News: House Costs Rise & Real Estate Market Helps Ontario Deficit

In this week's Industry News (Week of 16 Aug 2021).

Hot real estate market, bump in federal transfers to help Ontario narrow its deficit | The Globe and Mail Ontario’s deficit is narrowing, as a strengthening economy – including a sizzling real estate market – and a bump in federal transfers deliver an extra $2.9-billion to the province’s coffers. In its first-quarter fiscal update, the province’s Finance Ministry said it projects an additional $550-million in corporate tax revenues, $400-million more from land transfer taxes and $1.9billion in one-time funding from the federal government for pandemic recovery efforts. Ontario is now forecasting that the provincial deficit will decline slightly, to $32.4-billion in the current fiscal year, from the $33.1-billion forecast in its March budget. That projection includes $2.2-billion being set aside for COVID-related spending Prospective real estate investors often worry that government intervention and policymaker disruption could negatively impact the outlook for home prices. It is important to remember however that tax revenue, at all levels of government, are bolstered by a strong housing market and consumer base. Ontario, as an example, relies on revenue from land transfer taxes that are impacted by both home sale prices and transaction volume. With the province in a challenging deficit position, draconian measures intended to curb the housing market could further hinder the Ontario's financial position. Full press release available here.

House prices continue to go through the roof | The Economist American Policymakers might be worrying about the pace of consumer-price inflation, but the cost of household goods is not the only expense to have risen faster than usual over the past year. House prices in the country rose by 17% in the year to May, the fastest pace since records began in 1975, according to the latest S&P Case-Shiller index. House prices are going through the roof in many parts of the rich world. The Economist’s global house-price index tracks real house-price inflation in 28 countries. In the latest 12 month period available for each country, prices have risen in 26 of them, by 7.1% on average. In Britain they are up by 7.4%; in Canada by 11.2% and in New Zealand by 26%. The pace is quickening in many places, too. In 16 countries house-price inflation sped up in the latest quarter compared with three months earlier.

It is important to consider Canada's residential real estate market on global comparative basis. As home price appreciation outpaces wage inflation, the increasing unaffordability gap is not a Canadian issue, it is a global issue. High-quality rental solutions have emerged as an alternative around the globe, but remains a relatively nascent sector in Canada. Konfidis is proud to be a champion for high-quality rental housing solutions that offer an alternative for Canadian families, with a tenant-focused approach. Full press release available here.

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Konfidis is pleased to share our weekly real estate investing industry news piece herein. We love connecting with our members. Reach out with your questions to hello@konfidis.com.

Shael Soberano, CFA Konfidis Inc. Chief Investment Officer

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