News: Banks Are Being Vulnerable to Economic Shocks

In this week's Industry News (Week of 1 Nov 2021).

Banks more vulnerable to economic shocks due to decline of government-backed mortgage insurance, Moodys finds | Financial Post | Barbara Shecter Canada’s big banks have become more vulnerable to losses from economic shocks after increasing exposure to red-hot real estates markets in Vancouver and Toronto at a time when the level of government-backed residential mortgage default insurance was declining, according to a new report from Moody’s Investors Service. Despite these factors, Moody’s said the country’s largest lenders are not expected to be battered because they have been generating strong earnings and have “prudently” made provisions for loan losses in their portfolios. “In addition, their capital levels to absorb unexpected losses are higher than in our previous stresses,” the report said. As COVID 19 relief programs wind down, such as the Canada Recovery Benefit, do we enter a period of increased mortgage default? Or do we see stronger return to work numbers to support personal expenses? We've seen the frustration of business owners trying to attract people back into the work force. Perhaps stronger back to work numbers could lesson increases in mortgage defaults. See full article here.

Surging real estate wealth is a golden opportunity for some to accelerate retirement plans ] Financial Post | Jason Heath Real estate prices across the country have been on a tear with MLS Home Price Index benchmark prices up nationally by 13.9 per cent year over year in September, according to the Canadian Real Estate Association (CREA). For those in position to capitalize, the increase in real estate wealth offers an opportunity to accelerate retirement plans or, if they are already retired, to significantly supplement income. People who can work from home or find a job elsewhere and move to a lower-cost city may be able to get more house for their dollar. Single-family homes in places like Regina, Winnipeg, North Bay and many Maritime cities average under $400,000. Some British Columbia and Ontario residents could do downsizes of $1 million or more and live in comparable homes. COVID clearly highlighted a strong demand for larger format housing and for some meant leaving the cities to adopt work from home practices. It's entirely possible that retiree's could be the next wave of migration from the city centres to more affordable housing in secondary cities in the pursuit of unlocking retirement funds. That's good news for secondary city investors with possible increase in demand for housing. See full article 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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