Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

Canada’s Urban Housing Market: Considerations for Young Buyers

In our previous post in this series, Nicola Wealth Chairman and CEO John Nicola made the case that the Vancouver and Toronto housing markets are not in a bubble. In a podcast with Investing Matters host Ethan Astaneh, he explained how home price increases in these cities were not out of line with other investible assets over the past half century, and those waiting for an all-out crash to buy a home may be disappointed.

That’s not to say the current surge in interest rates won’t have an impact on urban housing prices. The cost of monthly or biweekly mortgage payments is an important factor influencing home prices, and the history of housing price appreciation shows not a steady rise but rather a highly cyclical one. Already since interest rates started rising last winter,  the volume of property sales has slowed, about 35% in Toronto and 20% in Vancouver, as of June 15th, 2022. “That is the precursor to seeing some slippage in prices,” Nicola said. “If higher interest rates combine with a psychology-driven reversal in the supply/demand balance plus possibly a recession, the correction could be significant.”

The hard truth for home buyers is that even if home prices come down, rising borrowing costs will make up most or all of the difference, keeping mortgage payments high. “People typically don’t pay cash for a home,” Nicola pointed out. So what are would-be homeowners to do? Here the buyer’s situation matters. Are they single? A couple with two incomes? A family with young children?

“There will be pockets where prices are going to look much better than they have in the previous few years,” Nicola said. If buyers want to live near the centre of cities like Toronto and Vancouver, they may have to not only time their entry well—when home prices are undergoing a correction—but also make some compromises. That may mean buying a fixer-upper single-family home or one with a mortgage-helper basement suite or opting for a newer townhome in a distant suburb—which may be an option if your employer continues to allow you to work from home a few days a week.

“People really have to think it through in terms of what their personal situation is,” Nicola said. But he urges young renters not to sit on their hands waiting for big-city prices to come tumbling down. Given the long-term trend of continued migration into urban spaces with a limited land area—Metro Vancouver has more than doubled its population in the past 50 years and could easily double it again, to 5 million, in the next 50—that’s a highly unlikely scenario. Waiting ten years for things to be cheaper is “a bit naïve,” he concludes.


This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. All investments contain risk and may gain or lose value. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required securities commissions.