In April 2021, TD chief economist Beata Caranci wrote a paper with an interesting title.

It’s called “Canada’s Housing Market and The Big Bang Theory: Occam’s Razor and Schrodinger’s Cat”.

In the paper, Caranci makes a number of observations, and one of these is that real estate has produced higher returns than the stock market over the last 20 years.

“Canadians don’t shy away from housing debt because more and more people see it not just as an ownership opportunity and store of value, but as a path towards wealth creation that carries less volatility than investing in the stock market,” Caranci wrote.

A recent home sale on the East Side of Vancouver is a good example…read more.

The Canadian real estate slowdown is getting started, as another leading indicator fades. Statistics Canada (Stat Can) data shows building permit values fell in August. Since permits are for future activity, a decline means less building is coming. All the declines were due to a drop in residential permits, which has fallen sharply from its peak. While the drop is sharp, there’s no need to worry about supply concerns yet. Even at this reduced volume, the value of permits still exceeds pre-pandemic levels.

Canadian Building Permits Fell 2.1%

Canadian building permits slid lower, but they’re still much higher than last year. The value reached a seasonally adjusted $9.7 billion in August, down 2.1% from the previous month. It’s still 16.9% higher than the same month last year, so not exactly a cratering of activity. Reduced permit values in Ontario (-9.9%) and BC (-7.5%) were the strongest regions contributing to the drop.

The drop in permit values are still fairly small, but there’s a big catch here. Permit values peaked in March 2021, and monthly values have now dropped 4.2% since then. Substantial, but not exactly an earth shattering drop.

Diving a little deeper though, we see construction activity is diverging. Residential buildings made a sharp drop, while non-residential buildings are making up lost ground. These are two district trends completely lost at the macro level…read more.