BMO wrote two notes this past week that caught our attention. The first was titled, “Nation of Rentals” in which they note,

Canadian housing starts dipped for a third consecutive month to a still-solid 239k annualized units. That leaves the year-to-date average running at 248k, and the latest 12 months averaging 256k.

The most noteworthy story in Canadian homebuilding is the ongoing, and widening, split between construction of homes for ownership, and those for rental.

Across major CMAs, combined housing starts of condominiums and for homeownership have now fallen to the lowest level since the 2009 recession, and the mid-1990s recession before that; while rental starts continue to run near record highs.

Indeed, rental housing starts are now outpacing home ownership starts. This is something our good friend Ben Rabidoux of Edge Analytics also flagged on our Loonie Hour Substack.

Rabidoux notes, “homeowner” housing starts (ie condos + single-family) have fallen to the lowest level since 1997.

As we have emphasized for a couple years now, the pre-sale market is dead and it’s not coming back anytime soon. This has forced developers to pivot to purpose-built rentals, which are ultimately financed/ insured via CMHC. It’s the only thing keeping the fee machine churning, just enough to keep the lights on and some of the staff on payroll.

We have already flagged multi-decade lows in new home sales across both Vancouver and Toronto. However, it gets more interesting when you parse through the data further. For example, in Q2 there were just 62 pre-sale units sold in the Metro Vancouver area. Remember, a pre-sale is what leads to a housing start. Therefor, 62 pre-sale units sold in Q2 in a metro region of nearly 3 million people is really something to behold.

In other words, expect purpose-built rental construction to continue to outpace condos and houses. Not because the rental business is booming (vacancies are at thirty year highs, and rents are down double digits) but because rentals are just less bad than the pre-sale market.

We are becoming increasingly convinced the recent condo bailout is an admission from the government that the developers problems have become the banks problem, and the banks problem has become the governments problem.

Remember the old saying, “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

So who does most of the construction lending in the Fraser Valley and interior of BC (the epicenter of the condo bust)? The BC credit unions. The same ones that have a 100% deposit guarantee backstopped by the BC government.

Things that make you go hmm…

This all ties into BMO’s other report, ‘Bottom Fishing in Canadian Housing.’

Canada’s housing market is stabilizing—dare we say bottoming—as this long cycle continues to evolve. In a nutshell, national resale volumes are stable, albeit at the lower end of pre-pandemic norms, new listings are also stable, and the broad market has come back into balance. With mortgage rates down, incomes growing and the economy holding in, prices look to be finding a floor. To be sure, there are pockets where weakness will continue well into 2027 (see the Toronto condo market), and we don’t believe that conditions will dictate a sharp recovery.

Are we bottoming? Does BMO have a valid case?

It seems logical to conclude we’re closer to a bottom than not. However, as BMO highlights, getting nominal prices back to their peak could take up to 9 years or more if history is any guide. Furthermore, inflation adjusted home prices will take even longer to recover. For example, it took over 20 years after the 1989 GTA housing peak for average home prices to fully recover after inflation.

As always, Real Estate is hyper local, and product specific. While we’ve flagged our ongoing concerns in the new condo market, we believe the single family market will be the first to recover. This isn’t a bold take, just one that’s backed by data.

Single family home building has collapsed to record lows.

A nation of renters that no longer builds houses because nobody can afford them.

If and when we bottom, you’ll see it in single family homes first.

Let’s watch.

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As expected, the Bank of Canada held rates this past week.

“After a year of weakness, Canada’s economy is showing signs of improvement,” the bank said in its monetary policy report. “Growth is expected to pick up, and inflation eases gradually from its recent peak. Uncertainty is still high.”

What is perhaps most interesting, is the BoC forecasting $75 brent crude prices, with prices currently hover around $88/ barrel and climbing as tensions in the middle east reach a boiling point. Based on the BoC’s math, Brent at $80-85 adds 0.3 percentage points to inflation.

In other words, it’s becoming increasingly possible the BoC will raise rates into an energy crisis, and the sharpest house price correction in 40 years. If so, we believe this would be a significant policy error.

From a housing perspective, the Bank of Canada is forecasting an increase in residential investment, despite what they note as, “a large stock of unsold small condominiums in Toronto and Vancouver.”

You don’t say.

We’re not sure what data the Bank of Canada is looking at, but there’s nothing we’re seeing on the ground that suggests residential investment (new developments) will pick up anytime soon.

Developers are sitting on a mountain of unsold inventory, which has prompted bailouts from various levels of government. This wash out will take several years to play out.

Remember, there are nearly 12,000 unsold units just in Metro Vancouver alone.

As our commercial lender said, “If you want lower prices, speed up the court system. There’s a backlog of insolvencies just waiting to be processed.”

In other Bank of Canada conundrums, CPI rental inflation remains elevated, sitting at 3.5%.

We find this perplexing considering rents have been contracting nationally for over two years now. Average asking rent for all property types in Canada was $2,033 in June, down 4.3% year-over-year, the 21st consecutive month of annual decline. Per Rentals.ca, rents have declined 6.9% over the past two years, falling to their lowest June level in four years.

The Banks CPI rental inflation basket has some obvious flaws. We believe downwards pressure on rents seems like the obvious conclusion assuming tepid population growth continues, with a record stock of purpose built rental completing over the next few years.

While the Bank is right to be worried about oil prices, they definitely don’t have to worry about shelter inflation.

The resale market remains challenged. National house prices were down 3.6% on a year-over-year basis in June, and have now dropped 20% since the peak, and 36% in real terms (inflation adjusted). The biggest decline in 40 years.

However, on a more positive note, home sales appear to have bottomed and are slowly ticking up at the same time new listings fall. There were 4.8 months of inventory nationally at the end of June 2026, unchanged from May, and the lowest level so far in 2026. This is slighly below the long term average of 5 months.

In other words, inventory levels are showing signs of peaking and stabilizing. Yes, new listings are still high (the second highest June in 20 years) but many of these “new listings” are just sellers recycling the same inventory. For example, a seller listing at $1M for 30 days, cancelling the listing, and bring it back on the MLS as a new listing at $950K. Rinse and repeat.

We likely haven’t bottomed yet, but there are early signs we might be getting closer to the end than the beginning. A government bailout doesn’t hurt either.

Of course, if the Bank of Canada follows the oil markets higher, then all bets are off.

Let’s watch.

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We got further confirmation from the Eby government this past week that the condo bailout will move forward. My full thoughts here.

“You’re hearing directly from developers that this is not what they asked for and it is not from their perspective a bailout,” he says. “When you buy something that’s on liquidation, you don’t say to yourself, ‘I’m supporting a bailout for the store.’

Adding,

“This is an opportunity for us to recognize the reality that people can’t wait for housing. We can buy housing at below our construction cost and make it available affordably, and if we don’t do it, someone else will do it.”

The Eby government says they will buy housing at below construction costs.

Newsflash, everything is selling below construction cost today. Which is also why the pre-sale market no longer functions.

If the government is looking for properties selling below construction costs, look no further.

We have the first resale at the Butterfly project since the building completed over a year ago. It just traded at $1425/sqft, well below its pre-sale price of $2400/sqft.

Here’s another one just down the street at Landmark on Robson. It just sold at $1,190,000, well below the pre-sale sticker price of $2,591,000.

This puts the current market value of high-rise luxury in Vancouver at $1272/sqft, which absolutely no developer could even come close to building for.

Like we said, just about everything is selling below construction cost these days, and so we’d agrue this isn’t a great investment thesis, although we wouldn’t expect much different from the government.

Nonetheless, price discounts are plentiful in the marketplace today, and we believe more is coming, regardless of the bailout package.

Mostly because developers are stuck with a lot of unsold condo inventory. Based on data compiled by Altus Group, this figure sits at about 12,000 condo units.

Furthermore, there is still a lot of bloat in the resale market, even with the market improving ever so slightly in recent months.

We currently have 6.2 months of inventory in the resale condo market as of the end of June. This is high from historical standards, although things have been improving in recent months. Encouraging news for a beleaguered condo market.

With the high levels of inventory on the market, we are still seeing downwards pressure on prices. Both the benchmark price, and the average price per square foot for condos has declined by 7% over the past year.

However, I don’t feel this fully captures the state of the market. From what we’re seeing on the ground, buyers are being incredibly selective. They’re taking their time and looking for condos in great locations, and more desirable buildings. These types of condos are holding their value better.

Meanwhile, older buildings, mediocre locations, or places that need renovations are getting hit hard. This product is often going no bid, and prompting sellers to hammer prices if they want to move on. Prices in this segment have declined by more than 10% over the past year.

Based on current market conditions, we fully expect more opportunities for buyers in the months ahead, although they might soon find themselves competing against the government, who will ironically be using their very own tax dollars to do so.

Let’s watch.

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Today I’m sharing a note that I had originally published on The Loonie Hour Substack last week. I believe this piece is worth resharing to my wider audience that hasn’t read it yet here. This piece summarizes my key thoughts on exactly what is happening with this developer/ bank bailout.

I believe this is Canada’s Big Short moment. Not that any banks are about to go under, but rather, an admission from policy makers that things are a lot worse than they seem on the surface, and its reaching a point where policy makers are getting desperate.

Please read on, and let me know what you think in the comment section. Please also consider subscribing to The Loonie Hour Substack where i’ll be writing somewhat frequently.

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Last week we learned that Mark Carney, in partnership with David Eby, announced the new Canada-British Columbia Partnership on Condo Conversion. They will leverage “innovative financing tools” to convert more than 2,200 vacant condo units into affordable homes.

“Looking out at condos that have been built, that are unoccupied, that are going to sit there potentially for another couple of years; we are going to go and use the right financing mechanisms and convert those into affordable housing so people can move in and use those,” said Carney.

Adding,

“Developers are stuck. They don’t want to sell at a loss.”

“It is a way to clear off on the books this overhang.”

WTF?

So what do we make of this, besides the obvious moral hazard.

Well, first off, the pre-sale market is on life support. New condo sales are virtually non-existent. After hitting 19,000 sales during the height of the bull market, they dropped to just 2900 last year, and are on track for even fewer this year.

It’s no different in the GTA. New condo sales are running at 40 year lows! And that’s why Doug Ford got his bailout last month. The Ontario plan is a $1.3B public-private fund through the Building Ontario Fund and High Art Capital (the former cannabis guys) to purchase blocks of unsold GTA condo inventory and convert them into roughly 2200 long-term rental units. Once the fund was set up, they partnered with the feds to remove the HST, immediately saving themselves 13% with the stroke of a pen.

The Government is ok with the political backlash because we they know have a really big problem on our hands.

Let’s not forget David Eby got elected campaigning against the Real Estate industry. Now he’s bailing them out

This is our Big Short Moment.

This is a bailout for developers, but also the banks! Yes, we believe the former banker, Mark Carney, got the tap on the shoulder.

The Banks have massive exposure to the development industry, and that exposure has grown tremendously in recent years.

Why do you think some of the banks have been offering blanket appraisals?

Banks have been offering mortgages to pre-sale buyers using stale appraisals (in some cases, appraisals that are two years old). This is done to maintain the illusion that values have not dropped during the construction period, allowing pre sale buyers to obtain full financing based on the pre-sale purchase price.

Here’s how it works. Imagine a scenario where you bought a pre sale condo for $1M. Construction is nearly complete so you need to get a mortgage and close on the property. However, the market is down and that condo is only worth $800k today. In theory, the banks should only be lending up to 80% loan to value on that $800k value. However, using stale appraisals, they are lending 80% of $1M, which is 100% LTV!

Why would banks do this? Because they are the construction lender on the project and they need these buyers to close otherwise they have an even bigger problem.

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Developers are already sitting on unsold units. Typically a developer will hold back about 20% of the condo units during construction. They hold unit backs to try and maximize profits at the end of a project, since prices typically rise during the construction period. It’s also a way to manage risk if you have construction costs overrun.

The problem is prices have not risen during construction. They’ve fallen, and they’ve fallen a lot.

Cue the inventory loan. This is when banks lend to the developer against the value of their unsold condos. As the developer sells off these units, the loan slowly gets repaid.

The banks have a lot of exposure here too.

Like we said, the banks might have had a say in this “developer bailout.”

We find it rather ironic timing that OSFI, the banking regulator, simultaneously lowered the Domestic Stability Buffer for Canada’s big banks from 3.5% to 3.0% of risk-weighted assets, effective June 19, 2026.

In simple terms, it gives the banks more capital flexibility, which can make it easier to absorb bad loans or keep lending while credit losses rise.

Is it a coincidence this is all happening in the midst of a condo bailout? We think not.

There is a crisis brewing. The pre-sale market is completely broken and we’re not through the worst of it yet. More condo projects will be completing soon. More buyers will walk from deposits, and developers will continue accumulating unsold supply.

There’s 4500 vacant and unsold units in Metro Vancouver, and that number is set to rise.

And so, the Eby government, in partnership with the Carney government, are going to take about a third off the units offline, and warehouse them into a rent to own program. I’m not at the leisure of disclosing the name of this rent to own company, but here’s how it works.

This rent-to-own program is marketed as a bridge to homeownership for people who can’t qualify for a mortgage today (red flag). The government buys the home, the resident pays a 2.5% down payment and moves in. The resident still doesn’t own the home but makes monthly rent payments while also paying an additional equity payment on top.

The resident is not just paying rent, they are paying rent plus an equity contribution for a contractual term of 5 years. In 5 years they need to qualify for a mortgage on a purchase price that was contractually agreed upon from the start. The company currently models 5% annual appreciation on their website (red flag).

So if mortgage rates move higher, income doesn’t rise, or the property falls in value, the buyer can end up paying more each month without ever making it to full ownership.

The government is selling this as a feel good story. We are helping people with no down payment get access to the housing ladder. Where have we seen this before?

The reality is, these people are just the exit liquidity for the developers and the bankers, they just hope you’re not smart enough to figure it out.

If we really wanted affordable housing we’d let these unsold condos keep falling in price, or have the government pick them off in bankruptcy.

It’s funny, I was chatting with a large commercial lender this week. They do a good share of inventory loans for new condos. His words, not mine,

“If you want lower prices, speed up the court system. There’s a backlog of insolvencies just waiting to be processed.”

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As we have written before, the pre-sale market is on life support. New condo sales are virtually non-existent. After hitting 19,000 sales during the height of the bull market, they dropped to just 2900 last year, and are on track for even fewer this year.

The pain is becoming too much, and so, the great bailout has arrived. Last week, Mark Carney, in partnership with David Eby, announced the new Canada-British Columbia Partnership on Condo Conversion. They will leverage “innovative financing tools” to convert more than 2,200 vacant condo units into affordable homes.

“Looking out at condos that have been built, that are unoccupied, that are going to sit there potentially for another couple of years; we are going to go and use the right financing mechanisms and convert those into affordable housing so people can move in and use those,” said Carney.

Carney added “models” will be released in the fall. Adding, “It is a way to clear off on the books this overhang.”

In other words, we will use your tax dollars to provide the exit liquidity for our closest, and most politically connected developer friends.

Imagine telling the soccer mom in Winnipeg, or the plumber in Saskatchewan that their tax dollars are going to bail out some wealthy developers in Vancouver, the same ones who have enjoyed an unprecedented thirty year bull market.

Markets go up. Markets go down. That’s capitalism. But if developers keep the profits and taxpayers absorb the losses, that’s not a market, that’s crony capitalism.

And capitalism without bankruptcy is like Christianity without hell.

Despite the public backlash, if we assume the Carney government moves forward with this back door bailout, they will purchase 2200 unsold condos in BC. This is not an insignificant number. As of right now, per CMHC data, there are nearly 4500 completed and unsold condos in Metro Vancouver, ready for move in.

Other calculations, such as data derived from Zonda and Rennie suggest the number of completed and unsold condos sits at 3945 as of the end of Q1 2026.

In other words, the feds could absorb nearly half of the new vacant condo supply in Metro Vancouver with the stroke a pen. Insane.

Now, once we add in other parts of BC, such as Victoria and Kelowna, perhaps we can round that number up to 6000 or 7000 vacant units, as a rough estimate. Either way, your tax dollars could absorb roughly a third of all the unsold inventory in BC.

Instead of letting prices fall and allowing the free market to clear, the government is going to suppress economic gravity while picking winners and losers in the industry.

Surely we have to assume the selection process will prioritize those who are closest to the Liberal party. Established developers with strong political ties get first dibs at the trough.

If you’re a small developer, an overleveraged pre-sale buyer, or just a regular soccer mom that can’t afford her mortgage, sorry but it’s insolvency for you. Thanks for playing.

Imagine a scenario where Carney buys up all the unsold luxury condos WestBank is sitting and then fills them with low income tenants. Bet you didn’t see that coming.

Anyways, this bailout for BC mimicks what we saw in Ontario last month. Doug Ford’s Ontario plan is a $1.3B public-private fund through the Building Ontario Fund and High Art Capital (the former cannabis guys) to purchase blocks of unsold GTA condo inventory and convert them into roughly 2200 long-term rental units. Once the fund was set up, they partnered with the feds to remove the HST, immediately saving themselves 13% with the stroke of a pen.

All of this reeks of morale hazard, and they don’t even try to hide it anymore.

If we really wanted affordable housing we’d let these unsold condos fall in price, or pick them off in a forced liquidation/ bankruptcy. As we have always argued, Canada’s housing woes are entirely self inflicted through bad policy.

You don’t have to like the rules of the game, but you better understand them.

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As expected, the Bank of Canada held rates this past week. What’s perhaps more interesting, is the language they used.

“Economic weakness combined with rising inflation is a dilemma for monetary policy. Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent,” Governor Tiff Macklem said in an opening statement.

“For now, holding the policy rate unchanged balances those risks.”

In other words, the economy is dealing with a bout of stagflation. Quite the dilemma indeed.

Markets are still pricing in one rate hike by the end of the year. Colour me skeptical.

Remember, Q1 GDP outright contracted, a big miss considering the BoC was forecasting 1.5% growth. Whoops.

Meanwhile, as of the time of this writing, it appears the war in Iran may have finally reached an end, for the tenth time.

“The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump said on Sunday in a social media post. “I hereby fully authorize the toll free opening of the Strait of Hormuz and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”

Good news Tiff Macklem, the bond market, and mortgage holders alike. The Canada 5 year bond yield had already retraced 30bps over the past month, and should move further once markets are open on Monday. Let’s watch.

In other news, shelter, which is a large weight of the CPI basket continues to get crushed. Per Rentals.ca, average asking rent in Canada declined 4.7% year-over-year in May, representing the 20th consecutive month of year-over-year declines.

As of Q1 2026, the inventory of purpose-built rental units under construction reached a historic high of more than 200,000 units. Something this newsletter has been duly noting for well over a year.

Meanwhile, on a city level, rents in Vancouver have fallen on a year-over-year basis for 30 consecutive months, with the average rent now 5.6% lower than four years ago in May 2022! Rents in Toronto have fallen for 28 months, but remain 3.1% higher than four years ago.

Four of the six largest markets now have lower asking rents than three years ago in May 2023, with only Montreal and Edmonton having increased over the same time period.

As we have flagged before in our past notes, Montreal and Edmonton are not far behind. Edmonton is currently engulfed in a multiplex boom unlike nothing that’s ever been seen before, almost entirely financed via CMHC MLI rental financing. Often times, fraudulently. Although that’s a story for another time.

We continue to believe the rental market isn’t getting enough attention. Media headlines have been largely focused on pre-sale condo buyers and the mortgage renewal wall.

In other news, and perhaps on a more positive note, activity for single family detached houses in the city of Vancouver has enjoyed a noticeable uptick over the past month or so. One or two months does not make a trend, but if and when the market shifts it always happens in the single family detached market first. It starts in the city and then ripples outwards.

Vancouver house sales were up 38.5% year-over-year last month, with inventory down 10%. This is in sharp contract to the Greater Vancouver condo market which saw sales down 7%.

Single family is always the first to move. It shouldn’t be a surprise, considering we no longer build new houses. It’s a hard market to oversupply.

Move in ready houses at more attainable price points continue to sell well despite all the turmoil. Let’s see if this holds.

Thank you for your attention to this matter.

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We couldn’t help but chuckle at the comments from Premier David Eby this past week, who took credit for the precipitous decline in the rental housing market.

Yes, rents are down big time, but let’s give credit where credit is due. The Federal government, despite its sins of the past and its incredible fumble of the housing and immigration file, is finally on the right track. Rents are falling for two primary reasons,

1. Immigration is back under control. After allowing the population to inflate by a record 1.2M people per year, the feds have aggressively tightened immigration to the point where Canada and BC’s population are outright contracting. This has never happened before.

2. CMHC has insured a record amount of new rental construction financing, creating a record boom in new apartment supply.
   

Cities like Vancouver are now sitting on the highest vacancy rate in 31 years and there’s still a record supply of rental construction in the pipeline completing soon.

Yes, rents are heading lower from here, which will keep Eby happy. One last hurrah before the wheels fall off the rental construction market too.

At some point, developers and REITs are going to pull back in a meaningful way. They are cannibalizing themselves with new supply.

All you have to do is look at the latest financials from CAPREIT, Canada’s largest Residential Investment Trust, who owns a significant footprint in Ontario and BC. Overall turnover rents are down 2.1%, but turnover rent for tenants who have been in place for less than two years is down 10.8%. First flagged by my good friend Ben Rabidoux.

The oversupply in the rental market is already forcing governments to walk back certain bull market policies. Kelowna recently lifted their AirBnB ban after vacancy rates jumped from 1% to 6% (we think they could touch double digits before this cycle bottoms).

At some point Eby might think twice about cheerleading the decline.

Speaking of cheerleading the decline, despite the Canadian Real Estate blungeoned by the sharpest price decline in more than three decades, Canadians say it hasn’t gone far enough!

About 55% of Canadians want home prices to fall further, with that figure jumping to 69% among 18- to 34-year-olds, according to a Nanos Research Group poll for Bloomberg News.

Even among homeowners, two-thirds told Nanos the price decline to date was a positive or somewhat positive development for the housing market.

It’s not often you see the majority of Canadians cheering for home prices to fall, yet here we are.

It’s understandable, considering affordability issues. Yet we aren’t convinced these same voters will be willing to endure the pain required to bring meaningful affordability. After all, it’s all fun and games until someone loses an eye (or a job).

Until then, the cheerleading shall continue.

Let’s watch.

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For the first time in six years, the Canadian economy slipped into a recession. Real GDP fell by 0.1% on an annualized basis during the first quarter, Stats Canada reported on Friday. That follows a 1% contraction in the fourth quarter.

The mainstream media is framing it as a “technical recession” because I guess its the polite thing to do while we wait twelve months for a bunch of PhD’s at the CD Howe Institute to officially declare it.

Whether this number gets revised higher by a couple basis points a few months from now is irrelevant. The point is, for a lot of Canadians, these are tough times.

In the major metros of Toronto and Vancouver it’s felt like a recession for a few years now, especially if you’re involved in the Real Estate sector.

In fact, It’s long been argued that housing is the business cycle.

In a research paper titled ‘Housing is the Business Cycle’ written by Edward Leamer at the National Bureau of Economic Research, he argues:

Housing is not just another interest-rate-sensitive sector — it is the business cycle’s early-warning system. Residential investment may be a small share of long-run GDP growth, but around recessions it becomes disproportionately important. Housing turns first, consumer durables follow, and business investment typically weakens later. That sequencing matters. By the time the labour market rolls over and policymakers recognize the downturn, housing has often been flashing red for quarters.

The key insight is that housing downturns are not primarily price events — they are volume events. Prices are sticky on the way down, so when demand softens, transactions collapse. That drop in volume then ripples through construction, mortgage finance, real estate services, renovations, furniture, appliances, and local employment. In that sense, housing is less a side effect of the cycle and more often the mechanism through which the cycle arrives.

For regular readers of this newsletter, this is glaringly obvious. In Toronto and Vancouver we’ve already seen resale housing volumes collapse to multi-decade lows. Last year, the Greater Vancouver area endured a 25 year low in annual home sales.

This has flowed through to the construction sector, where investment demand has collapsed, killing the pre-sale market. The number of pre-sale condos sold has gone from 19,000 in 2021 to just 2900 last year. So far in 2026 we’ve sold 469 units, and are projecting to end the year somewhere around 1500. This is getting awfully close to zero when you consider how many of these 1500 sales will be cancelled once these projects don’t hit sales targets for construction financing.

This of course flows through into other consumer durables, such as appliances. Coast Appliances — which employs 300 people at nine distribution centres and 17 showrooms across Canada files for insolvency.

News of Coast Appliances’ difficulties wasn’t a surprise within Canada’s stressed development sector.

“I didn’t have any information about Coast, but I wasn’t surprised that a supplier to the residential development industry got in trouble,” said Michael Drummond, interim CEO of B.C.’s Urban Development Institute.

“When housing stalls, the whole supply chain feels it. Presales have basically collapsed, unsold inventory is rising, and it’s harder to (plan) any new thing right now.”

You don’t say.

Anyways, despite all of this, markets are still pricing in a rate hike from the Bank of Canada by the end of this year.

I guess markets believe the Bank of Canada can alleviate inflation derived from a war in the middle east by plunging a few more households into insolvency.

It’s worth noting that the Bank of Canada was projecting 1.5% annualized increase in GDP last quarter. Instead they got hit with a “technical recession”

One could argue they should probably be cutting, not hiking. But alas, don’t count on them to do the right thing. Need I remind you the Bank of Canada started hiking rates in March of 2022, one month after the housing market had peaked, and home prices had already inflated by a record 23% in a single year.

Patiently waiting, let’s watch.

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Despite the sharpest house price correction in more than three decades, mortgage arrears in Canada remain low. Recent data from the Canadian Bankers Association shows the national arrears rate was a paltry 0.28% (as of February 2026), which means just over a quarter of a percentage point of mortgages are in arrears. Or rather, 28 mortgages out of every 10,000 were 3+ months behind on a payment.

This is well below levels in the United States and the United Kingdom.

In other words, nothing to worry about. Right?

However, one can’t help but notice the growing number of court-ordered listings littering the MLS.

In fact, the number of court ordered listings for sale is the highest it’s been in two decades.

The reality is, the Canadian Bankers Association only tracks mortgage arrears at federally regulated banks. What’s missing from their 0.28% figure is all the bad loans issued by credit unions, private investors and mortgage investment corps.

This is likely why the MLS is telling us a much more concerning story. The big banks are the most conservative of lenders, but even for them, we believe the trend is higher.

From a close industry source, Mortgage delinquencies at one of the big banks have doubled in the past three months. With 70% of the growth coming from Vancouver & Toronto.

In other words, more forced sellers looking for a bid in an illiquid market.

Stress is evident everywhere you look.

Here’s consumer insolvencies in BC. Record highs. Courtesy of my good friend Ben Rabidoux.

Keep in mind this is just at the retail level. We’ve repeatedly noted the enormous stress in the development space, which is really ground zero for this bear market.

From an article in BC Business magazine this past week,

Bids are com­ing in below the debt levels on projects that have run into trouble in the last year. And there seems to be no end in sight.

“This is a monu­mental re-set,” says Mark Good­man, whose broker­age spe­cial­izes in apart­ment and multi-fam­ily devel­op­ment sites. The com­pany has a list of court-ordered sales on projects from Van­couver to Langley that it’s work­ing on. “We’re going to see con­tinu­ing pain and more dis­tressed sales for at least two years. And the price is going to have to be sig­ni­fic­antly lower.”

At the Van­couver Col­li­ers divi­sion that deals with fore­clos­ures, court-ordered and des­per­a­tion sales, it’s the same story.

“Until early 2025, we had sev­eral land sales in dis­tress that res­ul­ted in mul­tiple com­pet­ing offers when presen­ted to court for approval. In the early part of last year, there was greater optim­ism that the mar­ket would recover. This has stalled with uncer­tainty remain­ing on where pri­cing is going to land,” says Jen­nifer Darling, asso­ciate vice-pres­id­ent.

The beatings will continue until morale improves.

Here’s completed and unsold inventory. Finished units sitting empty, accumulating interest costs.

Nobody knows when we’ll hit bottom. Timing markets is hard. Although it’s safe to say we have a pretty high conviction that distressed, court-ordered listings should continue to accelerate through the back half of this year.

Let’s watch.

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No Real Estate developer epitomizes the Vancouver Real Estate bull market quite like West Bank. Lavish luxury towers that shine above the Vancouver skyline, sold at record breaking prices. There was seemingly no price too high! After all, it was art in the sky, and chandeliers under bridges.

Impressive sales centres, unparalleled marketing. All of which attracted deep pockets from overseas buyers, desperate to hold a trophy asset in the skies of Vancouver. Local buyers couldn’t resist either.

And then, suddenly, the music stopped.

A plethora of foreign buyer taxes, speculation and empty home taxes all slowly leaked the air out of the bubble, just before Tiff Macklem at the Bank of Canada slammed the brakes in the summer of 2022 with a 100bps rate hike.

Today we are left tracking the fallout.

As reported by Howard Chai over at The Realist, A substantially-completed rental tower by prominent Vancouver-based developer Westbank has been placed under receivership, according to filings in the Supreme Court of British Columbia. The first one to date this cycle.

The 35-storey rental project is known as Joyce 2 and is located at 5083 Joyce Street in Vancouver, directly across the street from Joyce 1. Joyce 2 consists of 360 rental units and 4,500 sq. ft of retail space and the property is held by Westbank under 5055 Joyce Property Inc.

The receivership application was filed by Toronto-based pension fund OPTrust, which bought out Westbank from Sen̓áḵw last year for an undisclosed price. Notably, however, OPTrust is the second-ranking mortgage holder and the first-ranking mortgage holder is National Bank.

“The appointment of a court-supervised receiver has been sought to ensure the project can reach final completion in an orderly and timely fashion,” said Westbank and OPTrust in a joint statement provided to The Realist. “This was undertaken cooperatively with Westbank and is consistent with shared objectives to facilitate the completion of the project.”

According to OPTrust, the loan matured on December 31, 2025 and they issued a formal demand for payment on January 13. Since then, OPTrust says they learned that at least five liens had been filed against the project and that National Bank issued a demand for payment on January 8 after at least six defaults, including failing to make interest payments and failing to comply with equity infusion obligations.

OPTrust also said that a report prepared by the project’s development cost consultant estimated cost overruns of $15.5 million, with $8.2 million related to hard construction costs.

As of March 19, OPTrust says it is owed $109,211,965, with interest now accruing at the default interest rate, which amounts to $60,136 per day.

OPTrust says National Bank, which is in support of the receivership, is not prepared to advance additional funds for the project and that the project is now “at a standstill due to a lack of available capital.”

The announcement hardly comes as a surprise, but rather it’s surpsing how long it took.

Financial issues have been well documented, and according to public reports, Westbank been an active seller in recent years in a bid to free up liquidity.

A recent lawsuit from a former employee also notes a list of issues with Westbank projects, according to an affidavit first reported by Bloomberg.

The Alberni, a distinctive high-rise tower in Vancouver designed by the firm of famed Japanese architect Kengo Kuma, has “many unsold units” and vendor take-back mortgages outstanding, the message said. The recently opened Butterfly, another unique condo tower in Canada’s third-largest metro area, “is well over budget and closings are slow and uncertain,”

Those two projects have seen some eye watering resale activity this year.

The first resale at the Butterfly has now sold firm and closed on the MLS. Originally sold pre-sale for $2,561,000 (plus GST) has now sold as a completed resale for $1,518,000. That’s a million dollar loss not including the 10% in fees on top (GST, PTT, Realtor and legal fees).

In other words, the mark to market is at $1425/sqft. That’s a far cry from the building average pre-sale price of $2800/sqft per Altus Group.

It’s a similar story over at Westbanks other marquee high-rise, Kengo Kuma, which completed a few years earlier.

Let’s be honest, there’s nothing new about a Vancouver developer having a project slide into receivership. However, one can’t deny the fascinating story of WestBank, a former bull market darling that caught the allure of what we thought was sophisticated capital.

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We’ve written a lot about the Canadian rental market. A rental construction boom financed by the federal government has pushed vacancies to multi-decade highs, and pushed rents down by double digits across most major metros.

Rental construction is almost entirely financed through CMHC, a government-owned crown corporation. They are now financing nearly 90% of all new rental construction in this country, through their MLI program which offers 95% loan to cost on new construction, and 50 year amortizations on completion. Some in the industry have called it '“welfare for developers”.

Nonetheless, it’s been a successful program in bringing on new supply. So, mission accomplished.

It caught our attention this week when the government announced new rental financing measures in its spring economic update.

The government is taking action to help lower financing costs to build residential properties with up to eight units.

The Spring Economic Update 2026 announces the government’s intention to:

• Amend mortgage insurance rules to permit private mortgage insurers to offer multi-unit mortgage loan insurance on five- to eight-unit residential properties to promote competition and offer lenders more choice; and

• Amend mortgage insurance rules to increase flexibilities for mortgage insurers to offer products to borrowers building new three- and four-unit housing, helping unlock financing for “missing middle” homes such as triplexes and fourplexes—an important step toward increasing housing supply and addressing Canada’s housing shortage.

  
  The government will initiate a 30-day consultation on these measures and announce further details after this consultation.

Here’s what we think it means, in plain english.

The feds know they have way too much exposure to a rental market that is deteriorating quickly. However, if they pull the plug, new construction likely goes to zero, since rental is the only thing getting built now that pre-sales are running at 40 year lows. New construction going to zero doesn’t get you re-elected when nearly 9% of your labourforce is employed in the construction sector.

In other words, the feds want to pull back but can’t. So they’re attempting to trim back exposure, slowly. Last year they raised insurance premiums on the rental financing program. Now they’re suddenly allowing the private insurance market to come in and play ball. It’s all rather convenient timing.

We find it interesting that they’re only allowing the private insurers to finance up to eight units, which is the sweet spot for Alberta multiplexes, a product that is becoming grossly oversupplied. New rental multiplexes are popping up on every street corner, financed at nearly 100% LTV, and then flipped to unsuspecting Toronto investors (the same investors that used to buy pre-sales are now buying highly levered multiplexes).

Multiplexes have become the new hot thing, with retail money hot to trot.

One barrier to the multiplex space is the CMHC MLI program currently requires a minimum of 5 doors. However, in cities like Vancouver, we are often constrained to triplex or fourplex due to lot sizes of 4000sqft which make building five doors nearly impossible. So the feds have a solution for that too. Insured financing for three and four doors. What could possibly go wrong?

Just to clarify, we don’t like dislike the multiplex, and we don’t have a problem with the government offering a carrot to the private sector to build new housing. However, we can’t help but notice the risks building.

We continue to believe that the real estate cycle has turned, and the market is oversupplied, with more supply coming. Everyone is now chasing multiplexes, including bigger developers who used to sell pre-sale condos! Furthermore, anytime we see Toronto investors chasing a hot trend, we get both excited and nervous.

Investors chasing triplexes and sixplexes built on maximum leverage will probably go down for the dirtnap. After all, cheap and abundant credit served up on a platter always ends the same way.

Furthermore, the feds continue to emphasize they are happy to see falling prices and cheaper rents. Just look at the tone of messaging from their economic report.

Overall construction activity has remained elevated by historical standards. Housing starts totaled 260,000 units in 2025—well above the 2000–2019 average of about 200,000—driven by record levels of purpose-built rental construction supported by federal measures.

Growing supply—combined with efforts to bring population growth back to more sustainable levels—is helping to narrow Canada’s housing supply gap and deliver meaningful improvements in affordability.

Since recent peaks, average home prices have declined by 20 per cent, national rents are nearly 9 per cent lower than their 2024 peak, and average monthly mortgage payments for homeowners have fallen by more than $1,200 in Toronto and Vancouver, almost $400 in Calgary, and over $200 in Halifax from peak levels.

Together with continued gains in real household incomes, these developments are restoring purchasing power and easing access to housing for renters and first‑time buyers.

In other words, the messaging out of Ottawa seems to suggest they are pleased to see lower prices. That’s fine, they were elected to do so. However, we are left wondering why any prudent capital allocator would still be eager to deploy capital into a market that is being managed lower, other than the allure of immense leverage…

Let’s watch.

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Real Estate foreclosures are ramping up, and the stigma of defaulting is starting to fade. Our recent piece on The Loonie Hour Substack, guest authored by Ben Rabidoux highlights why strategic default is turning from a "moral failure" into a mainstream financial strategy.

Yes, media articles are now recommending it could make more sense to simply walk-away from your Real Estate.

And that’s exactly what’s happening, although its largely concentrated in the new condo space.

“I’ve been a real estate lawyer for almost 50 years, and I’ve never seen anything quite like this,” said Vancouver-based real estate lawyer, Perry Ehrlich.

The pre-sale condo collapse is well documented, with more buyers walking away. That’s an issue likely to grow with OSFI desperately trying to pull the rug on blanket appraisals which have, in many cases, ignored market values and financed buyers up to 100% LTV using stale appraisals on new condo units.

Defaults on pre-sale condos are increasingly common, yet actual mortgage defaults remain low from a long term historical basis. As my friend Ben Rabidoux points out in his piece on The Loonie Hour Substack, mortgage defaults in Canada are still below their 30 year average.

However, the three month change in mortgages going delinquent has surged by 1,200. You have to go back to Q2 2020 when the world locked down (and before the federally-imposed COVID “mortgage payment holiday”) for the last time delinquencies moved this sharply.

Meanwhile, the number of court-ordered listings currently on the MLS, it’s reaching fresh record highs across Metro Vancouver.

There’s nothing to suggest this is going to ease anytime soon. Falling home prices and rents are leaving property owners with fewer options to get themselves out of the jam. They used to say a rolling loan gathers no loss, but with prices falling the ability to refinance the debt is becoming more difficult.

I’d also turn your attention to what’s happening in the pre-sale assignment market. Despite a plethora of new condos in the pipeline nearing completion, assignment listings on the MLS are collapsing.

This is happening because developers are increasingly restricting pre-sale buyers from listing inventory on the MLS as they attempt to limit price discovery which could impair appraisal values for other buyers in the building, not to mention the record supply of unsold inventory they’re also holding.

The exits are being barricaded. Expect more defaults to come.

It’s a pretty negative outlook, but for astute buyers, opportunities commeth.

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If you thought last year was a tough year for the Canadian housing market, 2026 is shaping up to be even worse. Per CREA, national home sales slowed to a trickle in Q1, with the weakest start to the year since 2009. As my friend Ben Rabidoux with Edge Analytics notes, if you strip out the global financial crisis, this was the slowest Q1 in 25 years. Ouch.

As sales and liquidity dry up, home prices continue to fall, dropping 0.4% month-over-month in March, and down 4.7% on an annual basis. National home prices have fallen 21% from the peak, the sharpest correction dating back to the 1980’s.

Buyers are sitting on the sidelines with no urgency to pull the trigger, and they’re getting rewarded for that behaviour in the form of lower prices. Investors, meanwhile, are nowhere to be found.

As we’ve highlighted at length in this newsletter, the dearth of investors has major ramifications for the pre-sale housing market.

According to data from Urbanation, sales declined to a new 35-year low. In Q1-2026, 246 new condominiums were sold in the Greater Toronto Hamilton Area (GTHA), down 52% annually and 94% below the 10-year average. For the first time in at least 30 years, there were no new project launches during the quarter!

If you can’t sell what you already have, why launch a new project?

More from Urbanation:

A record-high 4,295 new condos were completed and unsold as of Q1, more than doubling the level from a year ago and nearly five times higher than two years ago. Based on sales during the previous 12 months, there was 92 months of completed new condo supply on the market, which doesn’t fully account for units that were presold but the buyer failed to close. Additionally, 8,629 unsold new condos were under construction and slated for completion in the next couple years.

Developers lowered asking prices for standing inventory to an average of $1,189 per square foot (psf) in Q1, a 5% decline from a year ago and a 13% decrease from the high three years ago. However, resale units in comparable buildings registered within the past three years averaged a selling price of $859 psf in Q1-2026, a 25% drop from the market peak in Q1-2022.

In other words, resale prices continue to adjust quicker to market conditions than developers, not necessarily because they’re smarter, but because a 25% drop in new condo prices renders many projects insolvent.

Given all of the above, it becomes increasingly obvious why policy makers decided to step in and remove the 13% HST tax on new housing just a few weeks ago.

Multi-decade lows in housing activity is prompting all levels of government to reasses, whether it be HST, GST, Development charges, foreign buyer taxes, or even AirBnb bans.

The BC Government has granted the city of Kelowna a sudden exemption from the AirBnb ban. I guess the finally figured out the local economy relies on tourism.

Not only is the Kelowna economy struggling, but vacancies have soared, not because of the AirBnb ban, but from a massive building boom. Kelowna is enduring record completions of new condos and apartments.

Chief executive of the Kelowna Chamber of Commerce, George Greenwood, said the business community is "elated" by the news, even if some would have preferred to see the changes take effect earlier. Greenwood said Kelowna has seen an increase in purpose-built rental housing coming online in recent years, so the lack of units isn’t a concern.

“We have hundreds of units sitting empty right now,” he said.

If he thinks there are a lot of empty units right now, just wait.

Kelowna has nearly 35% of their total rental supply currently under construction.

The vacancy rate has ballooned from its lows of 0.6% to 6.2% today and is poised to move higher.

Ironically, the BC government will attribute the rise in the vacancy rate to their successful policy making, but it’s really the feds who should take the credit here.

As I highlighted in a recent piece on The Loonie Hour Substack, the rental boom is entirely a result of the CMHC’s MLI program which allows Real Estate developers to finance up to 95% of the cost of new rental construction, and then, on completion, assuming you meet the debt servicing requirements, allows the ability to refinance the building up to 95% Loan to Value, and a 50 year amortization.

CMHC has pushed their exposure to the rental construction business from 5% in 2017 to nearly 90% today.

Don’t be surprised to see this program get tightened further as vacancy rates climb closer to double digits in some cities.

Like we said earlier, policy makers will be busy in the coming year as they contend with a sharp reversal in the housing market. Most of these housing related policies were birthed in a bull market.

Let’s watch.

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As we have highlighted previously, the rental market is undergoing a significant correction, and it appears poised to continue.

The city of Vancouver saw 2300 purpose-built rental units completed in 2025, the highest in four decades!

Keep in mind this is completions. We still have a pipeline full of rentals still under construction across Metro Vancouver that will be completing soon.

“We experienced a surge of housing completions — both in condominium and rental space — in the past year … and we expect this to continue for the next couple of years,” Shiva Moshtari-Doust, CMHC’s lead economist for B.C.

As a result, the vacancy rate has surged to a thirty year high in Vancouver, per CMHC.

Meanwhile, a recent report from Rentals.ca shows that rents continue to fall, dropping 5% on a year over year basis for one bedrooms, and 3% for two bedroom units.

Over the past three years, rents are now down 14% in Vancouver, an unprecedented move.

Just to recap, we built a record number of new rental housing, the vacancy rate increased, and that pushed rents lower.

In other words, the economic laws of supply and demand still hold true. Go figure.

As we have always argued, the housing crisis is almost entirely self-inflicted through policy decisions.

For once they may have got something right. Government increased the supply of credit (CMHC MLI Select) to the rental construction business, which spurred the private sector to build more rental housing, while at the same time they throttled the supply of immigration (population growth has gone from 1.2 million to zero).

Voila, affordability cometh.

This is playing out across the country, not just in Vancouver. The average asking rent in Canada fell to a 35 month low in March, with rents now falling for 18 consecutive months.

Every indication suggests the decline in rents should continue. Population growth is poised to remain anemic, and there’s still a ton of new supply nearing completion.

A healthy, well supplied rental market takes pressure off the resale market. Think about what we had a few years ago. The vacancy rate was sub 1% and rents were rising by 10% a year. This spurred speculation, investors came rushing in, betting on ever higher rents, creating excess demand in the resale market and increasing home prices. People who would normally rent decided to buy not only out of fear of missing out but also because they got sick of having to move every few years when their landlord decided to sell and cash in on the record prices.

Now we have the opposite. A well supplied market with falling rents has curbed speculation. The investors have disappeared, which is creating issues in the pre-sale market, while falling rents are killing purpose-built rental proformas. Yes, we’re sowing the seeds for the next supply shortage.

Shortages create gluts. Gluts create shortages. This is the cycle.

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Last week we wrote a piece titled ‘Vulture Funds’ in which we highlighted the quasi bailout of the construction industry via sweeping policy changes from the Ontario government and the federal government. The immediate removal of the HST tax, the taxpayer backed vulture fund used to acquire unsold condos, and now the halving of development charges. All of which are designed to lube the tracks of an industry that has come to a screeching halt.

BC is on deck.

Ten major industry groups are calling on Premier Eby to match Ontario's housing deal, a GST rebate on new homes under $1.5M and development charge cuts of 30-50%.

Whether you agree the development community (which has enjoyed a prosperous few decades) should receive a tax dollar infusion is a worthwhile debate.

However, i’m sure we can all agree, taxes on new housing are ridiculously high, accounting for roughly 20% of the cost of a new home, and should absolutely be lowered or shifted elsewhere.

I’d argue development charges should be counter cyclical. ie, you increase them marginally when the market is hot and willing to absorb them, and you reduce them when demand tapers and the costs can’t be pushed through.

Think about a city budget today. There have only been 121 condo units sold in Metro Vancouver this quarter. Down from a peak of nearly 6000 quarterly sales back in the bull market. In other words, development tax revenues have completely dried up. So you have two options today, local municiaplities can collect 50% of something, or 100% of nothing.

Not surprisingly, not everyone agrees.

“Literally, in one municipality this evening, there is consideration going toward council to increase their development cost charges by 167 per cent. That’s Port Moody. At a time when our industry is sounding alarms to be reducing these, municipalities are not listening. So there is optimism that our province will follow suit with Ontario,” said Matthew McClenaghan, president of Vancouver-based Edgar Development.

It’s slashing time. Because, well, everyone is taking less these days, and its not just developers.

Greater Vancouver sales figures for the month of March show no improvement in sales activity. Home sales were down 3% from last year, coming in at their second lowest total in 20 years. Home sales are running 36% below their 20 year average!

Inventory remains elevated at 7 months of supply which is continuing to squeeze prices lower. Home prices, as measured by the HPI, were down 7% across all property types, and 8% for condos.

This is the resale market adjusting in real time, every month they tick lower. That’s a death sentence for a developer sitting on a project that’s only 70% sold out.

It’s also a serious problem for existing buyers in the project who now face appraisal risks. Pre-sale buyers unable to securing financing and walking away from their contracts is all the rage these days.

“I’ve been a real estate lawyer for almost 50 years, and I’ve never seen anything quite like this,” said Vancouver-based real estate lawyer, Perry Ehrlich to CTV News via Zoom on Friday.

“Usually real estate is great, and if you hold it, it only gets better and better. But what’s monumental is the fact that people have put down huge deposits and think they can get bank financing… and they can’t.”

“It’s very unfortunate,” said another real estate lawyer, Alexandra Raszewska in a Zoom interview with CTV News Friday. “We’re getting a lot of calls, I’d say one or two a day where people are struggling. Closings are coming up this year, and they can’t cover the gap.”

Pre-sale buyers are stuck. Many of which relied on blanket appraisals that the banking regulator is now pushing to end.

What’s interesting is that assignment listings are collapsing in Metro Vancouver.

Normally you’d expect this number to grow with people seemingly wanting out of their pre-sale. However, what this data tells us is two things.

1. Realtors are likely telling these pre-sale buyers there is no market/ no demand for their overpriced assignment.

2. Developers are increasingly blocking assignments from hitting the MLS as any assignment offloaded at a discount will impair the values for the rest of the building. Remember, developers are also sitting on a record number of unsold units themselves.

   

   Like we said, everyone gets to take less.
   

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For the past several years this newsletter has highlighted the slow motion trainwreck that is the new condo market. The math on pre-sales hasn’t worked for a long time. Quite simply, the cost to deliver new supply was well above the resale market. The gap grew ever larger but the market didn’t care. Eager investors continued to pay steep premiums, blinded by the euphoria of a historic bull market.

Then, in March 2022, the music stopped.

The Bank of Canada began a rate hiking crusade, and immediately put an end to the euphoric pre-sale market.

Fast forward to today. New home sales in the GTA are running at 45 year lows. There were just 5314 new units sold in 2025. The lowest levels on record since they started collecting data, and 81% below the ten year average. Totally dead.

The pain is becoming too much for government to ignore.

A few weeks ago we learned the Ontario Government was partnering with investment firm ‘High Art Capital’ by announcing a $1.3 billion partnership to turn roughly 2,200 unsold GTA condos into rental units. The province is using the new Building Ontario Fund (BOF) to buy already built condos. The partnership will purchase blocks of at least 10 condos, built after January 1, 2023. Privately-run rental firms will manage them, and 25% of the units will be “affordable.”

This week, we learned the Ontario Government, in partnership with the Federal Government, is planning to temporarily remove the Harmonized Sales Tax (HST) for buyers of new homes.

Premier Doug Ford announced the plan, saying the full 13% tax will be removed for new homes valued up to $1.5 million from April 1, 2026 to March 31, 2027 for both primary end-users, and investors.

"Please get everything together, you have one year ... talk to your bankers and start buying the homes.” said Ford.

Convenient timing to say the least.

The taxpayer backed vulture fund will immediately save themselves 13% in purchasing costs with the stroke of a pen.

The Real Estate bailout has begun. The only thing that’s surprising is how long it took.

We expect more goodies are on the way, and not just for Toronto.

Keep in mind, nearly 9% of the Canadian labour force is employed in the construction sector, and the fallout is not contained to just the GTA.

New home sales are equally as dreadful in Metro Vancouver. Altus Group data shows the numbers are slightly higher than Mr. Jarvis suggests, currently sitting at 121 condo units sold this quarter. Down from a peak of nearly 6000 quarterly sales back in the bull market.

Meanwhile, we have 11,000 unsold new condos currently sitting on developer balance sheets. This is effectively “shadow inventory” as most of these units are not listed on the MLS.

I’m not aware of any vulture funds in Vancouver, but there’s probably a business idea here.

Last year the development community lobbied the federal government to remove the foreign buyer ban on the sale of new homes.

Freshly annointed housing minister, and former mayor of Vancouver, Gregor Robertson, seemingly obliged.

“We need to figure out the best role for offshore capital to play in the housing market,” the former Vancouver mayor said in an interview with Bloomberg News.

“We need to make sure housing is built and owned for Canadians first,” he said. “That said, we’ve seen more innovation on this in countries like Australia that enable some foreign investment into higher-end new homes, or in some cases rental housing.”

The foreign buyer ban officially expires January 01, 2027. We expect the taps will be turned back on, at least for new construction purchases. After all, the demise of the pre-sale market is started to put a dent in government tax coffers.

Let’s watch.

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As expected, the Bank of Canada held rates this past week. However, what caught our attention was the Banks dovish commentary, and the ensuing market reaction. Per the BoC press conference:

“The risk that higher energy prices quickly spread to the prices of other goods and services looks contained.”

“Governing council will look through the war’s immediate impact of inflation but if energy prices stay high, we will not let their effects broaden and become persistent.”

By all accounts it was a dovish presser, and markets interpreted it as such. Markets internalized the speech, and largely expected the BoC to remain on hold until the end of the year, with one rate hike priced in for Q4.

Less than 48 hours later, with energy prices surging, and bond yields ripping, traders in overnight interest rate swaps pivoted aggressively, betting that borrowing costs will increase by 75 basis points in 2026, starting with a 25bps point hike in July. Boom.

In other words, we’ve gone from no rate hikes before the war, to one rate hike expected on March 18th, to three rate hikes on March 20th. An unprecedented move.

If traders are right, the Bank of Canada will opt to fight inflation spurred by an energy crisis from a war in the middle east, despite domestic demand collapsing. Colour me skeptical. Rate hikes will not unlock the straight of Hormuz nor will they pump a single extra barrel of oil out of the ground.

Nonetheless, it doesn’t matter what we think, the bond market is on the move. The Canada 5 year bond yield is up a whopping 30bps this week, and 60bps over the past month. Tough timing for the record number of Canadian mortgages renewing this year.

If you’re coming up for renewal or about to make a purchase, you’ll want to secure a rate hold. Ideally you would have done it a few weeks ago.

When we frame it all up, here’s what we know for sure. Home sales in Canada are tracking below last year, and mortgage rates are now going up, not down. We are going through a historical housing correction, and that looks poised to continue.

Home prices are falling, and that’s a good thing for affordability per Carolyn Rogers at the BoC.

“The housing market is looking weaker, and weaker than than we had incorporated into our January outlook. So that’s something we’ll be looking at certainly when we prepare the April outlook. As you would know, I’m sure some of the the more recent data coming out in early March looks like we might see a bit of a rebound, but it’s probably too early to tell. So, definitely, we need to take another look at the housing market. What I would say about prices is, I think I said this at the last press conference, we need house prices to come down so that housing is more affordable. We’ve all been worried about how fast house prices went up in recent years, and now we’re worried about how they’re coming down. We do need them to settle down a bit for housing to get more affordable. There isn’t really a path to affordability, particularly in some of our big centers, without house prices correcting a bit.”

Mrs. Rogers has certainly had a helping hand in correcting home prices.

However, the unwind in Canadian housing is not only due to higher interest rates, but a sharp reversal in immigration.

Canada’s population declined by more than 100,000 people in 2025, marking the first annual decline in records that date back to the 1940s. Led by a sharp drop in non-permanent residents (temporary workers and foreign students). Population growth has gone from 1.2 million per year, to -100,000.

So we have falling home prices, a declining population, and higher energy prices all weighing on demand. Will the BoC put the final nail in the coffin and hike rates three times this year? Traders seem to think so.

Let’s watch.

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We’ve written at length about the housing bust emanating across the country. In particular, in the new construction space.

New home sales have hit 45 year lows in the GTA, and aren’t fairing much better in Greater Vancouver, and so, as we noted last week,

An article in the Globe & Mail highlighted the insolvency crisis plaguing the development community. According to data from the commercial real estate data firm Altus Group, 119 “distressed sale” transactions were recorded in 2023 across the country, totalling properties worth $767-million. In 2024, those numbers rose to 191 transactions worth more than $1.5-billion. Last year, 252 distressed sales were registered, totalling more than $1.42-billion.

At this point, the housing downturn is well documented, and so we couldn’t help but notice the willful blindness from BC’s housing minister, Christine Boyle.

Premier David Eby told the real estate community Tuesday he’s very worried about slumping housing starts and stalled high-rise condo projects, as he seeks to avoid contributing to what could be a housing supply crunch in just a few years.

“We’re following the housing starts pretty closely,” Eby said to delegates from the B.C. Real Estate Association meeting in Victoria. “We’re still above the 10-year average, the building is still taking place, which is positive. But I am extremely concerned about the next couple of years and where those numbers are going to go.”

While Eby was delivering his speech to Realtors, back at the legislature his housing minister was showing anything but concern at the situation.

Christine Boyle mostly shrugged her way through questions about housing starts during her ministry’s estimates, displaying none of the concern shown by the premier.

Boyle said “housing-starts activities in B.C. continues to be at a relatively historic high,” with purpose-built rental registration “strong” in 2025 and registration of data units “exceeding” expectations, all of which is, in her mind, “signalling strong interest in continuing to build.”

Strong interest? Regular readers here are likely scratching their heads.

As we have explained previously, housing starts remain elevated, but are a lagging indicator by 2-3 years! A housing start, as defined by CMHC is once the foundation has been built back to grade.

In other words, a housing start is what happens after the land is bought, rezoned, has received its development permit, building permit, pre-sold 60% of the building, excavated, and then built a new foundation back to grade. Only then is it marked as a housing start.

In other words, if you want to know where housing starts are going there are a few metrics we’d encourage our housing minister to monitor.

Firstly, pre-sales. After all, if you can’t pre-sell the building, you can’t get the financing to dig the hole and pour the foundation.

Pre-sales in Metro Vancouver are running at shockingly low levels.

You could also look at single family housing starts. The construction cycle is several years shorter. When market conditions turn, builders can adjust quickly and turn off the taps, unlike a high-rise condo project.

Single family housing starts in BC are running at 30 year lows!

Mrs. Boyle is right, rental housing has been robust, but it too is making the turn lower. With population growth now outright contracting in BC, and a flood of rentals completing, rents are plunging, killing developer proformas in the process and keeping CMHC (Canada’s largest rental construction lender) up at night. CMHC underwrites more than 85% of all new rental construction in the country and has significantly tightened underwriting standards in recent months.

Rents in BC are now lower than they were two to three years ago.

As a result, we’re seeing more rental developments going into insolvency on completion due to an increasing number of projects unable to acheive projected rents and cover the equity shortfall.

We’re also hearing of some developers raising capital on completion to cover vacant rental units, in hopes of holding out long enough that rent prices will rebound. Remember, BC has strict rental controls. Once a tenant is placed at todays depressed rental rates you’re stuck with that tenant for years, impairing long term returns to capital partners.

Suffice to say, there’s nowhere to hide these days.

BC’s construction industry is a mess, and there’s no turning this ship around in the immediate future.

Thus, we find it rather ironic that the BC government is still forecasting rising housing starts this year and next.

We’ll take the under.

Let’s watch.

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Last week we wrote a piece titled ‘Landmark Agreements’ in which the Federal Government signed an agreement acknowleding aboriginal title for the Musqueam First Nations across most of Metro Vancouver. It was a “Landmark Agreement” according to the Feds, yet received zero mainstream media coverage. Why it received so little coverage we’ll never know, but we certainly have our theories.

After the agreement leaked on Twitter (X), it soon spread like wildfire, becoming too large to ignore.

We then learned David Eby was at the signing ceremony, but was unaware of the contents of the agreement. The Feds say he was briefed weeks ago. The Squamish First Nations says they’ll be challenging the agreement, and homeowners were told there was nothing to worry about. Just ignore the circus.

Anyways, here’s what you need to know. We interviewed First Nations legal expert Tom Isaac on the Loonie Hour this week. Nobody knows more about First Nations law than Tom. Full interview here.

In short, aboriginal title is a “senior” interest that can burden the land and said key Land Title Act protections for private lands like indefeasibility don’t apply against it. That was the legal ruling in the BC supreme court in the Richmond/ Cowichan land claim. This puts serious clout over the property market across Metro Vancouver because the rights agreement doesn’t specifically state which lands are actually deemed to have aboriginal title. All we know is that Musqueam have “rights and title” within the asserted Musqueam territory, which is most of Metro Vancouver. There is also no legal wording in the agreement which specifically limits aboriginal title to just public lands.

Why our publicly elected officals are actively entering into land agreements without consent, let alone public consultation with its voter base is bewildering. Yet nobody speaks up out of fear of upsetting the reconciliation apple cart.

Anyways, from a Real Estate perspective it’s impossible to say how this will all play out. Although it’s certainly not helping with investor confidence, in a market that is already languishing.

Home sales fell again in February, dropping 9% year-over-year, and settling at their third lowest levels in the past 25 years.

Home prices slid 7% from last year, although that figure is underreporting the true extent of it.

To be fair, it’s not just Vancouver though. It’s nearly nationwide.

An article in the Globe & Mail highlighted the insolvency crisis plaguing the development community. According to data from the commercial real estate data firm Altus Group, 119 “distressed sale” transactions were recorded in 2023 across the country, totalling properties worth $767-million. In 2024, those numbers rose to 191 transactions worth more than $1.5-billion. Last year, 252 distressed sales were registered, totalling more than $1.42-billion.

Altus Group VP Raymond Wong said they define “distress sales” as ones that involve a court proceeding – creditor protection, receivership, foreclosure, power of sale – so the data does not include, for example, a property sold by an owner at a heavy discount due to financial distress.

The asset class seeing the most distress is development land, primarily because new home sales are virtually non-existent. Remember they hit 45 year lows in Toronto last year.

Part of that reason is because resale prices continue to gap down at a much quicker pace, a pace that developers simply can’t match. This is ultimately rendering pre-sale product uncompetitive against the rest of the market. Toronto resale condo prices are now down 25% from the peak.

Therefore the beatings will continue until morale improves.

We acknowledge the traditional territory… and increasingly the receiver.

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While everyone was busy following the enormous geopolitical events unfolding in the middle east, a subtle news release from the Federal Government went largely unnoticed or perhaps intentionally burried, despite having (potentially) significant ramifications for nearly all of Metro Vancouver.

The Musqueam Indian Band and the Government of Canada signed a Rights Recognition Agreement where Canada recognizes Musqueam’s Aboriginal rights, including title, and sets up a framework to “incrementally” implement those rights through an ongoing nation-to-nation relationship.

In simpler terms, it means the federal government is formally acknowledging that Musqueam holds Aboriginal rights — including Aboriginal title on land — within its traditional territory and is committing to work out, step by step, how those rights will be put into practice. The agreement creates a structured framework for gradually implementing Musqueam’s authority in decision-making over much of the Lower Mainland’s lands and waters.

Their traditional territory includes the region’s mountainous, forested watershed that feed into Metro Vancouver’s drinking water reservoirs, as well as West Vancouver, North Vancouver City, North Vancouver District, Vancouver, the University of British Columbia, the University Endowment Lands, Burnaby, Port Moody, Anmore, Belcarra, Coquitlam, New Westminster, Richmond, Vancouver International Airport, the northern areas of Delta and Surrey, and the waterways. It overlaps with several other First Nations.

The announcement comes on the heels of increasing polarization, after the B.C. Supreme Court recognized Cowichan Aboriginal title over parts of Richmond and, in doing so, declared that historic Crown grants of fee simple and other interests can be an unjustified infringement of that title—even where today’s owners were never served or named in the case. The Court did not void private titles, but it held Aboriginal title is a “senior” interest that can burden the land and said key Land Title Act protections like indefeasibility don’t apply against it, while also suggesting Aboriginal title and fee simple can “co-exist” only in a limited, reconciled way where one must ultimately yield.

First Nations lawyer, Tom Isaac of Cassels argues the result is legal uncertainty: private owners may keep their registered titles, but the usual assumption of “clean, indefeasible” fee simple is weakened on lands found to overlap Aboriginal title, with governments now under a duty to negotiate a reconciliation framework, and ultimately leaving nearly 800 acres of land in Richmond illiquid and unsellable while this decision gets appealed in court.

The Cowichan ruling has become the biggest political hot button in the province, and will be front and center in the next provincial election. Given all of this, I have two questions.

1. Why is the Federal Government refusing to publicly release an agreement that could impact nearly two million people.

2. Why has no major mainstream media outlet covered this story?

Other than Daily Hive, as of Sunday evening, not one major news outlet has even reported this story, despite the government calling them “Landmark Agreements.”

No public consultation or documents provided, and no (state-funded) media coverage.
Until then, we have more questions than answers. A thought only more concerning when you consider the outcome of the Cowichan decision that left homeowers with no notice, no say, and no ability to defend their legal rights.

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