand it's still an you know it's still positive demand population is

[00:12:00] still growing massively so well and not only that but we still have to we

[00:12:04] still have to build all the houses for the people that were already here

[00:12:07] right like yes we're slowing down immigration but we're not kicking

[00:12:13] people out either like there's still the problem has to be fixed now and

[00:12:16] that's still 3.5 million homes as a deficit so yeah lots to lots to do okay

[00:12:25] what do you think should we keep moving on yeah let's do it let's move

[00:12:28] on to the next piece here so a flood of supply is happening in some in

[00:12:32] kit some of Canada's major markets and this is kind of where you might

[00:12:35] actually see this being offset a little bit you're basically starting to

[00:12:39] see this resale supply coming in the market because a lot of people are

[00:12:42] buying those condos you know closing on those all of those record completions

[00:12:46] that we were just talking about or they you know they made investments that

[00:12:49] are no longer viable in the current interest rate environment or in the

[00:12:51] current rent environment with rents falling and so Vancouver and the lower

[00:12:57] mainland and then the GTA or GTHA are you're really your two major

[00:13:01] markets in Canada but those are the two markets we're really starting to

[00:13:04] see this supply flood taking place on the resale side so the Twitter and

[00:13:07] reddit communities are having a field day with this info with tons of

[00:13:10] accounts adding commentary to this but some serious well-known heavy hitters

[00:13:15] providing insights on this as well yeah real estate commentator fellow

[00:13:20] podcaster and friend of the show mr. Steve Soretzky weighed in on it with

[00:13:26] number a number of Twitter posts or sorry ex posts ex tweets what are they

[00:13:31] even called these days Dan I'm not not a Twitter guy like you or an ex

[00:13:35] guy but Steve goes on to say that new listings in greater Vancouver have

[00:13:39] been below normal levels all year then suddenly spiked 25% above the 10-year

[00:13:44] average in April one month does not make a trend but it is worth

[00:13:47] monitoring and then of course comments ensued after that and more on

[00:13:53] the Vancouver market after Dan reads another quote from another yeah

[00:13:57] another probably the most well-known fellow in the mortgage space real

[00:14:02] estate commentator and also a fellow podcaster Ron Butler also shared his

[00:14:06] thoughts on the increased supply in Toronto this comes from Ron mortgage guy

[00:14:10] on X slash Twitter the artist formerly known as Twitter I guess we call it

[00:14:15] huge increase in new real estate listings in BC Ontario what does it

[00:14:20] mean it likely means some real estate investors have decided they can't wait

[00:14:23] any longer real estate investors aren't like financial investors the

[00:14:26] financial markets are the most liquid on earth and traction costs are rock

[00:14:30] bottom sorry transaction costs are rock bottom so real estate has more friction

[00:14:37] because switching costs are more expensive and over the next 24 months 50k new

[00:14:41] construction rental condo units are completing in the GTA so that was kind

[00:14:46] of in that urbanation record completion so we're gonna see another

[00:14:49] two years of basically completions in the 25,000 per year in Ontario in 1990

[00:14:54] rental condo price capitulation led to a decade long real estate value

[00:14:58] disaster things today are not identical but let's see what happens next I mean

[00:15:02] literally since the second episode of this show we've been reluctantly

[00:15:06] comparing present-day setup to the 1990s setup and I feel like every day

[00:15:11] it gets closer and closer to materializing in that way like when you're

[00:15:16] seeing the GDP per capita slumps when you're seeing Canada delinquencies

[00:15:21] rising solvencies right consumer indebtedness credit cards yeah like and

[00:15:28] then the immigration setup huge now we're gonna see there's a big huge bump

[00:15:32] up 1989 was the last time we set a population growth record until current

[00:15:36] the current era and then it just whiplashed right down and so we're

[00:15:42] gonna have the same thing happen our population curve like that spike is

[00:15:44] always gonna be an outlier I don't think we'll ever see Canadian

[00:15:47] population growth ever that high again on a percentage basis so huge jump up

[00:15:51] in population growth oh no this is a problem huge drop housing

[00:15:55] affordability if you look at the housing affordability chart last peak

[00:15:58] was in the 90s next peak is today almost like history repeats its hour

[00:16:02] what is it it often rhymes I think is what was that Mark Twain or should

[00:16:06] I a twin is that they're married yeah and I mean the 1990 wrong goes on

[00:16:13] to say responding to a comment that the 1990 downturn was led by none

[00:16:18] other than condos in the GTA but the big caveat is that there were 90%

[00:16:24] fewer condos back then 90% fewer condos and they led to the same problem kind

[00:16:32] of scary stuff so let's look at some of the data here a Vancouver back to

[00:16:35] Vancouver now outside the GTA which we will return to Vancouver and the

[00:16:39] lower mainland are just ripping it with new and active listings on this

[00:16:45] chart that we're looking at here Dan I don't know if you can try to pull this

[00:16:48] one up yeah well so we see huge spikes in active listings huge spikes in new

[00:16:55] listings with total listings sold seeming to be almost at a 10 year low

[00:17:01] not good and it's not before I move on Dan any any comments on on this

[00:17:07] chart here not really I mean I think he's you get pretty much said at all

[00:17:11] like it's not this is not a good trend right yeah no I mean again right

[00:17:16] numbers speak louder than words and this is this is pretty scary when you

[00:17:20] start to look at it like this and it's not just Vancouver downtown Canada

[00:17:24] otherwise known as Toronto is also facing serious supply issues and not

[00:17:29] the supply issues that we are used to talking about this chart below here

[00:17:34] that Dan will pull up if you are one of the seven people that watch us

[00:17:37] on YouTube go over and check that out this chart shows well it clearly

[00:17:44] illustrates the largest absolute jump and the second largest percentage jump

[00:17:49] according to the Treb market watch data since they have been recording

[00:17:54] that since 2008 Dan feel free to elaborate on this chart for us please

[00:17:59] yeah I don't really have that much more to add to it I mean you're

[00:18:03] just basically seeing a big bump up in inventory the last time we saw a

[00:18:06] jump in inventory this much on a percentage chain base change basis was

[00:18:10] in 2017 and 2017 we saw a real estate crash right so I mean and 2022 is

[00:18:17] another good example right so like 2022 you saw a big jump in up in in

[00:18:20] March to April increase in inventory what happened then oh there was a

[00:18:24] crash like I honestly you know for the most part I think my position has

[00:18:28] been pretty clear on what could happen with pricing like I felt like it

[00:18:31] could have been kind of stable but or like a slow grind down but I

[00:18:34] think there might be like a little bit of a down lag here as we start seeing

[00:18:37] some of this economic pain materialize I think a lot of people are really

[00:18:41] banking on rate cuts which we're gonna talk about a little bit later but you

[00:18:44] know like I don't think 50 Bips or 100 Bips is gonna do anything to solve a

[00:18:48] lot of the problems because the problems are you know people whose

[00:18:51] mortgages are in the threes not you know what I mean not people whose

[00:18:55] mortgages are like you know everybody everybody who needs to renew in 25 26

[00:19:00] got mortgages at what like between 0.75 yeah well yeah I mean that's on the

[00:19:05] variable side like you're so your variable your variable borrowers would

[00:19:08] be already impacted but you're you're fixed like you know fixed we're in

[00:19:11] like a 3% yeah and so even if you're renewing at 4 your capital costs

[00:19:15] gonna go up significantly like you will feel bad especially in an

[00:19:17] environment where every other cost in your life has gone up in the past a

[00:19:21] couple of years so anyway let's move on to this next article yes so

[00:19:24] this one is from blogTO it goes on to say the housing type that has been

[00:19:31] experiencing particularly difficult recovery from last year's market lull

[00:19:35] spawned by prohibitive lending rates inflated cost of livings and just a

[00:19:41] tough economy in general and things only appear to be worsening when

[00:19:46] everyone hopes that they should be doing the opposite it's gone to the

[00:19:50] point that developers are actually putting entire complexes on ice due to

[00:19:56] the lack of interest even amid a housing crisis that lenders are trying

[00:20:00] to address through the construction of much new housing as fast as possible

[00:20:06] of as much new housing as fast as possible and now another somewhat

[00:20:10] alarming development in the form of near record breaking for the city

[00:20:14] thousands of resale condos on the market at one time all of them are

[00:20:19] waiting buyers they just aren't coming yeah so per the stats from the real

[00:20:26] estate analysts at urbanation they mentioned this the same report new

[00:20:30] condo sales in Toronto have slowed to a crawl dropping to a low not seen

[00:20:35] in 15 years with only 1461 units sold in the GTA GTA J over the first

[00:20:40] quarter of 2024 the firm rights at the market has is in the second worst slump

[00:20:45] since the financial crisis of 2009 outside of that brief period in 2009

[00:20:50] new condominium sales haven't been this low since the late 1990s urban

[00:20:55] nation's latest report says so you know the interesting part is like he's

[00:21:00] using the absolute number on a per capita basis the population since 2009

[00:21:05] is up like 10 or 20 percent right in the GTA so on a per capita basis

[00:21:09] it's probably far worse like in the you know the population of Toronto the

[00:21:13] number of buyers in the market that should be buying these condos is is far

[00:21:18] worse so I mean is it safe to say that we are in a recession at this

[00:21:23] point yeah it is funny right because like I haven't heard that in a while

[00:21:27] like no one's talking about that right now they talked about it what it

[00:21:30] was like six months ago that the our word got thrown around a little bit

[00:21:34] a year ago maybe yeah and crickets since no one's talking about it yeah

[00:21:39] well I think that everyone is sort of just accepted that we're in in a

[00:21:43] recession but you know like the the government is washing that with

[00:21:48] population growth like our GDP is still technically growing but you know like

[00:21:52] Benjamin Tal said it best Canada's in a per capita recession well we've

[00:21:55] been a per capita recession since 2016 like honestly we literally have

[00:21:59] been we have seen zero economic progress on a per capita basis in

[00:22:03] almost ten years like by next year we will have been in a lost decade

[00:22:07] and I know you've been working on an episode about this comparing it to Japan

[00:22:11] which I don't think that there is like a great comparison but from an economic

[00:22:14] progress comparison comparison it's sort of the same phenomena that's taking

[00:22:18] place which is our GDP per capita has not grown since 2016 actually that's

[00:22:23] that's not to say like it did grow and then it came back down but

[00:22:27] there's it's the same level that it was in 2016 which it shouldn't be

[00:22:30] you don't want it falling right like yeah it would be better actually if it

[00:22:33] didn't grow if you know what I mean leave it was just flat if it grew

[00:22:36] but it grew and I came back down so you have a lot of people feeling great you

[00:22:39] know spending money money jet skis going on vacation feeling safe to

[00:22:44] accumulate debt right taking on credit whatever and then now they're like oh

[00:22:48] oh no my income is falling or my wealth is falling and now I have to

[00:22:54] now I have all of this debt that I'm sitting on and my jet ski is not

[00:22:58] worth as much as I bought it for so you know gotta take an L on

[00:23:03] something you know is it gonna be the condo or is it gonna be the jet ski

[00:23:06] starting to look like the condo I think yeah don't sell the jet ski that

[00:23:09] is never sell the jet ski not financial advice okay so I think that

[00:23:16] that's that's enough for that one let's let's keep moving here let's

[00:23:21] talk interest rates Dan now here's the question are we talking cuts how

[00:23:26] we talking holds we wouldn't dare talk about another hike would we yeah

[00:23:32] honestly at this point I feel like nothing's off the table if you've been a

[00:23:36] listener to the show for a while you know that we aren't really in the

[00:23:39] business of predicting but let's look at this article from global news who

[00:23:43] I guess is feeling bold enough to get into the business of predicting so

[00:23:47] start us off Nick yeah so this one says can the Bank of Canada cut rates

[00:23:53] before the United States this is what Maclem and other economists are saying

[00:23:59] so the head of the Bank of Canada says there's a quote-unquote limit to how

[00:24:05] much Canadian monetary policy can diverge from the US as market watchers

[00:24:11] see earlier cuts coming north of the border this is interesting here

[00:24:15] governor at Tiff Maclem was asked about the impact of the US monetary

[00:24:20] policy on the Bank of Canada's interest rate path during an appearance

[00:24:24] at the House of Commons when he was talking to the committee on finance he

[00:24:29] said that the banks benchmark interest rate which remains at five percent

[00:24:34] following six consecutive decisions doesn't need to mirror monetary policy

[00:24:40] from other central banks around the world but he then added that there's

[00:24:45] a limit to how far they can diverge we're not close to that limit he

[00:24:52] had the ability to run our own monetary policy geared towards what Canadians

[00:24:56] need yeah so you know it was interesting they did like a joint press

[00:25:01] there with him and Jerome Powell as well they had they were pretty funny at

[00:25:05] the beginning though the biggest the best export from Canada was like ten of

[00:25:09] the funniest actors yeah yeah yeah it was Gary did accurate all the couple

[00:25:13] legends there is funny Mike Myers but yeah on a serious note we I

[00:25:18] don't know if 10 10 20 comedians can keep the Canadian economy going no no

[00:25:23] yeah I mean especially when they go and live in the US yeah now yeah I guess

[00:25:29] we'll do like a quick refresher let's look at what he means sort of by

[00:25:33] monetary policy so from the Bank of Canada's website the objective of

[00:25:37] monetary policy is to preserve the value of money by keeping inflation

[00:25:41] low stable and predictable this allows Canadians to make spending and

[00:25:46] investment decisions with more confidence it encourages longer-term

[00:25:49] investment in Canada's economy and contributes to sustained job creation

[00:25:53] and greater productivity this in turn leads to improvements in our standard

[00:25:57] of living Canada's monetary policy framework consists of two key components

[00:26:03] that work together the inflation control target and the flexible

[00:26:07] exchange rate this framework helps make monetary policy actions readily

[00:26:12] under readily understandable and enables the bank to demonstrate its

[00:26:16] accountability to Canadians now Dan you know a thing or two about monetary

[00:26:21] policy yourself what is that what's your take on that I mean like I think

[00:26:27] that they make it pretty clear like that they're very independent of you

[00:26:31] know like they don't care if your house goes down in value they don't

[00:26:34] care if condominium investors are going bankrupt like honestly like it

[00:26:39] would suck to be tiff because you have to have very thick skin like you

[00:26:42] gotta be you gotta be the asshole in the whole thing and you know their

[00:26:47] mandate is clear it's to keep inflation low because if an

[00:26:52] economy goes through severe inflation then you have a problem people don't

[00:26:56] trust your currency they don't trust your government you know Canada is a

[00:26:59] country that relies heavily on foreign investment foreign direct

[00:27:03] investment and we've seen huge outflows of foreign investment a few

[00:27:06] episodes ago right huge outflow mass exodus of capital capital yeah and so

[00:27:11] you want your economy to grow you can't just bring people you also have to

[00:27:14] bring capital and so you know this is a big component of it from my perspective

[00:27:18] now with that being said you know when he talks about diverging could

[00:27:21] devalue the Canadian dollar a little bit and it kind of becomes a trade-off

[00:27:24] it's like you know they almost have to have their own outlook on when is

[00:27:28] the US gonna cut and they're like how how early can we front run them

[00:27:31] by right can we front run them by could we afford four months or six

[00:27:34] months of Canadians you know having a lower buying power on the Canadian

[00:27:39] dollar maybe yeah as long as it's not a winter yeah as long as it's not a

[00:27:42] winter and we don't all need to go to Florida right like you know or like

[00:27:45] like honestly because I think Canadians will really feel it if they're

[00:27:49] traveling to the US or whatever and anywhere anywhere else and then I think

[00:27:53] you can really only have that divergence for like a quarter or two

[00:27:55] because after a couple of quarters you start like really feeling that

[00:27:59] imported inflation because remember we're buying goods in USD so if the

[00:28:02] Canadian dollars weaker against the USD then things are gonna get more

[00:28:05] expensive and you start getting what you would call imported inflation

[00:28:08] right so not something we want to bring in here yeah so exactly so simply put

[00:28:12] monetary policy is the set of tools that's used by any nation's central

[00:28:18] bank whether it's Canada's the Federal Reserve the Bank of England and they

[00:28:22] all use that to control the overall money supply and ideally promote

[00:28:26] economic growth and employee strategies such as revising interest rates and

[00:28:31] changing bank reserve requirements and we've seen a lot of that in the

[00:28:36] past few years now as Dan and I were just saying usually here in Canada we

[00:28:40] aim to be in monetary policy lockstep with the Federal Reserve in the United

[00:28:46] States with the theory that the following that following their lead

[00:28:50] would be good for the Canadian economy however Jerome Powell-Maclums

[00:28:55] counterpart south of the border said that inflation was proving far

[00:28:58] more stubborn than first thought and it would take longer than previously

[00:29:01] expected for the Fed to have confidence it needs to cut interest

[00:29:05] so again why does the US Fed rate matter to Canada?

[00:29:07] James Orlando who is the director of economics at TD Bank now TD Bank's been

[00:29:15] in some hot water recently but we won't get into that in today's episode

[00:29:20] Mr. Orlando director of economics at TD says a gap between Canadian and

[00:29:25] US interest rates can only weaken the exchange rate between the loony

[00:29:30] and the US dollar because investors gravitate to America to benefit from

[00:29:36] their higher rate and just overall more powerful investing opportunities

[00:29:43] yeah and with market expectations for the Bank of Canada cut interest rates

[00:29:47] in June or July followed by the Fed in November December I feel like you

[00:29:51] know Simone on the Podfathers Canadian investor podcast he kind of has this

[00:29:56] perspective that either like the US is gonna cut like ASAP which I feel

[00:29:59] like it's just like they don't have the runway to do that right now or they're

[00:30:03] gonna cut in like after the election because otherwise if they cut too close

[00:30:07] to the election will be very politicized which is like you got just

[00:30:10] got to be careful with and the economy usually performs while heading

[00:30:13] into an election anyways so everyone's out but it is funny right

[00:30:17] like cuz rally like sometimes when you just like think about democracy

[00:30:21] from the outside looking in you're like it seems like this really big

[00:30:24] waste of time right like it's like two people just cheering for sports

[00:30:28] teams that like have a huge impact on their life but somehow the US is the

[00:30:31] most productive place on earth yeah you know like nobody can squeeze the

[00:30:35] labor force for productivity like the US then so and like and like nobody

[00:30:42] does elections like the US like really like it is like it consumes them so

[00:30:45] like every three years they're like completely distracted by an election

[00:30:49] so true right yet somehow they're the most productive place on earth and

[00:30:52] they're more productive in those years it's like almost like actually

[00:30:56] being able to exercise like freedom like gets you hyped up to like go and crush it

[00:30:59] you know I don't know anyway where was I I think them cutting in November

[00:31:08] December Orlando said kind of would create a widening differential between

[00:31:13] the rates and put even more pressure on the Canadian dollar in months to

[00:31:16] come inflation ease significantly in Canada from 40 plus year highs two

[00:31:20] years ago coming in at 2.9 percent in March that compares with a 3.5

[00:31:25] percent in the US yeah however there is another article this one from CBC

[00:31:33] titled that we are getting closer in quotes to cutting interest rates Bank of

[00:31:38] Canada governor Tiff Macklem tells MPs he's quoted in the article as saying

[00:31:44] our key indicators of inflation have all moved in the right direction he

[00:31:49] said point into data on core inflation that strips out more volatile

[00:31:54] price swings such as food and energy prices which are massively impacting

[00:32:00] Canadians across the country right now I everyone I talked to complains about

[00:32:04] two things price of groceries price of gas we have come a long way in the

[00:32:08] fight against inflation and recent progress is encouraging the next

[00:32:12] opportunity for the Bank of Canada to cut rates comes just about a month

[00:32:18] from when we are recording this episode Dan on June 5th now Macklem's

[00:32:23] upbeat tone could be good news for homeowners and would-be buyers who have

[00:32:29] been forced to buy or refinance a home with interest rates at 20 year high so

[00:32:36] before we move on to this final piece we're gonna give some predictions my

[00:32:40] prediction is I have no idea what's gonna happen you know I mean a

[00:32:44] chance it on a prediction I don't know I I think they'll cut I mean like

[00:32:49] if you if you look at like I think Ken like you know you can really see in the

[00:32:54] way that Tiff talks in upbeat tone yeah the upbeat tone but I mean like you

[00:32:59] know a year ago like beginning in 2023 he was talking about cutting and the

[00:33:03] market was ripping like there's this thing called the pivot paradox which

[00:33:06] is basically like if people think that the central bank is gonna pivot then

[00:33:10] they behave like the central bank is gonna pivot preemptively yeah and

[00:33:13] they get all fired up and go lever up and buy stuff like you know think

[00:33:16] rack up the credit card and you know go take go buy some pre cons or whatever

[00:33:21] right yeah and then it necessitates the the central bank having to hold

[00:33:27] longer because people just went and did inflationary things if he's

[00:33:32] deliberately you know like I mean I think Tiff has learned in the past

[00:33:36] several years that like he has to be careful with his language because

[00:33:39] all Canadians are paying attention to him and our economy is very

[00:33:42] temperamental and invisible hand is is yeah it's arm wrestling right now it's

[00:33:47] not even an invisible hand it's visible it's just Tiff being like go this way go that

[00:33:50] way yeah but I think you know Ben Tao talks about this like kid the

[00:33:56] Canadian economy is way more attached to fluctuations in interest rate

[00:34:01] because we have more debt so we're gonna feel it more like if we're the

[00:34:04] most household indebted country in the world then an increase or decrease

[00:34:08] in interest rate is gonna impact us more than anyone else right like that's just

[00:34:12] you know it's surface area and so I think Tiff in in acknowledging that he's

[00:34:18] becoming more careful with their words that he's I'm gonna give him the

[00:34:21] benefit of the debt and say he's being very deliberate with his

[00:34:23] language here that would tell me that they probably feel that the economy

[00:34:27] needs a little bit of leg up right now and so I think he would be

[00:34:30] alluding to cutting I don't think it'll be like a huge cut I don't

[00:34:34] think it's gonna be like a life-saving cut I think that they're

[00:34:36] gonna try and do a soft landing I think it's far too late for that

[00:34:38] already but you know 25 50 basis points just to kind of let people know like hey

[00:34:42] we're in that mode now let's and we'll see what happens see if it's gonna help

[00:34:46] the economy see if it's gonna get some of those guys bidding on you

[00:34:49] know contracting jobs employed right keep get the machine running again

[00:34:54] yeah fire up the old diesel the diesel well we don't want the diesel

[00:34:57] completely turned off maybe it's kind of sputtering right now right yeah I

[00:35:02] mean look I agree there's there's I think I think almost everyone can

[00:35:06] agree and we've done tons of research on this what the banks are saying what

[00:35:09] the economists are saying there will be a rate cut this year at least one will

[00:35:14] it have the life-saving life-altering impact that everyone

[00:35:20] thinks it will no anyways I'm gonna leave it at that unless you have any

[00:35:23] further no predictions or things you want to say okay let's move on to the

[00:35:28] final piece here yeah so Canada has changed drastically over the last

[00:35:30] several years we were battling high inflation a severe housing crisis lack

[00:35:34] of jobs and a number of other factors and I mean anecdotally I can tell you I

[00:35:42] have never heard of so many people that I speak to young middle-aged

[00:35:49] elderly that plan to leave or they talk about leaving maybe they don't

[00:35:54] actually end up leaving but the consumer sentiment in Canada seems to

[00:36:00] there are greener pastures and I want to go find them because life has changed

[00:36:04] here so you may or may not have seen this but this has been making its way

[00:36:11] around online the last few days and it's pretty wild so we thought we

[00:36:16] would include it and then we thought we would fact-check it so I'm just

[00:36:20] gonna read one of the dozens of Twitter posts 3.5 million Canadians

[00:36:24] have left to reside elsewhere because of taxes and the government

[00:36:28] since 2015 alone these Canadians didn't complain they just left in total over

[00:36:34] 4 million have left and now our Liberal government is quietly discussing taxing

[00:36:39] anyone trying to leave taxing them $25,000 to leave now this has made

[00:36:48] its way all over the internet and I don't know when we saw it this morning

[00:36:55] we decided to include it last minute in this episode we kind of discussed how

[00:36:59] ridiculous and I think you brought up some some human rights violations well

[00:37:03] like so Canada already has a departure tax and it depends on like what the

[00:37:08] assets that you're leaving it's basically like a capital gains tax and

[00:37:11] this is like on the government website so if you go to the Canada website

[00:37:13] leaving Canada emigrants there's a heading that says departure tax and

[00:37:18] you can read stuff about it none of it really is like it's not

[00:37:22] like they're gonna try and like charge you know I mean like it's not like

[00:37:25] they're getting $25,000 cash at the airport before you before you like yeah

[00:37:30] I mean yeah you wouldn't but you'd have an obligation which is kind of

[00:37:32] like I mean once you've left like you know it's like how are they gonna

[00:37:36] get not financial advice but you know I mean it would make it hard to

[00:37:42] ever come back but so this this tweet it says again 3.5 million Canadians

[00:37:47] have left Canada to reside elsewhere so let's address that first

[00:37:51] I am a community notes contributor on on reddit because I'm very passionate about

[00:37:55] reddit here or sorry Twitter I don't know why I said reddit but community

[00:38:00] notes on on Twitter the proposed community note says from 2015 to 2023

[00:38:06] only about 775 thousand Canadians emigrated from Canada to another

[00:38:10] country so there then they they cited this statistic a number of

[00:38:17] immigrants from Canada from 2000 to 2023 so that statistic is is off and then the

[00:38:23] other piece there was an article that came out about this in Times Now news

[00:38:28] which is not something I've ever heard of but it they're fact-checking it

[00:38:32] basically Canada proposes 25k exit fee for those leaving the country fact

[00:38:36] checking the viral claim so why don't you read this one to me Nick yeah

[00:38:40] basically goes on to say that Canadian government introducing a new policy to

[00:38:44] fine or impose an exit fee on those who leave the country question mark

[00:38:49] several posts with similar screenshots have been doing rounds on social media

[00:38:54] claiming that Prime Minister Justin Trudeau proposed such a change

[00:38:57] however these claims that have gone viral are found to be untrue as none

[00:39:01] of the official Canadian government websites mention it anywhere so not

[00:39:07] true at least for now don't get all rattled about it I'm not like it's

[00:39:14] not to say that they wouldn't do it like no exactly surprise me with this

[00:39:16] table yeah nothing would surprise me with this administration but I like

[00:39:20] there's chill chill on it first yeah yes and no like it is interesting

[00:39:24] because you know a lot like this government does tend to leak things you

[00:39:28] know and then get a little feedback and see what I see and then be like oh

[00:39:32] maybe we shouldn't do that one you know or like oh yeah okay we can deal

[00:39:36] with that blowback really did you have to leak this to to get a sense of

[00:39:40] Canadians would be okay with it or not yeah I mean I guess like I get they are

[00:39:44] like I who knows like honestly there's a lot of things optically that they

[00:39:48] have like I don't even know if it's whether or not they they're leaking it

[00:39:54] to like get feedback like I think they know objectively hey this one's gonna

[00:39:58] be tough to get by right like like assuming that this is a thing but

[00:40:02] like you could use the capital gains one as an example right yeah yeah two

[00:40:05] couple days before the budget yeah oh you know there's gonna be a capital

[00:40:10] gains wealth tax it's like okay and then they see oh they're actually more

[00:40:14] pissed off than we thought like maybe we should either be prepared or you

[00:40:18] know like change this one a little bit or whatever so I think there's an

[00:40:22] incentive to like I don't think it's that they need to know whether or

[00:40:25] not people are gonna like it nobody's gonna be like oh yeah tax great like

[00:40:28] can't wait to spend more right yeah it's just like I think they want to

[00:40:31] kind of be prepared for the blowback at this point it's just kind of like that

[00:40:36] feel like they're just like we're playing both sides truth and the rumor

[00:40:39] working for us anyways my takeaway here is look it is it's definitely a

[00:40:44] possibility we have seen a lot of people leave we hear all about a lot

[00:40:48] of people leaving brain drain seeking better opportunities elsewhere

[00:40:52] young people looking for more affordability whether it's into

[00:40:55] provincial migration or literally just getting up and leaving whether it be

[00:41:00] to Central South America United States Europe whatever it may be you know this

[00:41:04] this isn't a good thing for Canada for the Canadian economy for Canada's future

[00:41:09] generations slapping a 25k exit fee on it I think is just gonna piss a lot

[00:41:14] of people off but we don't know if it's true or not so if you are one

[00:41:18] of the people circulating this or getting really concerned about it if

[00:41:21] you're Justin Trudeau talking about doing attacks yeah tell us yeah Justin

[00:41:26] if you're listening we need to know okay enough of this stop playing with us

[00:41:30] anyways that's it for me anything else Dan no not really I think make sure you

[00:41:35] check out realist.ca we got some cool stuff coming up join the community we

[00:41:38] love to interact with our folks our listeners and there's a great

[00:41:42] community of listeners discussing stuff like real estate investing we're gonna

[00:41:46] do webinars I think we've decided we're gonna do webinars monthly and

[00:41:49] I'm trying to come up with like a little bit of a schedule on this over

[00:41:53] the next little bit actually I kind of started working on one let me just

[00:41:56] pull it up because I know we've got the first one which is happening this week

[00:42:01] so by the time this episode is out it'll have already happened but

[00:42:04] are available if you do join our free community so you can go watch the

[00:42:08] recording so the webinar for May that was on May 8th was about the

[00:42:12] housing plan and that recording is available the next one I think we'll

[00:42:16] be doing because it'll be heading into June like the June 25th cutoff

[00:42:20] for capital gains will be doing BTBs and capital gains because cool

[00:42:23] before June 25th if you you know we want to show people how to calculate what

[00:42:28] kind of discount somebody should be giving out we're gonna talk about this

[00:42:30] in the next episode but you know like hypothetically if somebody's gonna their

[00:42:33] capital gains gonna increase by a hundred thousand dollars on the 25th

[00:42:36] shouldn't they be willing to sell their property at a fifty thousand

[00:42:39] dollar discount on the 24th right yeah hey so there could be some deals so

[00:42:42] we're gonna show you how to find those and then we're gonna talk

[00:42:44] about after the capital gains tax comes into place one of the best

[00:42:48] ways to mitigate capital capital gains is BTBs we're gonna do one on

[00:42:52] power of sales I think we're gonna do one on fourplexes ADUs kind of like

[00:42:55] garden suites had a lot of time those are all on my quest about some MLA

[00:43:00] select stuff as well kind of a moving target is that that program

[00:43:04] continues to change but nonetheless lots of really great topics from now

[00:43:10] for the rest of the year so if you're interested realest.ca we'll see

[00:43:14] you in there thank you so much for listening like us leave us a review

[00:43:18] send this an email and we'll see you on the next one the Canadian real estate

[00:43:23] investor podcast is for entertainment purposes only and it is not financial

[00:43:28] advice Nick Hill is a mortgage agent with Premier Mortgage Center and a

[00:43:33] partner in the G&H mortgage group license number 10317 agent license M2

[00:43:41] 1004037 Daniel Foch is a real estate broker

[00:43:45] licensed with rare real estate a member of the Canadian real estate

[00:43:51] association the Toronto real estate board and the Ontario real estate

[00:43:55] association