The Canadian Investor - Economic Uncertainty Continues to Reshape Canadian Real Estate

Episode Date: August 21, 2025

In this episode of the Canadian Investor Podcast, we’re joined by Daniel Foch, host of the Canadian Real Estate Investor Podcast, for a deep dive into the macro forces shaping Canada’s economy and real estate market. We explore the impact of rising youth unemployment, the steep decline in construction jobs, and the looming mortgage renewal wall for homeowners facing higher rates. We also discuss how five-year Government of Canada bond yields influence fixed mortgage rates and the broader economy, alongside the ripple effects of U.S. tariffs on Canadian industries like autos, steel, and lumber. Plus, we touch on key policy developments, including potential changes to the mortgage stress test and the debate over British Columbia’s foreign buyer ban. Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Do you keep hearing about these all-on-one ETFs lately? Well, I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification, all in a single ETF. Whether you're just starting out or simplifying your portfolio, BMO all-in-one ETFs make it easy to invest with confidence. Just Z-It and forget it.

Considering ETFs like Z-E-Q-T, BMO's All- Equity E-T-F, or Z-G-R-O, B-M-O's growth ETF. Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own, say, Don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors.

This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome to the Canadian Investor Podcast. I am back for another episode with a different Dan than Dan Can. So I'm here with Dan Foch. Some of you may remember Dan or you've listened to Dan. on the Canadian real estate investor podcast. So Dan's back on the podcast. We'll be talking a bit more macro, but also some of the things that are happening on the policy front when it comes to real estate. So before I get started, Dan, welcome back to the podcast. Do you want to give a quick intro for potential new listeners that would not be familiar with you? Yeah, 100%. Thanks for having me. Always a pleasure to hang out with you and chat macro and interest rates and kind of how everything, the, the, The belly of the beast, I guess, of the sort of real estate side of things. My name is Daniel Foch.

I'm a real estate broker by trade. I'm now working at a company called Valerie.ca, which is Canada's first AI powered real estate brokerage. And I host your real estate podcast, the Canadian real estate investor podcast. So if anybody's looking for more real estate focused content, I would encourage you to check out our show. It's on the network. It looks very similar. It won't be hard to find in your podcast platform. It looks just like the Canadian investor podcast, but two uglier guys, myself and Nick.

would disagree about, yeah, or two guys with more hair than Dan and I. So I'll just, I'll just say that. Well, welcome back, Dan. So we'll start off with some macro backgrounds. Talk about Canadian, the five-year bond yields, among other things and how it has a big impact. And not only real estate, but just the economy in general. We, we know we've talked about it. And we'll explain a bit more just so people are on the same footing as anyone else that would have a bit more knowledge on this. But we'll talk how. they affect fixed rate mortgages in Canada, but also it has some impact from business perspective, which can lead into real estate because you've said it, I think, and a bunch of other people that are not eligible in the space is that employment is probably the biggest factor in real estate. And of course, if businesses are having trouble refinancing debt, which ultimately could have impact on employment and then have an impact on real estate. Yeah, I think another thing like stack hands unemployment just came out a couple of days ago now first negative print one of the biggest job losses since covid obviously came after a couple of pretty big wins but you know

it's always tough to see whether or not those ones were legit there's a lot of part-time jobs created earlier this year there was a lot of jobs created from the election but the biggest red flag for me in stack can's most recent unemployment print was youth unemployment the like young people actually Yeah, if you have it up there. So if you, so there's two things. So construction lost 22,000 jobs. So we're finally starting to see the knock on effects of this ailing real estate market. Right. So you're seeing precon basically the whole, you know, I'm sure everyone's heard of this condo crisis that's happening in the city of Toronto. Precon volume is dropped like as much as 80%. So basically we went from selling, you know, 100,000, uh, across Canada to 20,000 or or less to be honest. Like even even 20,000. Thought you were going to say to 20. No. No, I mean, well, like some of the numbers are that low. Like I think Q1 Toronto sales was like 500 condos, right?

So we went from creating a lot of supply for that through this pre-construction, you know, casino basically to now none. And once people aren't buying pre-construction houses, then those jobs start to dry up and that we're kind of getting to that phase. So 22,000 jobs lost in construction unemployment. A lot of that's getting backfilled by a shift to purpose built rent. and we'll talk a little bit about that in today's episode. But the other one that really, really stuck out to me, if you scroll down, actually, they made a couple of charts on it. They show the youth employment level is 53%.

So almost one in or almost half of young people don't have a job, which, you know, a lot of young people haven't entered the workforce yet. So, you know, some of them are still in high school, university. But the problem is youth unemployment is also rising. It's the highest it's been since the global financial crisis. And we know how. that set up the millennial generation for a really, really big struggle getting into homeownership, right? They all, they're the, the late, the latest generation to get into

homeownership. The average first time homebuyer age has been rising pretty steadily. And so my fear is if we have a, a future of young people who are now battling this huge unemployment issue, but also things like AI taking away entry level knowledge work jobs, your whole cohort of first time buyers could be at risk. And that's, that's a bit of a, it's a bit of a risk factor moving forward for Canada's housing market. Yeah, and it's interesting, too, that the age groups that seem to be picking that up are like the core age group from 25 to 54 and then the older cohorts of 55 to 64. This one is especially interesting for me just because when I think about retirement,

that's typically the age that, you know, 55 may be a bit young for retirement, but that's typically the age that people will shift into retirement. And you're seeing that there's actually a much higher employment than the average 2017 to 2019. That's what they provide here. The stats Canada graphics. And it's just a small nugget. It's obviously a very small sample.

So I don't know if we can draw too many big conclusions just yet out of it. But it is interesting that you're seeing a higher proportion of the older demographic that are working. whether that's out of, I'm not sure if it's out of necessity because of cost of living being higher, not enough savings. I'm not exactly sure what is driving that. I know there's a lot of people that may retire and then come back part time to the workforce because they're bored, for example. So I'm sure it accounts part of that too, but that that is one that I, I thought was pretty interesting. Yeah. So, you know, older people working longer, younger people not working as

much. You know, it's funny because you hear in a lot of industries and the construction industry is one where this is especially true that we just did an episode on it, this idea of like a silver tsunami it's called where basically you're going to have like, you know, um, 10% of the workforce expected to retire over the next, I think 10, 15 years. And so there will be some changes, but it's like, when does that changing of the guard happen where we start getting some new blood into these industries and seeing these retire? And it seems to be getting pushed further and further because people do want to work longer for whatever reason, probably I My guess would be it's a financial incentive, and that's delaying young people being able to enter a lot of these positions.

Yeah, and I wonder too, like, and I know you're pretty deep in that space, but I know we're going off on the employment tangent, but a lot of these jobs at 15 to 24 year olds would have, I think a lot of these white collar entry level jobs, am I wrong to assume that a decent chunk of them are actually being replaced by AI right now? Well, I think you're absolutely correct. Like a lot of the knowledge work CEOs have said they would rather hire AI than a Gen Z worker, right? So I mean, you hate to see it, but, but it sounds like that's probably a trend that's, that's happening. I think Microsoft put out that that list of like the jobs that were most at risk and the least at risk. And a lot of the ones that were least at risk were all like skilled trades. So I think, you know, you could start seeing a lot of young people actually go shifting towards more hands on work to hedge against this, this risk of AI. And I think, you know, I don't.

even know if unemployment's necessarily a tangent per se. I think it's a perfect setup to talk about, you know, the macro bond yields and the rate environment. Because if you go back to like, you remember that period when, when Pierre Pauley was like really grilling Tiff McClum in that one like YouTube video they did or whatever when, you know, everything, when, when like, Parliament and like a lot of those committees were done like on Zoom. And he, and he was talking about how many Canadians could withstand an increase in a certain interest rate. And Tiff McClum said something that is very important. And it rings true to this day, which is the biggest reason for people not paying their mortgage is they don't have a job, right? Or they lose a job.

And so unemployment is, it's the only thing left. Like we've weathered a lot of the rates or any of the pain that you were going to see in the real estate market has already come out or is slowly coming out as people can no longer withstand these higher rates. But unemployment is really that next question, that next data point to watch. Because if it rises and it rises to historically high levels, that's more and more people who are. who are going to need to sell their houses because they only have maybe three or four months of mortgage payments set aside if they lose their job or whatever it is, there are risks associated with this.

Yeah, no, exactly. Unemployment is definitely a key trigger here. And it'll be interesting in terms of the AI. And maybe the last thing is I'm sure you do that too, is just in terms of being a, like having a research assistant. Yeah. Like that kind of job to me is almost fully done. Because, you know, having a human research assistant, you would still have to validate the work.

You still have to validate the work from AI, but you can get it done by AI and just save that extra body that you would have had to pay just a few years ago. Yeah, it's really funny because, you know, like one of the ways that I've differentiated myself as a realtor is by being like an analyst and almost like a little bit of like a pseudo-economist. Like, well, I'm actually doing a master's of science in economics right now. But, you know, two of the things on that Microsoft list of the 40 jobs at most at risk were like analysts and like economics professors, right? So it can do those like those jobs, which is, I mean, functionally as a real estate professional or a lot of knowledge work jobs is like gathering information, finding the key points and then drawing some conclusions from it. And I think a base level, you know, LLM seemed to be really good at that.

Yeah. And I think one thing that is probably good for you before we get into the fixed rates is I think jobs. where there is a human connection, human touch, just you doing a podcast, people kind of relating to you from that way. I know my old job I would meet with people in person or remotely, but to talk about retirement, their pension. And I think those are the kind of jobs that people want to talk to someone because they have questions and whether they just want to know, like, they want to talk to a human. They don't want all the information spit out. by an AI or an avatar or whatever it is. So I think those kind of jobs should be pretty resilient just because I think a lot of people will still have in the back of their mind even though the information has improved where you're with a chat bot and like you're so annoyed because you just want to talk to a person and you're just like the chat bot is not getting your questions

and then you just get annoyed. So obviously that will improve but I think that it will probably stay ingrained with a lot of people for a period of time. I think it's one of those things where, like, with what we do with content creation, like I've seen all of the AI generated videos. And for if it's like a character that's been invented, like if it's not somebody who exists, you can't really tell that it's AI. But like I think Ryan Sirhant, who's like a big famous guy in my industry, you know,

he posted a bunch of like these AI generated videos of him talking. The New York guy. Yeah, yeah, yeah, yeah, exactly. Like the Netflix guy. Yeah. And it was like, dude, they're really bad. honestly you know and so and so and my industry a lot of people you know age realtors are famous for like being lazy and basically not wanting to make their phone calls and so the first application of

AI that they're trying to use is doing their outbound calling because they don't want to call their clients or call their leads and it's like nobody wants to talk to a robot and if and you know that I think is that one thing that's left that's going to insulate people or create a hedge against AI is is that interpersonal connection honestly I think until until I can replicate you know what we do as individuals really really well which it's we're not far from that to be honest no no but it was just scary but yeah yeah well let's let's hope that uh you know there's not too many people impacted in this kind of market i like having some cash on the sidelines it gives me the flexibility to jump on opportunities when the right stock goes on sale but just because the

cash is waiting it doesn't mean it shouldn't be working for me that's why i use EQ Bank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month into your EQ bank account. Your cash stays liquid and ready to go when it's time to invest. And if you're not in a rush to access your funds, EQ banks notice savings accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share?

With QuestTrade's new fractional shares, you can invest any dollar amount and build a diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100. No problem. Questrade has you covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to questrade.com to open and fund an account. Use code TCI and you get $50 to get you started. In today's volatile markets, making small smart investing decisions matters more than ever. That's where the Globe and Mail comes in. From stock analysis and earnings report to tariffs and interest rates, the globe's business and investing

news help you take action. With tools like CPP, RSP, TFSA, and mortgage calculators, the globe offers a full suite of resources to help you plan, invest, and stay on track no matter where you are on your financial journey. Ready to invest in you? Visit globeandmail.com slash subscribe for unrestricted access at a special introductory rate. I guess now to get back to the five-year bonds. So I'll go a bit over how it works. Feel free to interject because I know you know this space pretty well. So for mortgages, why it's so important is because fixed mortgages are not driven by what the Bank of Canada does.

I guess partially they will have an impact on the short-term rates when the overnight rate from the Bank of Canada has changed. it will have an impact on that. Or it's sort of like a forecasting mechanism on what the bond market of investors thinks the Bank of Canada is going to do for the next five years. Yeah, exactly. And also they bake in some inflation expectation. Of course, the U.S. will have a big impact on that. So what the U.S. 10 year yield will actually do that will impact it as well.

So there's a lot of different things that will go into that. So it's not just, you know, we heard a lot from real estate brokers that they were saying, well, the Bank of Canada will cut and then the market will just start rocketing. And we're seeing that hasn't really done that mostly because I think the fix rate, which remains very popular in Canada, the five-year fix, has been, you know, relatively sticky over the last year or so. I think it's been within a range. You probably know a bit more what it is. but I think it's been what hovering around high threes to probably high fours in terms of range for the past year or so. Yeah, yeah, exactly. Been kind of stuck in that channel and you've sort of seen your, like the way that fixed rates often get priced is sort of your, like you'll hear in the space sort of like GOC plus one or GOC plus two and your variable rates are often prime plus or minus like in most cases minus now or prime minus one.

And so Prime is basically the best rate that a bank can afford to lend you money at. And GOC is just the government of Canada bond yield. And in a lot of cases, the reason that the bank's price mortgages relative to the GOC, their fixed mortgage is relative to the GOC, is they're the same duration. So if I want to go get a five-year return on my money, I can lend money to the government of Canada and make a whatever 3% yield. And I would assume that they're relatively credit worth. They've had a pretty good history of paying their track record.

They can kind of just print more money to get their way out of the problem. And so I'm willing to accept a pretty good deal. Yeah, as an investor, not a bad setup. And so I can get a, I can get a lower return, but it's a more higher likelihood that I'm going to see that return indefinitely. Or I can go lend money to you or me, right? If I'm RBC or some big bank. And if I lend money to you, I'm going to say, well, he could lose his job or, you know, he could get canceled on the podcast, whatever, or, you know, there's some sort of risk of him not paying.

And if that happens, then I want to be compensated for that risk. And so I'm, I want to, rather than the 3% that I can make lending money to the government of Canada, I want to make a little bit, build in a bit of a risk premium, right? And that 1% or, you know, 150 or or 200 basis points over is what gives you your fixed mortgage rate. So if I'm going to lend money to Simol or Dan, maybe I'd probably be a little bit higher risk because I own a bunch of rental properties. They're going to charge me a little bit more. They're going to charge you a little bit less and they're going to charge the government, Canada, even less. Yeah, yeah, exactly. And obviously, there's going to be the, whether the type of mortgage, whether it's an insured or insurable mortgage, there's going to be a bit more or less of a premium.

If it's backed by this CMHG or Gen Worth or one of those insurers, market competitions will have an impact on that. and then obviously borrower quality and so on. So that's always something to keep in mind when people will see mortgage rates. They do incorporate those risk factors for banks. And of course, the banks, the way they're legislated, when they invest in government securities, it's basically zero risk waiting for them. So it does allow it. It's a preferred asset for them to invest in.

I don't think the risk waiting is very high for mortgages, but still, it's a bit higher depending whether it's insured or not and some of the key factors obviously we went over them global bond trends especially the US will impact the five year government of Canada bonds market expectation

for the Canadian economy inflation expectation Bank of Canada policy outlook like you mentioned and perceive risk of the government of Canada debt which is I think one that will probably see more and more now in the coming years especially if we can't get those deficits

it's under control, which I don't know. I may, maybe I'm too. Doesn't look promising. What's that? Doesn't look promising. It doesn't look promising unless we make a new accounting conventions and stop counting certain expenses. But I digress. But yeah, I think it's something we will likely be seeing as the markets and bond investors

will probably be demanding higher yields, especially if they don't see any added sides of those deficit. And then you can come into, wow. What's the Bank of Canada going to do? Because a lot of people don't realize, but yes, at some point, they will have to monetize those deficits because there becomes so much debt that there's just not enough demand for that debt. If there's not enough demand for that debt, how do you create extra demand? Then yields need to go up. But that also means that the cost of borrowing for the government of Canada will have to increase as well.

So then the Bank of Canada can be in quite the conundrum at that point where if they want the yields to remain low, they can essentially, like a bad of words, just print money, start buying some of those Bank of Canada bonds with some newly printed money. And then you make the yields go down. But the problem with that is it could create some pretty bad inflationary pressure. So there's a lot of factors involved. Like I'm trying to, I'm probably oversimplifying it. I just explain it to right now, but I think it just shows a complexity of the bond market and actually trying to predict those five-year bond yields for mortgage holders and whether

you're renewing in the next few years or whether you're trying to buy a house in the next few years or in next four, five, six years. Yeah, totally. And I think, you know, one of the things like that I like to observe is the Bank of Canada's monetary policy report. They're really good at summarizing a lot of the factors. And it's really interesting to me, I went back and charted how many times they mentioned housing in the Bank of Canada Monetary Policy Reports. And the last two were like the lowest mentions of housing.

So I think that they feel that their job is done in the housing market, right? There was a lot of, there was a period of time whether I think there was a lot of concern and risk associated with the housing market. But I think that they feel like they've managed a lot of that away. And now they're mentioning uncertainty, obviously, a lot. And, you know, and tariffs, trade war. Their big concern right now is that you start to see a lot of those things get passed through to the consumer. And there's very limited in what they can do using their, they really have one tool, right, the interest rate. And it's a very blunt tool.

So, yeah, they can hit the market really hard with a change in the interest rate. But the reality is that's not going to take away tariffs or some sort of other inflationary factor that could get passed through the Canadian consumer. And so that's something they're really watching right now. and they don't want to put too much credit into the market and capital into the market make borrowing too cheap because there's a couple of factors, but the big ones are they're worried about tariffs becoming an inflationary situation and there's really no way to tell whether or not like there's two forces here. One is deflation because we're exporting less and our businesses start suffering and that's

deflation or disinflationary. And then number two is, well, we're paying more for stuff because goods go into the U.S., they get a tariff on them, then they come here and then we, we absorb that, that could be inflationary. And they don't know the outcome. And so right now they're a little bit reluctant to cut ahead of knowing the answer to that question. I think they'll very much cut or raise in response to it when it happens, but I don't think that they'll try and get ahead of it because it really is a guess. Like there's no, no real evidence of, of, you know, an outcome. Yeah, we had Trump 1.0 in, you know, 16 to 18, but that was, it was definitely different. We weren't a

real target then. That was kind of just a global thing. So those are the things that the BOC really seems to be struggling with right now. And the market seems to be struggling with pricing them in as well. Well, yeah, because if you listen to 10 different economists, you'll probably get 10 slightly different answers on the impact of tariffs on inflation. So I think that's one of the issue. There's always the risk that there is just a lagging impact. too. I know a lot of Trump supporters in the U.S. are saying, like, see, there's no inflation. The tariffs have been on. But the reality is you start looking at what businesses actually did. And a lot of businesses front run the actual tariffs by just purchasing a whole lot

in advance, knowing that tariffs would come by themselves some time, whether it's purchasing in advance for the Christmas holidays or whatever it is. They bought themselves some time. or maybe they just figured that Trump would just back down and lower tariffs, but that extra purchasing, that extra inventory at some point will run out and businesses will need to either find alternatives or pay higher costs and then they'll have to decide whether they want to pass that on to the consumer or take part of the hit, which in reality it will probably be a combination of boats. So you'll probably end up seeing some inflationary pressure,

whether it's a one-time impact or not, that's another debate I've seen from economists. A lot of them think it's going to be a one-time impact. Others think it may be a bit more sustained. So we'll have to see when it comes to that. But all that to say is there's a whole lot of uncertainty and no one really knows what to expect when it comes to that. 100%.

Okay. So in terms, you had a study. So I know you added some notes about Oxford economics, stating that yields could continue to rise. Yeah, I think that, you know, they put out this thing recently that because of military spending in Canada, like because we're going to have to hit those NATO targets and there's like a very predictable amount of capital that's going to need to be spent by the Canadian government, it's almost just like a layup for investors to say, hey, like I know they're going to need this money

and I know it's going to go to that purpose. And so there's this notion that that could cause yields to rise. a little bit and or demand for Canadian bonds to rise a little bit because the government's going to continue expansion of that of that deficit through the military spending. The other piece is that... Do you think demand would rise or do you think demand would fall? No, fall probably. Yeah, yeah, yeah.

Yeah, yeah, because of the nervousness. Yeah, yeah, because of the expansion of the deficit, I think it would, your demand would fall a little bit and that would reduce the price, therefore increasing the yield. The other piece I think that probably the Bank of Canada is really paying the most attention to right now beyond the whole trade war thing is the monetary side in the U.S., which is, I think that it was like CME Fedwatch had like a 90% chance of a rate cut in September from the Federal Reserve. It might have come down a little bit, but it was over 90 for a bit there. Yeah, let me keep talking. I'll put it up here. But the Bank of Canada is really, they're forced in some way to follow. the Fed. And in the same way that we're fearful of importing inflation from this trade war, where

we get a lot of our goods from the U.S. and they're a biggest trading partner. And if those goods are subject to tariffs, either on the Canadian side or on the U.S. side, they get passed through, that could create inflation. The same thing could happen if the Canadian dollar gets devalued too much. And we saw this early when the Bank of Canada started cutting well ahead of the Fed. The Canadian dollar was getting absolutely decimated relative to the U.S.D. And I think that if we get back on that path, like Trump, Trump kind of saved us a little bit in that regard because this, the trade war really devalued the USD relative to other global currencies. And so the Canadian dollar kind of came back a little bit, not a ton, but it came back a little bit. And so we have some relative strength compared to when we first started cutting.

When we first started cutting, the Canadian dollar was just absolutely smoked. And if Canadian dollars weaker relative to the U.S.D and we buy all of our goods in the, in U.S.D, or if we buy a lot of them from the U.S. directly, then that means that our relative cost of those goods would go up. And that's inflationary. That's called imported inflation. And so I think that the Bank of Canada is also probably being very careful. If they're concerned now is a return of inflation or is resurrection of inflation, then I think they're going to be very careful not to get too far ahead of the Fed, what they're cutting. So why does this matter? Because we just mentioned that, you know, there's a 90% chance of the Fed cut. Could one cut give the Bank of Canada more room to cut further? Probably not. But if they start trending in a downward direction, it could give the Bank of Canada a little bit more room to cut without devaluing the Canadian dollar too much.

It really depends on how the market kind of prices in the U.S. currency as a result of the Fed's moves. But I think that those are the factors. Like we really depend. And I mean, globally, like Canada is the fly on a horse's butt, right? And the U.S. is the is the horse. And nobody really cares in the global currency markets about sort of like what's happening here. To be honest, with all due respect to Canada, I love this country and our economy and all of that stuff.

But like we kind of have to do what our biggest trading partner is going to do. If we get too far from that, then you can end up with currency crisis or a bunch of other issues, which we saw happen in the 1990s. And we saw the inverse of it actually happened in blowout of the global financial crisis when Canada didn't cut. And the Canadian dollar was was way higher than the USD because the US and everyone else around the world cut. I mean, we did we did cut as well. But but our currency stayed quite a bit stronger compared to a lot of other global currencies. Yeah, I think weren't we like kind of in the middle of a bull market foil though at that point?

I think that probably helped the Canadian dollar. Yeah, yeah. But just to support what you were saying, so what I'm showing here for those on joint TCI, so it's a DXY chart. So the DXY is just a dollar index. And just to sum it up, there are just a basket of some of the major currencies around the world. There's six or seven, if I remember correctly, the Canadian dollar is in there. It's a pretty small weighting. There's a euro.

I think the yen's in there as well. Just compares it to the value of the U.S. dollar. And then it's on a base of 100. Anything over 100 tends to be a bit more of a stronger U.S. dollar below 100. It's a weaker U.S. dollar. It peaked literally before Trump took office in January of this year. It had, you know, it had peaked a few years before to be fair. But again, it went back up. It was going up steadily. And then when Trump in January, it took office, it peaked around 109. And then it's at 98 now. So just to reinforce what you're saying, the U.S. dollar has definitely been on the

downtrend ever since. And now it's been a bit more kind of sideways, I would say, for the last couple months. Yeah. And so I think that this is probably something that the Bank of Canada is really paying a lot of attention to in such that, you know, if we can manage away the inflationary risk from tariffs, we still also have to manage away the inflationary risk from a disparity in Canadian dollar to the US dollar. Yeah. And then to, uh, first, uh, first, the what's going to happen or the predictions from the CME Fed watch tool. Yeah, you're pretty spot on. So the market is pretty much pricing in a rate cut of 25 basis points for the September meeting. And then the base case now is you're looking at a 50-50 almost between

rates being down 75 basis points and 50 by the end of the year. So definitely the market pricing and more, but I feel like I've been talking about that for a year and a half now, two years where expectations were that the Fed would cut, would cut, would cut, and I feel like they've been behind for quite some time. So I don't know what to make of this we'll have to see. But I guess the unemployment or the employment numbers in the U.S. are not trending all that well, especially with the recent revisions that were announced pretty significant revisions. And then And probably not helping the case with all of that, Trump firing the head of the BLS, the Bureau of Labor Statistics in the U.S. So there's definitely a lot of uncertainty there, but the employment numbers do not look all that great in the U.S.

Yeah. I think the, you know, towards the end of that, like it's always, it's funny because you're really balancing like the monetary versus fiscal side or like basically government side in the U.S. where, you know, the U.S. economy was really strong, and that's why the Fed was very careful. Like, they didn't really need to add more fuel to the fire. You didn't want to get a return to the inflationary scenario. And I think, you know, Trump's tariff policies have really taken a lot of steam out of the U.S. economy. And ultimately, I think it's hard because it ends up becoming pretty volatile, right? Like Canada, we saw this as well. When tariffs first happened or were first announced, you saw this, and there was that 90-day delay, you saw this huge pull forward

of demand where companies were buying a bunch of stuff in anticipation, so they, you know, if they ended up being able to save the tariff, they would buy it today so that they didn't have to buy it later when the tariffs were on it. In the U.S., you were seeing the same thing. And so there was this short-term blip where the economy almost looked like it was going even harder, but then that's a bunch of demand that gets taken away from the future, right? So now you're seeing a big drop off in Canadian exports and in a lot of trade activity. and the same thing happening in the U.S., right?

You saw this big rush of people. Like, you heard of, like, Apple was, like, taking, flying, like, planes full of phones. Yeah, I saw that. And those things are inflationary. And so usually, like, typically it's not that common for the government or people, like businesses to really interact with government policy in that way. It's not uncommon for them to interact with central bank policy in that way.

Like, there's this thing called the pivot paradox, where if basically if businesses think that the Fed's going to pivot, it, like if they're going to cut, then they basically go and spend a bunch of money. And then that becomes inflationary, right? So you, like, if you think the Fed's going to cut, you'll go and spend a bunch of money so you can get assets, load assets for a better inflationary environment or whatever it is. And that becomes inflationary and it prevents the Fed from being able to do, like, to run their course. We're almost seeing the same thing happening on the government side in the U.S. where people are front-running decisions from a lot, this basically

one tool that Trump is using to change the economy. And it sounds like that volatility is really creating a lot of exhaustion and stress in the economy and, you know, trending towards probably economic contraction. So like recession in the U.S. other than basically like Navidia keeping the entire. Yeah. Yeah. Big tech has definitely been leading the way. I do look. It's called sector SPDR. It's really interesting and just gives a breakdown of ETFs that follow every sector of the SNP 500 and the discrepancy between sectors is something to behold, especially with healthcare. Health care has been struggling for obvious reasons with the regulatory climate in the U.S. In this kind of market, I like having some cash on the sidelines. It gives me the

flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me. That's why I use EQ Bank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month into your EQ bank account. Your cash stays liquid and ready to go when it's time to invest. And if you're not in a rush to access your funds, EQ banks notice savings accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. EQBank.ca to learn more and keep your money earning even while you wait.

Want to buy a stock but don't want to shell out hundreds or even thousands for a single share? With QuestTrade's new fractional shares, you can invest any dollar amount and build a diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100? No problem. Quest trade has used. covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to quest trade.com to open and fund an account. Use code TCI, and you get $50 to get you started. In today's volatile markets, making smart investing decisions matters more than ever.

That's where the Globe and Mail comes in. From stock analysis and earnings report to tariffs and interest rates, the globe's business and investing news help you take action. With tools like CPP, RSP, TFSA, and mortgage calculators, the Globe offers a full suite of resources to help you plan, invest, and stay on track, no matter where you are on your financial journey. Ready to invest in you, visit globeandmail.com slash subscribe for unrestricted access at a special introductory rate.

I wanted to pivot a little bit because there is something that we've heard a little bit of talk when it comes to mortgages and I'd like you to talk a little bit of that and I'll talk about the business side of things afterwards but it hasn't been as much talk about the renewal wall for mortgages

that were taken between 2020 and early 2022. So those especially fixed mortgages or I guess those variables with fixed pay That will be coming up pretty much now up until 2027. I know the Bank of Canada released some data back in July, projecting that a third of all mortgages holders are likely to see payment increase by the end of 2026.

And that average increase for fixed payments for fixed mortgages would be about 20%. That's not nothing, especially with the costs of everything else going up. So is that something we're just underestimating? mating. I just don't see as much talk about it in the past couple months and it could be a bit of a double whammy, wouldn't it be? Well, yeah, it could. So I think it's the reason people haven't talked about it as much is it's not as bad as it originally was. So, you know, 2023, 2024 when we were in like a 5% fixed rate environment and it was clear that everyone who took a mortgage in the last couple of years was going to renew at a higher rate, that was scary, right? Because the entire economy was going

to be taking on higher debt servicing costs, which meant less money they could spend on consumption, which would not be good for the economy. I think the Bank of Canada has very significantly soften the blow by bringing their overnight rate down and bond yields have soften the blow by coming down as well. And a little bit, obviously, like not as much. So your fixed rate environment, you're kind of like low fours, whereas like, you know, a year and a half prior, you were, you were kind of mid-fives, low-fives. And so what happened was a lot of this is you have to temper consumer expectations. So CMHC tracks like what type of mortgages are being originated mostly. And the majority of consumers are actually using variable rate mortgages now.

But a year ago, the majority of consumers were using short-term fixed rate, so three-year fixed. And two years- Really, huh? Variable mortgages. Yeah. Yeah. Well, yeah, consumers are behaving as though they think rates are going to come down. So they're piling into the variable rate to try and capture that downtrend. People don't understand the RIS are taking on, do they? Well, you would think they do based on what happened during COVID with everybody piling into the variable rate and catching the rate hiking cycle.

But I think a lot of it is also, you know, the stress test almost pushed people into that because it was the lower entry rate. And so because when your fixed rates started rising ahead of your, your Bank of Canada overnight rate, like the bond market really kind of telegraphed that the Bank of Canada was going to have to raise, people were like, oh, I can't afford to buy with a fixed rate anymore. So I'm going to go with the cheaper variable. And I think that it was really just a buying power exercise where they were just trying to maximize as much debt as they could because prices were so. So out of necessity almost. Yeah.

And stress test circumvention. And this is one of the reasons I think OSFI right now is actually making an effort to, review the stress test because I think that it had that one single negative externality. I think it did a really good job at managing away the risk and a lot of other things. And if it didn't exist during the COVID period, I think we probably would have had a lot worse of a problem on our hands. But I think that it does have this issue where once your fixed rate is high enough, like right now, if you're doing a four year qualifying in a four year fix or sorry, a four percent fixed rate, you're qualifying at six percent, right? So it's

either your contract rate plus 2%, or it's a minimum of 5.25, whereas variables, some variables are priced lower. And so if you can get a lower variable, you can qualify at the, you know, 5.25, yeah, or even 50 bips lower or whatever. And so a lot of it is stress test or convention, which it creates more risk, not less risk, because if you have more people on the, and so going back to the renewal wall, you know, you have all of those people who took variable during COVID, they already saw the interest rate risk.

They already realized that interest rate risk. Then you have all of your fixed people who took the, you know, five year fixed in 2021, 2020, 2020, 2020, early 2022. They're all coming up for renewal in 25, 26. That's going to, you know, many of those are going to reset at higher rates. Most of your 2021 rates are going to reset at higher rates. But then there's also this whole separate year or a couple of years where, you know, somebody was renewing in 2023 and they're coming up for renewal because they only took a three

year. Somebody was renewing in 2024 and they only took a two year. And a lot of those people are actually renewing at lower rates. Yeah. So the Bank of Canada has done a decent job at softening the payment jump for all of the people who are really in trouble and reducing the payment for the people who are actually going to be taking or getting their payment coming down. The one thing I will say that's really worth paying attention to is the majority of those loans that were originated in 2021 were acquisition loans. So it wasn't a ton of renewals or refinances. There was a lot of renewal and refinance activity, but it was one of the busiest years for transactions ever in Canadian history. Yeah. And so the bigger risk for a lot of those households isn't like the fact

that their payments may begin to jump up by 20 or 30 percent. It's probably also that there's a good chance that they overpaid for their house in that year relative to its current value. And the property has also dropped 10 or 20% in value. And so can, like, any kind of refinancing becomes impossible at that point. Exactly. You have no, there's no rope left, right? Like there, there's no equity that you can pull on. Like a lot of people in the finance space will interpret Canadian mortgages as equity based loans, not borrower based loans. They're not based on the borrower's income. Like, they're based on how much equity you have left in your house to continue to bail yourself out if you end up in a bad situation. And now because a lot of those folks have their

equity diminished, there's really no, there's no way out. And the way out is liquidating. And that's where you start seeing the supply come into the market. So it's a very interesting and dynamic problem that we're going to be dealing with over the next couple of years. Yeah. No, I know. It's always amazes me. Like, you know, I bought a new house or a new old house at the beginning of the year. And always amazes me how much money banks would be willing to approve. you for and I have an internal budget which I feel like I'm more the exception than the rule here. I think a lot of people end up just caving in to. Yeah, exactly. Most I can afford. And might as well get that bigger house or nicer house because I want to keep up with the Joneses

type of deal. But no, I think that's a good overview. I mean, we'll see. I still have my I still have my concerns when it comes for the renewal wall, especially because when you combine it width and that one is not talked about because I think tariffs makes much better headlines or just anything Trump related that he says that is crazy will make better headlines but is the renewal wall for businesses so a lot of people don't realize and unless you're really into macro and you read this stuff and listen to some deep macro thinkers you probably aren't aware that a lot of businesses actually were pretty smart during the pandemic and just took out some really really cheap debt. So they saw record amounts of corporate bonds being issued during the pandemic. So

2020, 2020, when rates were historical lows. And these maturities for fixed rate tend to be between five and seven years. So you do the math. And there's going to be a lot of maturities coming up pretty much starting this year, next year up until the end of this decade. So up until 2029, 2030. And that's where it could become problematic. And I wasn't able to find some specific data for Canada, but I think the numbers are also quite big for Canada worldwide. It's pretty massive as well. And what you're seeing is you may have some businesses that will get into a lot of trouble

because they're trying to refinance their debt and they are looking at much higher payment. It's not any different than households, right? If businesses, typically they'll just have to, you know, they'll pay coupons. And then when it comes due, they have to repay that debt. Well, if they can't repay the debt, to refinance it and likely at much higher rates. So the businesses that weren't managed as well or management didn't start planning for those potential higher rates could really get into trouble.

And that's where you could see some businesses having to make some cuts in employment and then having some impacts on employment around the world, but also in Canada. So that's why I'm saying when you combine both of them with the potential higher payments for a lot of borrowers. And then you combine that with some potential job losses relating to that renewal wall for businesses. I think that's where it could become very problematic a couple of years down the line. Like, I don't want to scare anyone, but it is something that is not really talked about all that much, I find. Yeah, I agree.

I think that there's, it should be talked about more especially just purely given the knock on effect on consumption. Like the scenario that you were talking about with the Bank of Canada model that, you know, some people grabbed the bearish headline where it said 60% of mortgages could renew at a higher rate or could see their payments go up. And that's true. If rates stay the same, 60% of people are going to see their mortgages reset at higher rates in the next two years. The assumption is that on the low, you'll probably end up on the lower bound of that or somewhere in the middle. The lower bound, which is, you know, how much lower can rates get? It's still 30%. So even if rates have a lot more downside, it's still 30% of the economy. is going to see some increase in their household debt burden. And obviously during that period of time, their incomes have gone up a bunch of other things, but also their expenses have gone up. And we've seen a ton of inflation. And so if people have less and less disposable income because they're spending it on debt and increased car payments and whatever, all these other things, it just there's no way

from my perspective that I can't eventually move into consumption, but it just takes a really long time. And we're already seeing, I think we just saw our first quarter of negative GDP growth and we're probably going to see another one. So I think we'll be in a technical recession by the end of the year, right? Yeah. No. And then you combine that with the trade and what's happening. So like we said before, real estate tends to be very regional. I think real estate, if you look across Canada, it has performed very differently depending based on the market. And you're seeing that the U.S. increase a couple of weeks ago or at the beginning of August, they increased the

tariffs from a baseline at 25 to 35% although there are a lot of goods that are exempt from the USMCA. The emphasis on the baseline here, since there are certain tariffs that are lower and some that are higher, if you're looking at higher tariffs, I'm thinking here aluminum and steel, I think they're at 50% now, if I remember correctly, but you're looking at things like lumber, autos that are also facing some tariffs. And obviously, some parts of Canada will just be more impacted than others. So I wanted to just get your thoughts just quickly on that. And in terms of parts of Canada, that could be impacted. And I'm not, it's not an extensive list, but just to give people ideas, so Windsor, like the auto sector. Or obviously, I think a big chunk of the suburbs of

Toronto to also have some exposure to that. Hamilton, when it comes to steel, secondly next St. Jean when it comes to aluminum production, Alberta, some non-examble agricultural product because the oil and gas, there's lower tariffs on that. And there's also a big chunk of oil and gas that is also exempt under the USMCA. And then one that, I mean, I was looking and I'm happy to share the slide here is So St. Marie with steel. And if you look at Algoma steel, which is one of the large employers in that city. You can tell just by the price of the stock, how much it's done. It's pretty bad over the last year. The Algoma Steel, the stock is down 63%. And then if you look six months, it's down 47 year today, down 56. So you can tell already how much tariffs have waited

on the stock price. And you can just imagine that I haven't looked at their earnings call on the last few months, but I can just imagine that they'll probably be doing some layoffs there if they haven't started already. Yeah, I think there's been some really good analysis on this. And I think we mentioned it last time I was on the show, but I'll share my screen here as well. Basically, Oxford Economics, who I mentioned earlier in the episode has done one. They found Calgary, St. John, and Windsor, the Canadian metro is most vulnerable to Trump's tariffs. And I think St. John is because there's a huge oil refinery there. And where you talked about the exemptions, it's just going to make more sense for us to actually just take the oil in its raw form

and take it to the states rather than refine it and then it becomes unexempted. Windsor's the obvious one from an auto parts perspective. And then I think that there's a couple of other ones done by the Financial Accountability Office of Ontario, where they talk about Ontario's trade relationship with the U.S. Ontario has the highest effective tariff, right? So if you look at basically, like, take all of the goods that a province produces and apply the levels of tariffs, I think Ontario's is like 13, effective tariff is like 13%. Everybody else is like 10% or below. So I think Ontario is really going to feel the brunt of this and that 401 corridor, which it's crazy to say because it's not like Ontario really needed more headwinds.

We've got declining population growth. We've got the highest unemployment and rising unemployment. Toronto's unemployment is brutal. We've got our housing market getting smoked. Construction sector is getting smoked by condos, which you mentioned earlier in the episode. But there are definitely some serious headwinds for the Ontario economy, I think, as a result of this.

And I think that's really going to end up being the ground zero. The other thing I will mention is, you know, we talked about this last time, I think, or the first time when we did a trade war episode. But basically, you know, the Trump 1.0, like there ended up being 70,000 exemptions. And I said from the very start when Trump got elected and started talking about tariffs, There, I think the eventual, like, there's so many jokes made about Trump. Like, you've seen the meme of like the madman guy and he's just standing there. You know, like that scene when he's drunk.

You know the meme I'm talking about. And he's like, and it just says on the board like tariffs, but everything's exempt, right? And that was the outcome of at least Canada and the U.S.'s tariff relationship. China was really the only one who ended up with tariffs, I think, from the original Trump administration. It ended up being like 10%. And Biden kept them on. So there wasn't really any change as a result of that in Trump 2.0, except now we've got this whole volatility of like, I'm threatening them and then take it back, you'd be 90 days,

whatever. I do think that the ultimate outcome, I think that the U.S. can't really actually create a revenue stream from tariffs without their consumers realizing, like in a year from now, consumers are going to realize like, oh, this is actually costing us a lot of money. And I think that there will be some political pushback. So my, my guess is that we'll just see a ton of exemptions and probably be business as usual in a year from now to tell you the truth. That's my, that's my ultimate like, you know, not financial advice, but total guess on kind of the outcome of the whole trade war thing. Yeah, it's interesting, especially if they don't do that and they just power through because then they would just basically make it really fresh in people's mind and just

in time for the midterms. Yeah. Which would be probably political suicide for him and the Republican Party, even though he's technically not supposed to run for for another term. But I guess we'll have to see it's probably not a zero probability outcome. But in terms of the impact, so are you starting to see some impact from the data if you've gathered from those regions that are the most impacted? Like are you seeing real estate starting to be impacted or people are still holding the forward and hoping for the best in terms of tariffs? I think that people are just exhausted, to be honest.

I think that they, like, earlier in the year, people were trying to model for an outcome. And they were trying to say, oh, you know, I'm not going to buy a house because there's an election in April or, you know, there's the trade war going on. And once that's resolved, I will make my decision. This is the biggest financial decision of my life. And I really only see the housing market intimately. I don't, I see all the other industries based on data. But in the housing market, I think people have just come to the terms of the fact that they're probably not going to get a resolution. I think people are remembering what the first Trump term was like and how we never really, it was always volatile.

It was just like four years of chaos. Yeah. And so I think that people have, they already have reached that exhaustion point where they're just saying, you know what, if I need a house, I'm upsizing, downsizing, entering the market, exiting the market, whatever, I'm just going to do it or I'm not. Like, they've just made a decision. Am I willing to do this given if this chaos exists for four years? No. Okay. At some point in the future, I'll have to make a different decision.

Am I willing to do this with the current set of chaos if that lasts another four years? Yes. Okay. Then they start proceeding. And now you're starting to see a couple of people come out of the woodwork. Housing market activity is ramping up a little bit. Prices are still grinding down. And a lot of people don't realize this.

They think that volume and price are positively correlated. But actually as price comes down, you start to see more people. can afford houses, so more people reenter the market. So I think I'm seeing it at the point where people have just kind of given up on trying to hope for a resolution. And they're just saying, I just have to proceed as if I'm not going to get one. What would that look like? Yeah, what about though, like just unemployed putting pressure on, you know, on people to sell their home is kind of in those regions. Are you starting to see that a bit more? Like, yeah, you're seeing. I think so. I mean, I would argue that a lot of people who were already at a risk position, like,

Like, there are people who would get on, like, lose a job and be able to survive for six months or a year. And so those people probably are fine. The people who are at risk were already at risk due to other financial decisions, too much debt. I don't know. Like, yes, I think that there are going to be people who will lose their job and real. And then they'll hold on for three months and burn through their, their, and then they'll, you know, burn through their emergency savings and then start thinking about selling the house. And I think you're starting to see some supply come in in that regard. An actual probably bigger trend that I'm seeing in Ontario right now is this return to office.

So all of your banks are, that's a big reason why people are buying and selling right now because a lot of your banks are basically mandating four days back to work. And like something like 60,000 bank employees are coming back to Toronto. So that's like all of your people who move to Muscoca or like, you know, Barry or whatever. Yeah. Now coming back to the GTA, that's a lot of the supply that's actually being created in some of those. So it's almost the inverse. And actually to tie this into the employment.

conversation. I'm almost wondering to myself whether or not the banks are doing this as like a scan of saying like, hey, let's let's push, see how many people we can get back into the office. And then the people who say no now, because I think banks are probably looking at, you know, another couple rounds of layoffs, I think if I'm looking at my books at the bank right now. They're pulling a Nealon Musk with Doge. I think I honestly, like I could kind of see it happening, right? Oh, the people who said, no, we're not going to do four days of work. Okay, well, I think that's cause, right, to like for layoff or firing. I don't know. I don't know. understand employment law, but it couldn't, like, it wouldn't surprise me if that was kind of

the game they were playing and they're trying to get, re-get control of the employment market right now. Yeah, I think, yeah, I think they could probably, if it's a rework requirement and people don't do it, then, and they were provided with enough opportunities. I think they, they probably would be able to do it with cause. No, that's a good point. And it's interesting that I guess because of that a little bit, like, you know, we live relatively central in Ottawa. and one thing I've noticed is those older neighborhoods with where homes are not just being built anymore and they're pretty centrally located. I've noticed they've been much more resilient and maybe it's in part because of that return to work where people were out in the suburbs and now they're like, you know what? I don't feel like commuting an hour, an hour and a half every morning and every night to get back home.

So it's, I don't know if it's just me, but I've seen a little bit of divergence, at least in the Ottawa market. I don't know if it's like that in other big metro areas. Yeah, I mean, I guess Ottawa, I think like half of those government layoffs are going to exist in that employment too. So you'd probably start seeing some of that unemployment. Like, is that supposed to take place what over the next year? Or the 60,000 jobs? We'll see.

Yeah, they, it all depends, right? Depending how they end up doing it if they do it is still a question. But if they end up doing it, it also depends like maybe they just don't replace workers. that were retiring. And I know there was a lot of remote work to after the pandemic that happened. They hired a lot of workers across Canada that may have a base location in Ottawa but would work remotely. So I just don't know to the extent that it would, like obviously Ottawa would be affected.

I just don't know to the extent. Right. Yeah. Well, I guess the last point here, I know you wanted to talk a little bit of policy. So we're almost on the hour. So do you want to finish up here with just some interesting policy news that have been happening that would be relevant to just the real estate space that people may not be aware of? I know I know the ones you'll talk about to actually listen to a recent podcast you did as a guest. So I got a little brief on that.

Yeah, I think the biggest one, well, the biggest one from my perspective, I actually already mentioned, which is Osphia is considering removing the stress test. So OSFI has been basically running a year-long test on the banks. So they're testing the banks at 4.5x income over the whole portfolio. And if it yields comparable results, so if they can de-risk the market in the same way by stress testing the banks rather than the consumers, then they probably will remove the stress test. And I think that test terminates in November of this year. So the expectation would be if the results are good, they'll probably remove the stress test sometime next year. 4.5-X household income to the price or the loan, right?

Across the whole portfolio. And I think it's less than 10% of the bank's book has. to be 4.5x income as well. So this actually would disproportionately negatively impact your high net worth borrowers. So high net worth with like low income or people who can write down their income on paper. Now we'll have to start claiming more. And I think that that might be actually an incentive to try and get a little bit more tax revenue out of rich people.

So they claim a little bit more income versus right now you're stress tested at your minimum qualifying rate as an individual. And then and actually, sorry, that would that would also positively impact your, your lower income borrowers, relative. Right now, like a higher, a wealthier person can always win in the market, whereas they're trying to balance the incentives. So it helps younger people for some home buyers especially. The other one that I think has been very contentious is that BC developers are calling for a

foreign buyer ban. And the reason why the stress test and foreign buyer ban are the two biggest ones from my perspective is those are really always mentioned. Are they calling for the foreign buyer ban or that to be removed? Sorry, the removal of the phone buyer. Okay, okay. Yeah. I'm like, unless I miss something,

thought they was still on. Sorry, I missed a word there. So they, so the foreign buyer ban is on and basically BC has very much, it's no secret that BC has very much always depended on, on foreign capital to keep its real estate market ripping. And BC developers, like Vancouver especially, is dealing with the most unsold condo units in the country. BC, most of the per capita unsold condos, highest per capita untold condos are in, in areas in the lower mainland. And so, So, you know, there's a big issue here brewing for, similar to what we mentioned, how the knock-on effects are happening in construction. I think that, you know, the same thing is happening in BC as Ontario.

And so BC buyers are basically saying, well, easy way to solve this problem is to let foreign buyers back into at least pre-con. They're not even asking for it to just be in resale. They're asking to say, we want foreign buyers to be able to buy brand new houses or pre-con houses. Australia actually has this model. So foreign buyers can buy off-plan brand-new houses. but not resale market houses, and it hasn't really yielded any positive results. So I don't really see the Canadian government conceding to these demands of a bunch of

developers who are basically saying, hey, make it easier for us to do our business. But I could see them taking the easy way out, which is they extended the foreign buyer ban from 2025 to 2027. So I like the easier political route is probably just let it expire, not renew it in 2027. And my guess would be that the market's going to be even worse by then. And so probably more the market and just general Canadians will be more receptive to letting foreign buyers back into the market. And I think the government might just kind of see if they can sneak that one through on a non renewal. They're not going to remove it.

It would just be political suicide to do that right now. Yeah. And even if they do, I think one thing they probably don't realize is there's increasing capital controls around the world for governments. actually keep capital within the borders and not going elsewhere for obvious reasons because it's easier to tax and they want them to invest in the local economy and not others. So I think the playing field here for foreign buyers is actually quite different than it was even a few years ago. I think you're just seeing it and lack a better word, financial repression, however you want

to say it. But I think it's becoming harder and harder, obviously if you're very wealthy and you're looking a way to do it, you'll probably find a way to do it. And there's been enough money laundering and crime in Canadian real estate that if there's a will, there's usually a way to do it. But if you're making it harder, I think it may not have the same impact as some of these builders are hoping. Yeah, 100%. I think the other piece is taxes, like the both provinces. So what happened, like if you go back to the whole history and lore of the foreign buyer ban, BC taxed foreign buyers in 2016 and that dropped the market significantly like 10, 15%. And then they all, all that capital

moved to Ontario. And then Ontario tax foreign buyers, both those taxes still exist. So even if you get rid of the ban, they're not going to be super incentivized. It might actually push that capital to other, you know, tertiary markets, which could be a bigger problem. And they have a vacant Unix tax as well, right in BC, if I remember correctly? Yeah, they do. Yeah. So I guess if you're a foreign buyer and you're, it's another tags that you'd probably have to pay. If you buy the unit and you can't sell it or you're sitting on it, then you have that extra vacant unit tags that you'd have to pay as well. Yeah, I guess the question becomes like, you know, it's similar to like the underused housing tax that they tried to propose at a national level where you had to file and

basically say if your house was in declare and they were trying to build a beneficial ownership registry. The fact that they scrapped that whole thing after like multiple extensions of the deadlines and it was just such a mess for the CRA. And I really, I'm for the CRA workers. Everybody's blaming the CRA for it, but it was policymakers who were kind of making a problem for them. If people are just using Canadian real estate to shelter their capital from a foreign government, they don't care. Like, that's a small, that's like a, it's like a speeding ticket, right? Yeah. Yeah. And so that it's a, it's an anonymity tax. So they would just rather pay the five or 10k a year to keep their name out of the foreign ownership registry. And that seems

to be the outcome. And I think that's why they scrapped it. They just said, oh, nobody's going to actually do this. Yeah. No, that's a. good point. So anything else in terms of policy, that would be no worry before we wrap this up? No, nothing major from my perspective. I think those are the key ones that in my world that people are looking at right now. Okay, no, that's really interesting. I mean, it's always fun to talk with you. I know we end up talking a little bit more about macro, where we tend to talk a little bit more about companies when it comes to the actual podcast. But there's a lot of development. I think if it can help people understand how important the government bond yields,

not only the government of Canada, the five-year bond, but if you're looking obviously the U.S. 10-year, which is extremely important in how it drives a lot of financial outcomes in their lives, even if I think the vast majority of people aren't aware of it. I think that's probably that's a good takeaway from this episode. If people want to hear you more and hear Nick's beautiful radio voice, although it doesn't have a radio face, the ladies always gravitate around Nick. So if you, people want to hear more about you and Nick, they can go to the Canadian real estate investor podcast or where else can they find you then? Yeah, just Google me. The last name is Foch, F-O-C-H. I'm fortunate enough to have a unique name. So I will usually

show up on Google. I do. You know you've made it when you're like, just Google me. Or just your name is like unique enough that like Nick Hill is going to have a hard time getting to the Top of Google. That's right. That's right. But yeah, I do content on YouTube, Twitter, LinkedIn. I try and be on like every platform. So whatever platform you're on and, you know, like to consume your information. I'm probably there. And I would love and appreciate a follow and DM, whatever. Leave me a note. Always happy to chat. Okay. Well, thanks again for coming on, Dan. So just probably the last housekeeping here. This was recorded on August 12. We're recording a bunch of episodes and advances because. Dan Kent and I will be taking a little bit of time off for the last two weeks of August. We'd like to minimize the recording, so we want to keep up that fresh content. Not quite sure when this episode will be coming out, but it will be coming out in the next couple weeks. So by the end of August, just wanted to mention that, especially because we talked a little bit of macro and tariffs and the orange men down in our neighbors from the south. So just in case there's some weird developments, which is not a zero chance outcome,

I just wanted to let people know when we recorded this. So thanks again, Dan, for coming on. And I'm sure we'll have you back at some point before the end of the year. Yeah, looking forward to it. Always love a macro chat with you. Okay. Same. Thanks, Dan.

The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.