61: Breaking Down the Bank of Canada Rate Hold with with BCREA Chief Economist Brendon Ogmundson

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back to the Kelowna Real Estate
Podcast.

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I'm your mortgage broker host,
Taylor And I am your real estate

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agent host, The Matt The Matt
Glenn.

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I'm going to look for another Matt
Glenn There isn't.

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There's only one.

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How's it How are you?

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I'm doing great, man.

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Went out for family dinner last

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night at a Mexican place downtown,
Chilango, Mexican.

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It was like insanely good.

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They have this cheese dip

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appetizer.

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Highly recommend it.

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Oh my God.

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Yeah.

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Queso.

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Queso, you mean?

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Yeah.

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Yeah.

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It was a queso dip and brought me
back to the Yeah.

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days.

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Oh, I love that, dude.

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That is awesome.

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By any chance, was the building

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falling apart like every other
building downtown?

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No, it was an amazing building,
but we were talking about this.

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Have you heard about this?
The UBCO campus, like several

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buildings have now been evacuated
around that hole.

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So I heard about it on our last
podcast when Ben Stewart briefly

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touched on it saying he was
talking to the housing minister

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and I didn't really think a whole
lot of it until you were

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disclosing how bad it was.

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So yeah, shed the light.

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It was crazy.

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So like in the fall, the CoLab,

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who like a couple agents in our
office had offices in there where

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they were just told to leave
because they were no longer safe

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to be in the building.

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That was last fall.

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And then a few months ago, I think
the Legion was evacuated, which is

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pretty amazing because I'm pretty
sure it's only a one story

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building.

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And then just now the 68 unit

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supportive housing place is
evacuated.

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It's like this is kind of crazy to
have this many other buildings

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just have to be abandoned so that
this building can get built i near

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there a few weeks ago and i yeah
the vantage point like in the

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interior health building yeah it
was like three four stories up i

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was looking i'm like this is a
massive hole like how are they

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supporting the adjacent land but
obviously there is an there before

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they started digging i was hearing
that it's like downtown colonna

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like we're close to the lake right
i used to live downtown colonna

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and one time a few years ago
probably like in 2013 i was

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digging a hole to plant a tree in
my yard and i dug down probably

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like four feet and there was water
in the hole right so like i

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basically dug a well in my
backyard i mean first of all very

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impressive you dug that deep good
for you but secondly yeah so there

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are challenges with digging down
in a hole in downtown but like

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obviously when you're digging a
hole like that it can get a little

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crazy but it's just i don't know
if it's just like the age of the

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buildings or the way they're built
compared to that place that's yeah

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making them crumble but my god i
sent some repercussions in the

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near future i don't know what i'm
not the right guy to ask but

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something like you can't just
evacuate all these buildings and

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just move on yeah you heard it
here first digging a hole is hard

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to do downtown yeah somebody's
gonna be accountable yeah the

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building is gonna be awesome when
it's done but like it's not gonna

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make future projects easy that's
for sure there's gonna be yeah

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wild well talking about digging a
hole bank of canada.

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Last week, we're recording this on
the announcement day, but they

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have maintained their overnight
policy rate.

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So no change.

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We bring in fan favorite Brennan

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Augmentson, two-time returning
guest, BCREA chief economist.

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We were talking a little bit off
air.

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He's so intelligent, but he said,
you know, one of the hardest parts

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of his job is basically to
communicate this complex data at a

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level that most people can
understand and he's doing a

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terrible job yeah i don't
understand anything the says okay

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last night i literally woke up and
i was like you think that an

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economist would not be selective
for someone that can talk about

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facts like this so well but like
it's amazing i think that the vcra

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is the jackpot hiring this guy he
was awesome to have on especially

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on rate day talking about the rate
it was he had some smart he's one

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of the best guests to have on
because you don't really need to

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do any prep work for him like matt
and i are just like a machine gun

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firing as many questions as we can
adam you know 45 minute period

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yeah there's nothing that stops
them.

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It's actually pretty fun.

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He's a great guest.

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Yeah.

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So we do talk about Bank of Canada

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projections.

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We talk about some current policy

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changes that the government
provincially and federally have

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come out with.

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Talk about where fixed rates are,

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where they could potentially go in
the next few years.

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And he's just such a great
resource.

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Give him a follow on LinkedIn.

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He posts a few times a month and

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his reports are just honestly
fascinating yeah easy to digest

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but like just raw data here's what
it is so yeah love having him on

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yeah give him a follow he's that
he even comes on our show so we're

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getting somewhere yeah yeah
absolutely the best podcast in

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town soon to be voted number one
thank you listeners is sponsored

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there taylor's wife emily works
there yeah it's amazing you should

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it out we are having max on next
month's coming on the show his

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show will be out in a couple weeks
and you guys can kind of yeah

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listen to his story a little bit
more he's been on the show once

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before but he's going to dive into
some more interesting stuff for us

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so stay tuned for more yeah so if
i was right if you could please

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vote for the podcast and vote for
century 21 best Best of Kelowna,

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Super happy that Kelowna Now even

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Yeah.

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And now, Joey, the show.

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It's a good welcome back to the
show, Brennan Augmanson.

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Thanks for joining us.

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Great to be here, thanks.

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So today's the day of the rate
announcement, so I imagine you're

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probably one of the busiest guys
in BC.

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Yeah, I mean, not so much
media-wise because they banked and

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didn't do anything, but I have to
get up really early because the

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Bank of Canada now is doing their
announcement at 6.45 a.m.

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Pacific time.

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They've got to prepare an email to

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send out to subscribers before
that, and then do some other kind

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of posts and work and see if
there's any major implications

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from the Bank of Canada's policy
statement or anything.

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So I've got to be a little more on
the ball a lot earlier than I'm

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used to.

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I'm not a simple person.

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So a few more cups of coffee
earlier and I was ready to go.

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That's awesome.

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I mean, we'll just let the

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listener know that we are
recording this April 10th.

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So yeah, it is Bank of Canada rate
announcement day and we'll try and

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get this out a week after.

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Was this expected by you?

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Like, where are we kind of sitting
at expectations for today?

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I think especially, you know, if
you look at the trend in inflation

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and the measures the Bank of
Canada watches really closely,

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like, especially like they even
called it out today, three-month

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annualized core inflation, which
is like for all the real monetary

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policy heads out there, that's
like, oh, they're dropping all the

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trend inflation numbers that we're
all watching in their statement.

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Those measures have been trending
at target or below.

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If you strip out shelter costs,
it's actually been negative over

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the past three months.

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Price levels have been negative.

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And even on a year basis,
ex-shelter, inflation's running at

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like 1.4%.

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Combine that with the fact that

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unemployment rate jumped to 6.1%
in March, which is the highest

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it's been in three years.

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That has been unexpected.

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Not necessarily because we're
losing a lot of jobs, but more so

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the labor market can't create
enough jobs to keep up with

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population growth.

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Those two things tell me that it's

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probably time to cut rates, but
the Bank of Canada is fairly

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cautious, so I didn't expect them
to do that today, but there's

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certainly a lot of evidence they
should be looking at cutting rates

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in June.

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We'll see what happens.

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We get two more CPI releases
before the next meeting.

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So hopefully those also are
showing inflation trending

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downward and that'll convince the
bank to cut at their So when you

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say shelter costs, how much of
that is interest rate, like

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mortgage rate?
A good portion.

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So shelter is both rent and
ownership costs.

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We calculate CPI.

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Overall, shelter is about 30% of

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the weight in how we calculate
CPI.

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So it's a pretty major driver.

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I think about two thirds of that

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30%, it's about 18, 20% of it is
ownership costs.

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Part of that is mortgage interest
rate costs.

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I think it's like six or 7%, but I
have to look.

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And then the rest of it is just
like maintenance costs for owning

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a home and property tax and home
prices are reflected in there too.

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And then on the other side, it's
that last 10% or whatever is on

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the rental side is rents and
costs.

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So it's certainly big and it's
certainly been a major driver of

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inflation because it's been up 30%
year over year.

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So Bank of Canada knows that their
own actions are driving mortgage

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interest rate costs higher, right?
And one of the reasons why a core

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inflation is going to be a little
bit sticky because of shelter

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costs, you can make a really good
argument that the Bank of Canada

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should look past those costs
because there's nothing monetary

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policy, one nothing that high
interest rates can do to fix

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shelter inflation right now.

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And in fact, as you kind of hint

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at, they're actually driving
shelter costs higher with higher

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rates, either just mechanically
from having mortgage interest rate

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costs higher or by impeding
supply.

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So we're not able to get as much
built because borrowing costs are

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too high.

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So long term, they're actually

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impeding, kind of bringing
inflation back down.

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So to apply.

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So long term, they're actually

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impeding, kind of bringing
inflation back down.

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And then also most of the demand
side factors pushing rents higher

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are about federal immigration
policy, not about really like

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overheated demand or something.

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It's not like the market right

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now, like the ownership market is
pretty weak.

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So it's not like we're seeing like
overheated demand in the ownership

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market.

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And we're not seeing like, oh, we

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have so much job growth for young
people that it's pushing more and

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more people to form households,
move out of their parents' houses

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and rent apartments or something,
right?

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We have a huge amount of
non-permanent residents, a lot of

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temporary foreign workers and
students, 850,000 in Canada in

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2023.

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And that's putting a lot of

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pressure on rents.

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There's nothing that high interest

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rates can do about that particular
problem.

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We So, you know, we look at
inflation and most of it's coming

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from shelter costs that are
outside kind of the purview of

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monetary policy.

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Probably, you know, a good time

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just look past that and set rates
based on some measures that strip

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those shelter costs So we have the
federal government.

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I think they've come back a bit on
the immigration and the temporary

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foreign worker thing.

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But like, so that adding to it,

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00:09:02,254 --> 00:09:03,882
but then you have the BC
government and the federal

240
00:09:03,882 --> 00:09:06,460
government adding all these rules,
like how much of an impact are

241
00:09:06,460 --> 00:09:09,452
these things going to have all the
things that they've done seemingly

242
00:09:09,452 --> 00:09:12,054
every week since we've had this
podcast?

243
00:09:12,054 --> 00:09:13,503
The provincial government has been
busy.

244
00:09:13,503 --> 00:09:14,443
Some of it good.

245
00:09:14,443 --> 00:09:17,274
So over the past year, they've

246
00:09:17,274 --> 00:09:21,112
announced a lot of the types of
supply side policies that

247
00:09:21,112 --> 00:09:24,440
economists have been saying we
should be doing for close to 20

248
00:09:24,440 --> 00:09:24,729
years.

249
00:09:24,729 --> 00:09:26,752
So things like density around

250
00:09:26,652 --> 00:09:28,371
transit and small scale multi-unit
housing on single family lots,

251
00:09:28,371 --> 00:09:29,433
that kind of thing.

252
00:09:29,433 --> 00:09:30,491
Hopefully speaking of permitting,

253
00:09:30,491 --> 00:09:33,445
that's all part of their homes for
people plan.

254
00:09:33,345 --> 00:09:36,094
And then they throw in some stuff
that's not so great that I think

255
00:09:36,094 --> 00:09:39,761
is just sort of to feed feed their
base perhaps, or maybe to be

256
00:09:39,761 --> 00:09:41,813
charitable, maybe they just really
believe that things like

257
00:09:41,813 --> 00:09:42,846
speculation is a real problem.

258
00:09:42,846 --> 00:09:45,372
So they also in their budget had a

259
00:09:45,353 --> 00:09:47,432
flipping tax that's 20% on the
profits of selling a home that you

260
00:09:47,432 --> 00:09:49,836
purchased within two years applies
to both primary residence with

261
00:09:49,836 --> 00:09:51,683
some credits and exemptions, as
well as secondary housing, which

262
00:09:51,683 --> 00:09:54,465
again is already taxed at the
federal level, but why not throw

263
00:09:54,465 --> 00:09:57,951
on another tax?
I see one post for the

264
00:09:58,051 --> 00:09:59,824
anti-flipping tax, if it will
actually do anything.

265
00:09:59,824 --> 00:10:02,832
So you said it would lower sales
by 1.7% in BC estimated.

266
00:10:02,832 --> 00:10:06,159
I mean, first of all, that's
amazingly specific how you first

267
00:10:06,159 --> 00:10:08,004
of Doesn't have all the reason for
no reason.

268
00:10:08,004 --> 00:10:12,597
it's not going to do the intent of
what the government is trying to

269
00:10:12,697 --> 00:10:13,007
do.

270
00:10:12,907 --> 00:10:15,263
Obviously, So do you think like

271
00:10:15,263 --> 00:10:17,538
they have good intentions behind
it and they think this will

272
00:10:17,538 --> 00:10:20,268
actually work?
Or is it just more of a, hey, we

273
00:10:20,268 --> 00:10:22,964
got to throw everything at this
and it helps them in media as

274
00:10:22,964 --> 00:10:24,900
well?
I think they believe, maybe not as

275
00:10:24,900 --> 00:10:29,286
strongly as they used that to,
this sort of thing is a real

276
00:10:29,286 --> 00:10:29,538
problem.

277
00:10:29,638 --> 00:10:31,245
I don't need to believe that.

278
00:10:31,245 --> 00:10:33,116
Otherwise, it'd get too cynical.

279
00:10:33,116 --> 00:10:35,165
I mean, they don't believe it's

280
00:10:35,165 --> 00:10:38,097
going to have much of an impact.

281
00:10:38,097 --> 00:10:40,789
If you look at their own revenue

282
00:10:40,789 --> 00:10:43,581
estimates for the tax, like
they're very low.

283
00:10:43,581 --> 00:10:48,490
So they don't really expect this
to be a big impact on demand.

284
00:10:48,390 --> 00:10:51,970
Well, we have some models so we
can simulate, you know, put a tax

285
00:10:51,970 --> 00:10:53,858
on investors, what might happen.

286
00:10:53,857 --> 00:10:55,971
The share of sales, like the

287
00:10:55,971 --> 00:10:59,686
purchase and sale within two
years, the government says 7%.

288
00:10:59,586 --> 00:11:02,877
It's actually usually closer to
like 10, 11%.

289
00:11:02,877 --> 00:11:07,920
The share that purchase and sell
within a year is like 3%.

290
00:11:07,898 --> 00:11:11,780
And within six months is one and a
half percent.

291
00:11:11,751 --> 00:11:16,034
So like, who are the actual
flippers that are going to get

292
00:11:15,987 --> 00:11:16,120
caught by this?
It's not someone who's selling

293
00:11:16,047 --> 00:11:21,025
their home after, you know,
holding that for 18 months, right?

294
00:11:21,025 --> 00:11:21,842
They're most likely going to be
selling because they're changing

295
00:11:21,842 --> 00:11:22,957
jobs, their marital status
changed, their family grew, like

296
00:11:22,920 --> 00:11:23,545
something that's going to be
exempted.

297
00:11:23,508 --> 00:11:24,358
There's a pretty long list of
exemptions.

298
00:11:24,358 --> 00:11:25,795
Then you have people who renovate
a home and add a basement suite

299
00:11:25,795 --> 00:11:26,790
and then sell it.

300
00:11:26,780 --> 00:11:28,324
They've added a unit of housing.

301
00:11:28,224 --> 00:11:28,689
That's an exemption.

302
00:11:28,689 --> 00:11:30,400
So in that, like, say, 10% within

303
00:11:30,328 --> 00:11:31,667
two years, it's a very small
portion that are actually going to

304
00:11:31,667 --> 00:11:32,817
end up paying this tax.

305
00:11:32,817 --> 00:11:34,700
And it's probably those that are

306
00:11:34,920 --> 00:11:36,441
buying and selling within six
months, really just looking to

307
00:11:36,441 --> 00:11:38,524
take advantage of short-term
market conditions.

308
00:11:38,424 --> 00:11:40,058
If that's true, just make it a
six-month flipping tax.

309
00:11:40,058 --> 00:11:43,487
My problem with making it two
years is now you're incentivizing

310
00:11:43,487 --> 00:11:46,770
some potential sellers to just
delay listing at a time when we

311
00:11:46,670 --> 00:11:48,100
don't have enough listings.

312
00:11:48,100 --> 00:11:50,902
So, you know, there's all sorts of

313
00:11:50,802 --> 00:11:53,088
situations where a potential
seller, maybe they bought a home

314
00:11:53,088 --> 00:11:55,804
18 months ago and they just want
to sell it.

315
00:11:55,804 --> 00:11:57,891
They don't meet one of the
exemption criteria because there

316
00:11:57,891 --> 00:12:00,100
is no exemption for just like, I
wanted a different house that

317
00:12:00,140 --> 00:12:00,434
doesn't qualify.

318
00:12:00,434 --> 00:12:01,960
So they're just going to wait.

319
00:12:01,860 --> 00:12:04,272
If they wait, that means listings
are going to fall.

320
00:12:04,272 --> 00:12:07,779
We're going to get markets
actually a little bit tighter.

321
00:12:07,879 --> 00:12:12,214
So there is a risk, like there's
no certainty with this, of course,

322
00:12:12,214 --> 00:12:15,270
but there is a risk that prices
actually rise higher with the tax

323
00:12:15,270 --> 00:12:17,300
than without the tax, which is
totally counterproductive to what

324
00:12:17,300 --> 00:12:19,816
they're trying to And you had some
data too about property transfer

325
00:12:19,816 --> 00:12:20,160
tax.

326
00:12:20,280 --> 00:12:22,977
Like if there is a slight decrease

327
00:12:22,977 --> 00:12:25,903
as they're predicting, then it's
going to impact the property

328
00:12:25,903 --> 00:12:28,316
transfer tax, which obviously
decreases revenue to the province.

329
00:12:28,316 --> 00:12:30,418
Can you talk about that a little
bit?

330
00:12:30,418 --> 00:12:32,784
If you have lower levels of
transactions, obviously you're

331
00:12:32,684 --> 00:12:34,476
going to be collecting less
property transfer tax.

332
00:12:34,476 --> 00:12:38,947
So I think they estimated that the
tax would gross like $43 million.

333
00:12:39,047 --> 00:12:42,643
So $43 million dollars in flipping
tax but then you have to account

334
00:12:42,643 --> 00:12:45,979
for lost ptt tax revenue so in
sort of like a general revenue

335
00:12:45,979 --> 00:12:49,913
sense you're kind of 43 million
here but you're losing you know 20

336
00:12:49,913 --> 00:12:52,260
million or so here so probably
only going to collect something

337
00:12:52,260 --> 00:12:54,251
closer to like 20 23 million
dollars once this program's fully

338
00:12:54,251 --> 00:12:56,876
up and running and that's without
even accounting also for like

339
00:12:56,876 --> 00:12:59,117
whatever the administrative costs
are for the program, because I'm

340
00:12:59,117 --> 00:13:01,231
not sure how they're going to do
compliance.

341
00:13:01,231 --> 00:13:03,921
So I assume it's going to be like
the speculation of vacancy tax,

342
00:13:04,021 --> 00:13:07,034
where when you sell your home, you
just check a box on the exemptions

343
00:13:07,034 --> 00:13:09,634
and then they'll have to have
someone come and audit.

344
00:13:09,534 --> 00:13:10,972
Like, did you actually get
divorced?

345
00:13:10,972 --> 00:13:14,873
Did you actually get a new job?
Show us your payroll jobs, right?

346
00:13:14,873 --> 00:13:18,553
So there's going to have to be
some like, you know, bureaucracy

347
00:13:19,680 --> 00:13:22,273
around this where they check if
you actually are allowed to have

348
00:13:22,273 --> 00:13:23,560
the exemption for selling within
two years.

349
00:13:23,560 --> 00:13:25,098
So that's costly as well.

350
00:13:25,098 --> 00:13:26,857
I think there's some examples of

351
00:13:26,957 --> 00:13:29,613
like, I think the federal
underused housing tax, whatever

352
00:13:29,513 --> 00:13:31,620
they call it, is actually losing
money after compliance and

353
00:13:31,620 --> 00:13:32,019
administrative costs.

354
00:13:32,019 --> 00:13:32,304
Really?

355
00:13:32,304 --> 00:13:35,245
These things aren't always cheap
to do.

356
00:13:35,245 --> 00:13:39,040
So there's a good chance that with
all those costs and the lost PTT

357
00:13:39,040 --> 00:13:41,737
revenue, that, you know, there's
close to zero or negative.

358
00:13:41,737 --> 00:13:45,709
I mean, the premier said, like, I
hope this does have zero revenue.

359
00:13:45,709 --> 00:13:47,583
That means, you know, there's no
flipping happening.

360
00:13:47,583 --> 00:13:47,732
Right.

361
00:13:47,732 --> 00:13:49,981
They don't think it's a big

362
00:13:49,981 --> 00:13:51,795
revenue driver, and it's not going
to Yeah.

363
00:13:51,795 --> 00:13:54,895
One of the other policies that
came out, and I think we spoke to

364
00:13:54,895 --> 00:13:58,734
probably a month or two previous
to this coming out, was the

365
00:13:58,734 --> 00:13:59,896
short-term rental legislation.

366
00:13:59,896 --> 00:14:01,836
How do you feel about that?

367
00:14:01,836 --> 00:14:02,832
Changed a bit.

368
00:14:02,832 --> 00:14:05,170
When it first came out, I was

369
00:14:05,170 --> 00:14:06,753
like, I looked at the data.

370
00:14:06,753 --> 00:14:07,827
There's two pretty neat studies

371
00:14:07,927 --> 00:14:11,677
done, one by McGill that I don't
think is that good and one by the

372
00:14:11,577 --> 00:14:13,272
conference board that I thought
was pretty good.

373
00:14:13,272 --> 00:14:15,861
But they actually both came out
with pretty similar numbers in the

374
00:14:15,861 --> 00:14:16,782
total impact on rents.

375
00:14:16,782 --> 00:14:17,704
It was pretty small.

376
00:14:17,704 --> 00:14:19,841
I can't remember what the exact
number was.

377
00:14:19,841 --> 00:14:22,270
But basically found there wasn't a
whole lot of upward kind of

378
00:14:22,270 --> 00:14:23,482
pressure on rents from short-term
rentals.

379
00:14:23,482 --> 00:14:26,919
So in my mind, it's like, all
right, well, these aren't really

380
00:14:26,919 --> 00:14:30,723
doing much, getting rid of them is
probably not going to have much of

381
00:14:30,823 --> 00:14:31,224
an impact.

382
00:14:31,224 --> 00:14:32,791
It's only about 15,000 sort of

383
00:14:32,791 --> 00:14:33,981
frequently used short-term
rentals.

384
00:14:33,981 --> 00:14:37,575
But then I talked to some people
around the province and especially

385
00:14:37,575 --> 00:14:42,039
like where you guys are, like
there's a lot of cities in the

386
00:14:42,039 --> 00:14:44,520
interior that really rely on
short-term rentals and don't have

387
00:14:44,520 --> 00:14:47,353
hotel capacity and it's a major
tourism so like i always got the

388
00:14:47,453 --> 00:14:50,552
tourism part of it like that made
sense especially you know in

389
00:14:50,652 --> 00:14:52,961
bigger cities but it's a huge deal
in like penticton or somewhere

390
00:14:52,961 --> 00:14:56,849
like that that has very little
hotel capacity and a lot of people

391
00:14:56,849 --> 00:14:58,857
who really have built businesses
renting out places for tourism.

392
00:14:58,857 --> 00:15:00,313
I think that's a big thing.

393
00:15:00,313 --> 00:15:01,880
And then the one thing that really

394
00:15:01,880 --> 00:15:05,062
swayed me against it, or at least
swayed me in favor of like a lot

395
00:15:04,962 --> 00:15:09,273
of carve outs is in places like
the North and the Kootenai and

396
00:15:09,273 --> 00:15:10,651
parts of the interior that are
somewhat healthcare deserts.

397
00:15:10,651 --> 00:15:14,040
There's a lot of people that need
to travel, you know, stay in their

398
00:15:13,940 --> 00:15:15,920
hospital and the family comes with
them, you know, husbands, wives,

399
00:15:15,920 --> 00:15:18,010
whoever, like Prince George has
the only cancer clinic within

400
00:15:18,010 --> 00:15:19,309
hundreds of kilometers in the
North.

401
00:15:19,309 --> 00:15:22,753
And those require long stays and
they don't have a lot of hotel

402
00:15:22,753 --> 00:15:23,894
capacity and hotels are expensive.

403
00:15:23,894 --> 00:15:25,345
So there's a really good argument

404
00:15:25,345 --> 00:15:27,877
to make in a lot of these areas
that they badly need short-term

405
00:15:27,877 --> 00:15:28,359
rental markets.

406
00:15:28,346 --> 00:15:29,812
Whatever the rule is now, I think

407
00:15:29,712 --> 00:15:31,519
it has to be two months or three
months or whatever it is.

408
00:15:31,519 --> 00:15:32,346
It doesn't make any sense.

409
00:15:32,346 --> 00:15:33,186
If anything, that rule certainly

410
00:15:33,174 --> 00:15:34,728
needs a lot of revisiting and some
significant carve-outs.

411
00:15:34,728 --> 00:15:35,070
Interesting.

412
00:15:35,070 --> 00:15:37,536
I mean, you post some awesome

413
00:15:37,636 --> 00:15:39,043
stuff and it's mostly data-driven.

414
00:15:39,043 --> 00:15:41,128
So we love your input on that.

415
00:15:41,128 --> 00:15:44,794
Kind of back to the rate, I guess,
you also put out something a few

416
00:15:44,794 --> 00:15:49,677
hours ago that you shared with us,
Bank of Canada, new neutral and

417
00:15:49,677 --> 00:15:50,213
mortgage rates.

418
00:15:50,212 --> 00:15:51,971
So it kind of looks like bond

419
00:15:51,971 --> 00:15:54,080
market or our fixed rates are
fairly stable moving forward for

420
00:15:54,079 --> 00:15:55,134
the next three years.

421
00:15:55,134 --> 00:15:56,607
Like we've already priced in the

422
00:15:56,607 --> 00:15:59,430
amount of reductions that are
supposed to happen, I guess.

423
00:15:59,430 --> 00:16:01,380
Is that what you're looking at?
Yeah.

424
00:16:01,380 --> 00:16:05,620
that what you're looking at?
So one of the things that the Bank

425
00:16:05,620 --> 00:16:06,825
of Canada did today, Yeah.

426
00:16:06,825 --> 00:16:08,031
what they do every year is they

427
00:16:08,031 --> 00:16:10,968
reassess what they think the level
of the neutral rate of interest

428
00:16:10,968 --> 00:16:12,660
is, which is kind of a wonky macro
idea.

429
00:16:12,660 --> 00:16:16,135
But it's the idea that there's
some level of interest rates or

430
00:16:16,135 --> 00:16:19,576
policy rates the Bank of Canada
sets that is consistent with

431
00:16:19,476 --> 00:16:21,840
inflation being at 2% over the
medium term, and there being sort

432
00:16:21,740 --> 00:16:22,918
of no slack in the economy.

433
00:16:22,918 --> 00:16:25,252
So in jargon, you mean, you could

434
00:16:25,252 --> 00:16:27,114
say there's zero output gap.

435
00:16:27,114 --> 00:16:29,469
So there's some level of rates and

436
00:16:29,469 --> 00:16:32,278
they provide a range because of
course, this isn't observable and

437
00:16:32,278 --> 00:16:33,289
there's lots of uncertainty around
it.

438
00:16:33,289 --> 00:16:34,532
So they provide a range.

439
00:16:34,532 --> 00:16:36,766
It used to be between two and 3%.

440
00:16:36,766 --> 00:16:39,132
So if you're thinking, most people
that kind of watch the central

441
00:16:39,132 --> 00:16:42,324
bank and like, all right, where's
the bank headed?

442
00:16:42,324 --> 00:16:44,315
Well, long-term, they think their
policy rate should be between two

443
00:16:44,315 --> 00:16:44,777
and 3%.

444
00:16:44,777 --> 00:16:46,760
So they're probably going to go to

445
00:16:46,760 --> 00:16:49,865
2.5% at some point, right?
They think that a rate that's

446
00:16:49,865 --> 00:16:51,295
consistent with inflation being at
2%.

447
00:16:51,295 --> 00:16:54,794
Today, though, in their
reassessment, they actually raised

448
00:16:54,794 --> 00:16:57,844
that range up to a range of 2.25%
to 3.25%.

449
00:16:57,844 --> 00:17:01,102
So I've been doing this for years,
looking at what's like a neutral

450
00:17:01,202 --> 00:17:02,020
five-year fixed rate.

451
00:17:02,020 --> 00:17:03,925
So basically, if you just say Bank

452
00:17:03,925 --> 00:17:06,960
of Canada is at their preferred
level of long-term policy rate,

453
00:17:06,960 --> 00:17:10,255
and then add in historical
spreads, you can get kind of like

454
00:17:10,255 --> 00:17:11,556
a neutral five-year fixed rate.

455
00:17:11,556 --> 00:17:13,796
And right now that's like 5.1%.

456
00:17:13,796 --> 00:17:17,101
And that's exactly where five-year
fixed rates are, which would mean

457
00:17:17,101 --> 00:17:20,335
like they've already priced in all
of the Bank of Canada's rate cuts.

458
00:17:20,291 --> 00:17:23,709
The old neutral was like, yeah,
maybe rates would fall back down

459
00:17:23,665 --> 00:17:23,740
to like 4.85, right?
Or kind of around there.

460
00:17:23,723 --> 00:17:29,800
But where they are right now might
just be where we're at long-term

461
00:17:29,745 --> 00:17:29,800
if the bank eventually cuts to
2.75.

462
00:17:29,771 --> 00:17:35,965
It means there's maybe not much
more to go in terms of relief on

463
00:17:35,842 --> 00:17:36,394
five-year fixed mortgage rates.

464
00:17:36,335 --> 00:17:37,110
It's this really interesting thing

465
00:17:37,110 --> 00:17:38,754
where like, everyone's sort of
waiting for the Bank of Canada.

466
00:17:38,695 --> 00:17:40,033
When's the Bank of Canada going to
cut rates?

467
00:17:40,033 --> 00:17:42,212
Maybe they're not going to wait
until And it's June.

468
00:17:42,212 --> 00:17:44,916
well, like, five-year fixed rates
have already priced in all of the

469
00:17:44,916 --> 00:17:46,525
potential rate cuts that might
happen.

470
00:17:46,625 --> 00:17:49,680
So why are we waiting?
This might be as good as it gets

471
00:17:49,680 --> 00:17:50,665
on fixed mortgage rates.

472
00:17:50,662 --> 00:17:52,184
So is your prediction that the

473
00:17:52,184 --> 00:17:55,425
fixed mortgage rates are going to
stay at this level for a couple of

474
00:17:55,425 --> 00:17:57,299
or is there upward pressure?
It's tough, right?

475
00:17:57,199 --> 00:17:59,455
Like just in that theoretical
framework, like that's what you

476
00:17:59,455 --> 00:17:59,979
would conclude.

477
00:17:59,879 --> 00:18:01,837
Like, do I think the bank of

478
00:18:01,837 --> 00:18:04,453
Canada is going to be at 275 for
several years?

479
00:18:04,453 --> 00:18:04,792
Probably not.

480
00:18:04,892 --> 00:18:06,427
We always have shocks that hit the

481
00:18:06,427 --> 00:18:08,688
economy, good or bad, that cause
them to raise their lower rates.

482
00:18:08,679 --> 00:18:12,682
But it's a good indication of
where they're going to kind of

483
00:18:12,782 --> 00:18:16,332
oscillate around, right?
You know, unless we get a major

484
00:18:16,332 --> 00:18:20,057
shock that causes the bank to
really cut below neutral, maybe

485
00:18:20,038 --> 00:18:22,520
they'll cut all the way to the
bottom of that range though.

486
00:18:22,520 --> 00:18:23,446
Maybe it's 225.

487
00:18:23,446 --> 00:18:24,901
Maybe five year fixed rates fall

488
00:18:24,901 --> 00:18:25,165
into fours.

489
00:18:25,165 --> 00:18:28,075
But as of now, it's a pretty good

490
00:18:28,075 --> 00:18:31,017
rule of thumb where rates are
going to If nothing changes

491
00:18:31,017 --> 00:18:33,583
globally, there's not a bank
collapsing in the States and

492
00:18:33,583 --> 00:18:33,950
pandemic.

493
00:18:33,950 --> 00:18:36,432
It's hard to price that stuff in

494
00:18:36,432 --> 00:18:36,754
obviously.

495
00:18:36,754 --> 00:18:37,076
COVID-24.

496
00:18:37,176 --> 00:18:37,433
Yeah.

497
00:18:37,333 --> 00:18:38,943
There was a really interesting

498
00:18:38,943 --> 00:18:39,394
chart.

499
00:18:39,394 --> 00:18:40,645
It was actually done by Rob

500
00:18:40,645 --> 00:18:42,190
McAllister and I saw you reposted
it.

501
00:18:42,190 --> 00:18:44,353
So he's got five-year fixed priced
in 2025.

502
00:18:44,353 --> 00:18:47,088
It's looking at a 4.75-ish range,
which I thought was very

503
00:18:47,088 --> 00:18:49,670
realistic, but his variable rate
was down to 4.2, which is to me

504
00:18:49,670 --> 00:18:50,950
seems like incredibly optimistic,
I guess.

505
00:18:50,950 --> 00:18:55,434
How do you feel about that?
would be, so right now, prime is

506
00:18:55,434 --> 00:18:55,567
7.2.

507
00:18:55,567 --> 00:18:57,549
Take 200 basis points out of that,

508
00:18:57,549 --> 00:19:01,967
or 225 basis points out of that,
then I guess we're around in the

509
00:19:01,967 --> 00:19:03,642
fives, 4.95, minus 50 or 60 basis
points for the discount.

510
00:19:03,642 --> 00:19:04,267
That's not unreasonable.

511
00:19:04,267 --> 00:19:04,700
Yeah, okay.

512
00:19:07,500 --> 00:19:07,960
So I guess that's kind of the
question we talk about at least,

513
00:19:12,440 --> 00:19:12,600
you know, when I'm speaking with
clients is should we do a

514
00:19:12,551 --> 00:19:12,600
five-year fix?
Probably not.

515
00:19:12,576 --> 00:19:16,635
But I mean, by some of this data,
we're kind of thinking this is the

516
00:19:16,595 --> 00:19:21,954
best it's going to get, but a lot
of clients will throw them into a

517
00:19:21,893 --> 00:19:22,719
three-year and hoping that in
three years it is lower.

518
00:19:22,697 --> 00:19:23,923
We're almost anticipating like,
Hey, do a three-year fix.

519
00:19:23,934 --> 00:19:25,826
And then maybe there'll be an
opportunity on the variable side

520
00:19:25,826 --> 00:19:27,665
in three years, but probably not
on the fixed.

521
00:19:27,665 --> 00:19:30,140
One and those things where then if
you think in three years, the bank

522
00:19:30,400 --> 00:19:34,463
of Canada is going to be at its
sort of neutral level and then

523
00:19:34,363 --> 00:19:35,721
maybe starts to creep higher.

524
00:19:35,721 --> 00:19:36,560
I don't know.

525
00:19:36,560 --> 00:19:39,213
Is there how much downside is
there to rate after that?

526
00:19:39,213 --> 00:19:40,138
So it's tough.

527
00:19:40,238 --> 00:19:42,430
There's so much uncertainty with

528
00:19:42,430 --> 00:19:42,566
rates.

529
00:19:42,566 --> 00:19:44,671
It's going to do well for just the

530
00:19:44,671 --> 00:19:48,254
market to get its head around the
fact that we're probably going to

531
00:19:48,254 --> 00:19:51,213
be, for the next few years, at a
five-year fixed rate that's like

532
00:19:51,213 --> 00:19:54,147
high fours, low fives, instead of
the past decade where it't really

533
00:19:54,147 --> 00:19:55,320
seen rates like this.

534
00:19:55,320 --> 00:19:57,600
Or if they're like a new home

535
00:19:57,600 --> 00:20:01,305
buyer, especially or move on the
last 10 years, haven't had a rate

536
00:20:01,405 --> 00:20:02,238
environment like this.

537
00:20:02,238 --> 00:20:04,369
So it's going to take a little

538
00:20:04,369 --> 00:20:04,643
while.

539
00:20:04,543 --> 00:20:06,399
And it's interesting, like in the

540
00:20:06,299 --> 00:20:08,799
Okanagan market too, like things
are a lot weaker in the Okanagan

541
00:20:08,799 --> 00:20:12,871
than in a lot of other areas.

542
00:20:12,871 --> 00:20:16,104
It's one of the only markets that

543
00:20:16,104 --> 00:20:21,863
I think is trailing behind 2023
through the first quarter and our

544
00:20:21,863 --> 00:20:23,022
economy is quite weak.

545
00:20:23,122 --> 00:20:24,934
So whatever is going on in that

546
00:20:24,934 --> 00:20:29,002
area, like things look a lot
weaker than some other markets in

547
00:20:29,102 --> 00:20:29,493
BC.

548
00:20:29,393 --> 00:20:32,760
Like, what do you think that is?

549
00:20:32,760 --> 00:20:36,077
Because we had our municipal
government add more, like we were

550
00:20:36,077 --> 00:20:38,723
talking about short-term rentals
before, like when this David Eby

551
00:20:38,723 --> 00:20:42,339
came out with these rules, city
Kelowna Army went and added more

552
00:20:42,339 --> 00:20:43,511
restriction onto them.

553
00:20:43,511 --> 00:20:45,322
Seems kind of crazy looking back

554
00:20:45,322 --> 00:20:47,326
at that already, but is that a
catalyst to this?

555
00:20:47,326 --> 00:20:50,044
What other factors could there be?
I don't know.

556
00:20:50,044 --> 00:20:52,383
It's really hard to, when we're
talking about regional economies,

557
00:20:52,283 --> 00:20:53,108
because the data is pretty noisy.

558
00:20:53,108 --> 00:20:54,604
So if you're someone like me, it's

559
00:20:54,589 --> 00:20:55,206
like, I'm not there.

560
00:20:55,191 --> 00:20:56,795
So it's hard for me to tell what's

561
00:20:56,795 --> 00:20:57,376
going on.

562
00:20:57,376 --> 00:20:59,898
All I can say is the data that I

563
00:20:59,898 --> 00:21:01,098
see, sales are pretty weak.

564
00:21:01,098 --> 00:21:02,728
if you're Listings are pretty

565
00:21:02,728 --> 00:21:02,784
weak.

566
00:21:02,784 --> 00:21:03,965
Listings are pretty weak.

567
00:21:03,965 --> 00:21:05,841
Job growth is very weak across the
interior.

568
00:21:05,841 --> 00:21:08,892
So again, that is pretty noisy,
but that is Do you think like

569
00:20:58,605 --> 00:21:11,492
we're a destination town, right?
So like we have people come from

570
00:21:11,392 --> 00:21:12,322
Vancouver, from Alberta, from out
east.

571
00:21:12,322 --> 00:21:15,144
Like you wonder if like the excess
funds to come here are just not

572
00:21:15,144 --> 00:21:17,891
there right now because of these
interest rates and it's just us

573
00:21:17,891 --> 00:21:18,008
first.

574
00:21:18,008 --> 00:21:19,687
Yeah, we have seen a lot of

575
00:21:19,787 --> 00:21:21,578
outflows of migration to Alberta.

576
00:21:21,578 --> 00:21:23,913
So we, for a long time, had a lot

577
00:21:23,913 --> 00:21:28,527
of, especially in the interior in
the Okanagan, had a lot of people

578
00:21:28,527 --> 00:21:31,332
coming in from Alberta because
their economy was so weak.

579
00:21:31,332 --> 00:21:36,489
And that's largely reversed in the
past couple of years where now you

580
00:21:36,489 --> 00:21:40,751
have a lot of people, for
affordability reasons, for a lot

581
00:21:40,651 --> 00:21:44,903
of reasons, going back to Alberta
or going to Alberta for the first

582
00:21:44,903 --> 00:21:48,284
time to look for both housing and
job opportunities, that could be a

583
00:21:48,284 --> 00:21:51,248
part When you're saying the data
is trailing in the Okanagan or

584
00:21:51,248 --> 00:21:53,761
interior, is it listing, sales,
average home price or everything?

585
00:21:53,761 --> 00:21:55,963
Like what's slow about it?
It's mostly sales.

586
00:21:55,963 --> 00:21:59,496
So I'm just looking at it now it's
like literally down like 30 well

587
00:21:59,496 --> 00:22:04,021
for the after the first quarter
over quarter in the okanagan sales

588
00:22:04,021 --> 00:22:08,710
are down 14 and they were really
slow last year so that's 14 below

589
00:22:08,710 --> 00:22:11,780
an already pretty terrible start
to 2023 cam loops is down two

590
00:22:12,240 --> 00:22:13,590
percent so not quite as bad, but
for whatever reason, like the

591
00:22:13,590 --> 00:22:17,160
Okanagan, kind of Kelowna,
Penticton kind of area, Shushua, I

592
00:22:17,126 --> 00:22:19,246
don't know, is a lot weaker than a
lot of the markets.

593
00:22:19,210 --> 00:22:22,450
Like the lower mainland is up 15%
over last year.

594
00:22:22,450 --> 00:22:27,137
Last year was really weak, so
that's not a great number, but it

595
00:22:27,037 --> 00:22:28,303
is tracking ahead of last year.

596
00:22:28,303 --> 00:22:29,763
For whatever reason, the Okanagan

597
00:22:29,763 --> 00:22:32,065
is like the one market that's like
really to work, man.

598
00:22:32,065 --> 00:22:34,991
We need to pump some optimism into
this market, man.

599
00:22:34,991 --> 00:22:36,891
Taylor, you guys, let's fall on
your shoulders.

600
00:22:36,972 --> 00:22:37,516
Yours and I's.

601
00:22:37,416 --> 00:22:38,517
I I'm doing my best.

602
00:22:38,517 --> 00:22:40,856
Maybe it's again, like overall,
like in the province, the first

603
00:22:40,856 --> 00:22:42,234
quarter was a pretty weak quarter
for sales.

604
00:22:42,334 --> 00:22:45,090
We're at like a 65,000 sale pace
for the province, which is really

605
00:22:45,090 --> 00:22:45,165
bad.

606
00:22:45,165 --> 00:22:46,618
An average is like right?

607
00:22:46,618 --> 00:22:48,728
85,000, So we're like way below
normal.

608
00:22:48,828 --> 00:22:53,181
April's looking a little better in
some markets from the early early,

609
00:22:53,181 --> 00:22:55,318
data I've but it's seen, a really
slow start.

610
00:22:55,318 --> 00:22:58,308
And it's not quite what I
expected.

611
00:22:58,208 --> 00:23:02,309
You know, last year when we had
the Bank of Canada pause, clearly

612
00:23:02,309 --> 00:23:04,638
state they were on pause, which
they then of course ended up

613
00:23:04,638 --> 00:23:05,498
raising rates again.

614
00:23:05,498 --> 00:23:07,962
So maybe buyers are just kind of

615
00:23:07,862 --> 00:23:10,767
gun shy and they're just like,
they want to see actually lower

616
00:23:10,667 --> 00:23:11,983
rates before they get back into
the market.

617
00:23:11,983 --> 00:23:15,237
Not sure, but there seems to be a
bit of a psychological block Does

618
00:23:15,237 --> 00:23:17,716
your software break down like
single family houses and condos?

619
00:23:17,716 --> 00:23:19,989
Because I feel like the condo
market here is incredibly

620
00:23:19,989 --> 00:23:22,238
saturated or it's becoming
saturated do you see any data on

621
00:23:22,238 --> 00:23:26,066
the single family side we mostly
just look at the aggregates we're

622
00:23:26,066 --> 00:23:28,688
putting out our for our kind of
spring forecast in the next couple

623
00:23:28,688 --> 00:23:31,386
weeks where we'll do a more
detailed dive into product type i

624
00:23:31,378 --> 00:23:35,413
think in the okanagan it's just
kind of everything is weak it may

625
00:23:35,413 --> 00:23:39,045
be 14 below and already pretty
slow paced.

626
00:23:39,045 --> 00:23:41,464
It's GDP, is it getting worse
essentially?

627
00:23:41,449 --> 00:23:44,224
And is it specific to the Kelowna
market?

628
00:23:44,224 --> 00:23:48,147
Or do you track really down to the
municipal level or are you more

629
00:23:48,147 --> 00:23:50,814
provincially?
No. So we what we call a nowcast

630
00:23:50,814 --> 00:23:55,400
where we track economic growth in
the province as close to real time

631
00:23:55,400 --> 00:23:56,800
as the data allows.

632
00:23:56,800 --> 00:24:00,248
So, you know, jobs data just came

633
00:24:00,248 --> 00:24:01,136
out for March.

634
00:24:01,136 --> 00:24:03,207
So we have a decent idea like what

635
00:24:03,307 --> 00:24:04,539
March growth looks like.

636
00:24:04,639 --> 00:24:06,862
It tends to track economic growth

637
00:24:06,962 --> 00:24:08,835
really closely at the provincial
level.

638
00:24:08,835 --> 00:24:11,479
Once you get down to regional
levels, the data is a lot noisier.

639
00:24:11,479 --> 00:24:13,848
It's also a lot less available.

640
00:24:13,848 --> 00:24:16,248
So you have to end up using a lot

641
00:24:16,248 --> 00:24:17,646
of proxies for things.

642
00:24:17,646 --> 00:24:19,102
What it tells us though is like

643
00:24:19,102 --> 00:24:22,033
the Okanagan pre-pandemic was
growing a little faster than the

644
00:24:22,033 --> 00:24:23,702
rest of the province, which makes
sense.

645
00:24:23,702 --> 00:24:27,620
Slowed along with everything else
during the pandemic, had a nice

646
00:24:27,620 --> 00:24:30,925
rebound, but in the last year has
really started to falter.

647
00:24:30,925 --> 00:24:33,674
So I think our most recent
estimate for year over year growth

648
00:24:33,774 --> 00:24:36,117
in the Thompson Okanagan, so
including Kamloops, it's like zero

649
00:24:36,217 --> 00:24:36,766
for January.

650
00:24:36,766 --> 00:24:38,553
So started the year like close to

651
00:24:38,553 --> 00:24:39,588
like recession territory.

652
00:24:39,588 --> 00:24:42,220
The North looks like it had a

653
00:24:42,220 --> 00:24:47,640
recession last year the kootenai
is pretty weak lower mainland

654
00:24:47,604 --> 00:24:54,203
seemed to be growing pretty strong
a lot of that's you know really

655
00:24:54,164 --> 00:24:54,835
strong population growth you know
a lot of people migrate into

656
00:24:54,679 --> 00:24:56,024
vancouver and fraser valley and
places like that but most markets

657
00:24:56,024 --> 00:24:59,577
seem to be at least in the kind of
slow growth or recovering from a

658
00:24:59,577 --> 00:25:02,493
more challenging 2023 the okanagan
is the one that is actually

659
00:25:02,493 --> 00:25:04,548
deteriorating like it's not either
stabilizing or recovering it's

660
00:25:04,548 --> 00:25:07,620
still deteriorating and again
could just be noise in the data

661
00:25:07,620 --> 00:25:09,614
but it's something worth
investigating because for whatever

662
00:25:09,614 --> 00:25:13,120
reason that economy seems to be
struggling it could be like when i

663
00:25:13,220 --> 00:25:14,965
dig into it like somewhere it's
the employment data for like

664
00:25:14,965 --> 00:25:17,209
Kelowna is really weak.

665
00:25:17,209 --> 00:25:18,940
It's very seasonal, but even

666
00:25:18,940 --> 00:25:21,068
taking that into account, it's
still like jobs.

667
00:25:21,068 --> 00:25:25,800
I think we're down, I think like
20,000 jobs or something year over

668
00:25:25,800 --> 00:25:25,941
year.

669
00:25:25,941 --> 00:25:27,211
I can't remember what the number

670
00:25:27,211 --> 00:25:30,102
was, but like it was something
that was like So.

671
00:25:30,102 --> 00:25:30,807
Interesting.

672
00:25:30,807 --> 00:25:32,443
Does the government step in at any

673
00:25:32,443 --> 00:25:34,731
point when municipalities are
really like, do they wait specific

674
00:25:34,731 --> 00:25:37,205
cities anymore?
Or is it just purely based on the

675
00:25:37,205 --> 00:25:39,277
average population across Canada?
Here's our GDP, here's our

676
00:25:39,277 --> 00:25:39,411
inflation.

677
00:25:39,411 --> 00:25:41,063
This is what we're trying to

678
00:25:41,063 --> 00:25:41,646
balance out.

679
00:25:41,646 --> 00:25:47,302
Or do they go, oh my God, Kelowna

680
00:25:47,303 --> 00:25:48,034
is struggling.

681
00:25:48,034 --> 00:25:49,984
Maybe we should change something

682
00:25:49,984 --> 00:25:51,491
locally to incentivize business
there.

683
00:25:51,491 --> 00:25:52,201
a good question.

684
00:25:52,201 --> 00:25:54,265
I mean, so much of that is

685
00:25:54,265 --> 00:25:54,588
municipal.

686
00:25:54,588 --> 00:25:56,680
You see those fights right now

687
00:25:56,580 --> 00:25:59,060
over housing where you have the
province telling municipalities,

688
00:25:59,060 --> 00:26:02,973
you need to adopt either our
zoning or as good or better in

689
00:26:02,973 --> 00:26:03,324
your municipalities.

690
00:26:03,324 --> 00:26:04,967
Or essentially, we're taking over

691
00:26:04,867 --> 00:26:07,393
or you have the federal government
saying we're only providing funds

692
00:26:07,393 --> 00:26:09,849
and their housing accelerator
funds for municipalities that are

693
00:26:09,849 --> 00:26:11,938
making the right kind of moves on
zoning.

694
00:26:11,938 --> 00:26:14,367
and accelerator funds for
municipalities that are making the

695
00:26:14,367 --> 00:26:15,883
right kind of moves on zoning.

696
00:26:15,883 --> 00:26:17,522
So a lot of it is that it's sort

697
00:26:17,522 --> 00:26:19,445
of incentive based, but there's
only so much control the

698
00:26:19,445 --> 00:26:20,185
provincial government has over
municipalities.

699
00:26:20,185 --> 00:26:22,806
And there's only so much you can
control, like, you know, sometimes

700
00:26:22,806 --> 00:26:24,055
economies just are volatile.

701
00:26:24,054 --> 00:26:25,191
And especially ones like the

702
00:26:25,188 --> 00:26:28,099
Okanagan is, you know, sort of
diversified, but also still can be

703
00:26:28,096 --> 00:26:30,752
hit with, you know, weather shocks
and that kind of thing.

704
00:26:30,752 --> 00:26:31,020
Right.

705
00:26:31,020 --> 00:26:33,165
So it's hard to to say i wouldn't

706
00:26:33,165 --> 00:26:35,710
be super concerned until it's like
a multi-month trend given how

707
00:26:35,710 --> 00:26:38,994
noisy the data is but it's just
something worth flagging that

708
00:26:38,994 --> 00:26:44,770
things look a yeah i mean we did
just have ben stewart on he's the

709
00:26:44,770 --> 00:26:47,857
founder of quails gate and i mean
we talked about the wine industry

710
00:26:47,857 --> 00:26:50,880
because obviously we caught kind
of hammered this winter so that's

711
00:26:50,880 --> 00:26:53,446
gonna hurt short-term rental is
gonna hurt it's a big grant

712
00:26:53,446 --> 00:26:54,651
headwinds right yeah that's all i
hurt.

713
00:26:54,651 --> 00:26:56,665
Short-term rental is going to
hurt.

714
00:26:56,665 --> 00:26:57,943
It's a big grant.

715
00:26:57,943 --> 00:26:58,469
Headwinds, right?

716
00:26:58,469 --> 00:26:59,296
That's all.

717
00:26:59,296 --> 00:27:00,800
I think that things are going to

718
00:27:00,800 --> 00:27:05,198
start recovering in the second
half this year for the province as

719
00:27:05,198 --> 00:27:06,060
a whole.

720
00:27:06,060 --> 00:27:08,785
And I'm sure that'll apply to the

721
00:27:08,785 --> 00:27:09,743
Okanagan as well.

722
00:27:09,743 --> 00:27:13,538
Like it's going to be a slow year

723
00:27:13,538 --> 00:27:14,771
of growth in the province.

724
00:27:14,771 --> 00:27:16,347
We're forecasting like one, one

725
00:27:16,347 --> 00:27:19,085
and a half percent this year.

726
00:27:19,085 --> 00:27:21,406
A lot of it is like consumers just

727
00:27:21,406 --> 00:27:22,033
aren't spending money.

728
00:27:22,033 --> 00:27:23,401
It seems like maybe the anecdotes

729
00:27:23,401 --> 00:27:27,278
out there, or even if you like go
to a restaurant or people can be

730
00:27:27,278 --> 00:27:28,076
traveling a lot.

731
00:27:28,076 --> 00:27:30,626
So it does seem like they're

732
00:27:30,526 --> 00:27:30,934
spending money.

733
00:27:30,934 --> 00:27:32,977
But then when you look at the

734
00:27:32,977 --> 00:27:34,271
data, they're just not.

735
00:27:34,371 --> 00:27:35,498
Retail sales were negative year

736
00:27:35,489 --> 00:27:37,106
over year to start the year in BC.

737
00:27:37,106 --> 00:27:38,200
We were tracking consumer

738
00:27:38,900 --> 00:27:40,527
spending, which is like two-thirds
of GDP.

739
00:27:40,527 --> 00:27:42,353
We were tracking it last year at
1.8%.

740
00:27:42,353 --> 00:27:43,535
It's usually around three.

741
00:27:43,535 --> 00:27:45,904
So it was just weak.

742
00:27:45,904 --> 00:27:49,134
And at the same time, people,
they're not spending, but they're

743
00:27:49,134 --> 00:27:49,693
really saving.

744
00:27:49,793 --> 00:27:51,414
The savings rate in Canada fell

745
00:27:51,414 --> 00:27:53,241
for a decade, starting in 2010
until the pandemic.

746
00:27:53,241 --> 00:27:53,741
Pandemic happened.

747
00:27:53,641 --> 00:27:55,240
We had this huge buildup of

748
00:27:55,800 --> 00:27:56,132
savings.

749
00:27:56,132 --> 00:27:58,259
But we're not seeing that savings

750
00:27:58,259 --> 00:27:59,920
drawn down either.

751
00:28:00,150 --> 00:28:01,401
Right now, household savings is

752
00:28:01,301 --> 00:28:02,106
still 5% to 6% order.

753
00:28:02,206 --> 00:28:03,947
So it went from basically zero

754
00:28:03,947 --> 00:28:07,474
pre-pandemic to like six percent
of income post-pandemic so people

755
00:28:07,574 --> 00:28:11,728
are like cautious i don't know
what if it's like worried about

756
00:28:11,728 --> 00:28:15,255
mortgage renewals just worried
about the economy in general

757
00:28:15,255 --> 00:28:19,085
whatever it is it seems to be
driving people to save rather than

758
00:28:19,085 --> 00:28:23,584
spend and that means we're going
to be growing kind of slow so is

759
00:28:23,584 --> 00:28:25,040
this exactly what interest rates
are supposed to do is just kill

760
00:28:24,925 --> 00:28:29,341
all these things sure yeah this is
how are supposed to do?

761
00:28:29,317 --> 00:28:29,848
Is this kill all these things?
Yeah.

762
00:28:29,751 --> 00:28:29,951
Sure.

763
00:28:29,853 --> 00:28:30,742
This is how monetary policy works

764
00:28:30,644 --> 00:28:30,695
generally.

765
00:28:30,695 --> 00:28:30,895
Yeah.

766
00:28:30,797 --> 00:28:32,533
The interesting thing this time
around, like we've had sort of the

767
00:28:32,533 --> 00:28:34,779
demand impacts you'd expect from
higher rates, but we haven't

768
00:28:34,779 --> 00:28:36,429
really had the labor market
impacts.

769
00:28:36,429 --> 00:28:38,646
So like until recently, the
unemployment rate was still

770
00:28:38,646 --> 00:28:39,675
really, really low.

771
00:28:39,675 --> 00:28:41,107
We managed to get inflation down

772
00:28:41,007 --> 00:28:44,248
from over 8% to under 3% without
really much of a change in the

773
00:28:44,248 --> 00:28:44,471
unemployment rate.

774
00:28:44,471 --> 00:28:46,538
It bottomed out in June of 2022, I

775
00:28:46,538 --> 00:28:48,605
think, at like 4.9%, which was an
all-time low.

776
00:28:48,605 --> 00:28:50,227
Until March data, we were at like
5.8%.

777
00:28:50,227 --> 00:28:52,648
So it got up a little bit, but
like nothing concerning.

778
00:28:52,648 --> 00:28:53,687
Now we're at 6.1%.

779
00:28:53,687 --> 00:28:55,631
It's starting to flash a bit of a

780
00:28:55,631 --> 00:28:55,694
warning.

781
00:28:55,694 --> 00:28:56,948
But like, it's been pretty

782
00:28:56,948 --> 00:28:57,199
interesting.

783
00:28:57,199 --> 00:28:59,068
The economy has been slow.

784
00:28:59,068 --> 00:29:01,305
We didn't have a recession, but
it's been really slow.

785
00:29:01,305 --> 00:29:02,951
So like net interest rates are
having an effect.

786
00:29:02,951 --> 00:29:04,045
The labor market, you know, still
doing okay.

787
00:29:04,128 --> 00:29:05,430
The unemployment rate again, until
the most recent month was still

788
00:29:05,530 --> 00:29:06,052
very low.

789
00:29:05,952 --> 00:29:07,000
Wage growth is really high in BC

790
00:29:06,995 --> 00:29:08,871
as of March, like the year over
year growth in average wages was

791
00:29:08,871 --> 00:29:09,547
something like 8%.

792
00:29:09,547 --> 00:29:10,794
So even if you strip out

793
00:29:10,794 --> 00:29:12,769
inflation, that means like a 5%
increase in wages year-over-year.

794
00:29:12,769 --> 00:29:13,029
It's pretty strong.

795
00:29:13,029 --> 00:29:14,122
But it seems like people are

796
00:29:14,222 --> 00:29:16,624
taking those wage gains and just
saving them, not spending.

797
00:29:16,624 --> 00:29:19,312
So is this setting us up pretty
good for the future, though, to

798
00:29:19,312 --> 00:29:21,344
have everyone saving money?
I think so.

799
00:29:21,344 --> 00:29:23,273
I don't want some confidence
returns to driving consumer

800
00:29:23,273 --> 00:29:23,514
spending.

801
00:29:23,514 --> 00:29:24,900
People are like, you know what,

802
00:29:24,900 --> 00:29:25,976
I'm thinking the economy's going
to be okay.

803
00:29:25,976 --> 00:29:26,865
Rates are coming down.

804
00:29:26,865 --> 00:29:28,401
Inflation's not as high.

805
00:29:28,401 --> 00:29:30,053
Maybe it's okay to go out and
spend again.

806
00:29:30,053 --> 00:29:32,656
If that's the sort of the
psychology, then yeah, we should

807
00:29:32,656 --> 00:29:35,696
see a recovery and people should
be spending a lot.

808
00:29:35,596 --> 00:29:39,607
There's a lot of savings to draw
down over the next few years.

809
00:29:39,607 --> 00:29:42,915
Can you just tell us when it's
okay to spend again?

810
00:29:42,895 --> 00:29:46,359
Maybe put a post on LinkedIn and
be like, hey guys, you're good.

811
00:29:46,359 --> 00:29:47,994
Don't tell my wife.

812
00:29:47,994 --> 00:29:49,273
Fascinating though, like in the

813
00:29:49,273 --> 00:29:53,320
United States, they had the exact
same pattern of like this huge

814
00:29:53,320 --> 00:29:55,525
accumulation of savings during the
pandemic, but they're really

815
00:29:55,525 --> 00:29:56,217
spending it down.

816
00:29:56,217 --> 00:29:58,622
Like they're drawing down, I see

817
00:29:58,522 --> 00:30:00,624
household spending and savings
rate.

818
00:30:00,624 --> 00:30:03,354
It's well below sort of what it
was Thanks Biden.

819
00:30:03,354 --> 00:30:06,957
Yeah, well, the government's out
spending money and households are

820
00:30:06,957 --> 00:30:07,699
out spending money.

821
00:30:07,699 --> 00:30:08,913
They're a fascinating country.

822
00:30:08,913 --> 00:30:11,393
You ask them like, hey, how's the
economy doing?

823
00:30:11,393 --> 00:30:12,857
Like, oh, it's terrible.

824
00:30:12,857 --> 00:30:14,627
And they're like, how are your

825
00:30:14,627 --> 00:30:15,298
personal clients?
Never been better.

826
00:30:15,298 --> 00:30:17,177
It's this weird disconnect where
like everything is political.

827
00:30:17,177 --> 00:30:19,400
So they can't, you know, they've
been places a you know, they've

828
00:30:20,052 --> 00:30:20,941
been places a mess.

829
00:30:20,941 --> 00:30:22,719
Okay, we're talking about the US.

830
00:30:22,719 --> 00:30:23,608
This is a perfect segue.

831
00:30:23,608 --> 00:30:24,442
Like I've been hearing that the

832
00:30:24,414 --> 00:30:25,119
Bank of Canada basically can't
lower rates until the Fed does.

833
00:30:24,973 --> 00:30:25,749
Is that true?
And why is that?

834
00:30:25,749 --> 00:30:26,739
It's not true.

835
00:30:26,739 --> 00:30:29,164
So one reason why the Bank of

836
00:30:29,264 --> 00:30:32,480
Canada doesn't necessarily want to
get too out of sync with the US is

837
00:30:32,580 --> 00:30:35,100
if we lower rates and they don't,
international, global capital, if

838
00:30:35,100 --> 00:30:38,794
you're looking to save, you're
going to go to where rates are

839
00:30:38,794 --> 00:30:39,040
higher.

840
00:30:39,180 --> 00:30:41,357
Maybe Canadians are going to save

841
00:30:41,357 --> 00:30:42,728
in US treasury bonds, whatever.

842
00:30:42,728 --> 00:30:44,502
Tends to put downward pressure on

843
00:30:44,502 --> 00:30:48,816
the Canadian dollar, people get
out of the Canadian dollar into

844
00:30:48,816 --> 00:30:52,699
the US dollar, and you get a
higher rate of return, right?

845
00:30:52,699 --> 00:30:56,331
So it puts downward pressure on
the loonie, which means that

846
00:30:56,331 --> 00:30:59,124
import prices, which we import a
lot in the United States, our

847
00:30:59,124 --> 00:31:01,335
import prices go up, and that
tends to drive inflation higher.

848
00:31:01,335 --> 00:31:03,800
So there are some inflationary
aspects about falling exchange

849
00:31:03,900 --> 00:31:04,039
rate.

850
00:31:04,039 --> 00:31:08,826
It tends to be inflationary.

851
00:31:08,826 --> 00:31:09,953
Obviously, when we're already
concerned about inflation, we

852
00:31:09,886 --> 00:31:11,674
don't want extra, we want to be
importing inflation because of the

853
00:31:11,574 --> 00:31:11,874
exchange rate.

854
00:31:11,939 --> 00:31:12,932
That's one of the reasons why we'd

855
00:31:12,932 --> 00:31:13,529
be constrained.

856
00:31:13,461 --> 00:31:15,848
That can only go so far.

857
00:31:15,848 --> 00:31:19,365
Like if our economy is really
deteriorating, and usually the

858
00:31:19,365 --> 00:31:21,149
Canadian and US economies are
really in sync.

859
00:31:21,149 --> 00:31:22,960
Like our business cycles move in
lockstep.

860
00:31:22,960 --> 00:31:25,106
They're not right now, which is
kind of fascinating.

861
00:31:25,106 --> 00:31:27,387
Like they created about 300,000
jobs in March.

862
00:31:27,387 --> 00:31:28,259
We lost 2,200 jobs.

863
00:31:28,259 --> 00:31:30,900
Their unemployment rate is 3.8%.

864
00:31:31,180 --> 00:31:31,679
Ours is 6.1.

865
00:31:31,679 --> 00:31:32,626
Like there's a divergence

866
00:31:32,626 --> 00:31:34,820
happening where their economy has
been growing pretty strong and

867
00:31:35,120 --> 00:31:36,067
ours has been really weak.

868
00:31:36,067 --> 00:31:37,561
So that means that monetary policy

869
00:31:37,561 --> 00:31:39,300
probably has to diverge as well.

870
00:31:39,560 --> 00:31:40,935
We're not tied in a fixed exchange

871
00:31:40,935 --> 00:31:43,560
rate way to the US dollar.

872
00:31:43,740 --> 00:31:45,169
We have our own monetary policy.

873
00:31:45,069 --> 00:31:46,602
We have a loaded exchange rate.

874
00:31:46,602 --> 00:31:48,776
We need to do monetary policy that

875
00:31:48,776 --> 00:31:50,615
fits Canada while keeping an eye
on the United States.

876
00:31:50,615 --> 00:31:53,841
One interesting thing is that
movement in the neutral rate is

877
00:31:53,741 --> 00:31:55,744
actually entirely US driven
because they've been growing so

878
00:31:55,744 --> 00:31:56,120
fast.

879
00:31:56,120 --> 00:31:57,386
And because we're so tied to US

880
00:31:57,386 --> 00:31:59,215
interest rates, the Bank of Canada
raised their neutral rate really

881
00:31:59,215 --> 00:32:00,986
based on an increase in the
neutral rate in the United

882
00:32:00,986 --> 00:32:02,810
question?
I feel like I always ask you dumb

883
00:32:02,810 --> 00:32:03,505
questions because you're
incredibly smart.

884
00:32:03,605 --> 00:32:05,320
Where are they getting the data
from unemployment?

885
00:32:05,480 --> 00:32:09,340
Like 6.1% seems to I you would be,
almost mean, feel like I always

886
00:32:09,340 --> 00:32:11,567
ask you dumb questions because
you're incredibly Where are they

887
00:32:11,567 --> 00:32:12,060
smart.

888
00:32:12,060 --> 00:32:13,825
getting the data from

889
00:32:13,825 --> 00:32:15,891
unemployment?
Like 6.1% seems to be, I mean, you

890
00:32:15,891 --> 00:32:19,025
would almost feel like you want to
double check that number because

891
00:32:19,023 --> 00:32:22,376
are they just looking at people
who are applying for EI or like,

892
00:32:22,376 --> 00:32:24,250
where is that coming from?
There's two sources.

893
00:32:24,240 --> 00:32:26,007
One is the labor force survey.

894
00:32:26,007 --> 00:32:27,614
It's a survey, call you up.

895
00:32:27,614 --> 00:32:29,256
Do you have a job?
How much are you working?

896
00:32:29,180 --> 00:32:33,058
What's your average wage?
So the way we normally track

897
00:32:33,058 --> 00:32:33,423
things.

898
00:32:33,423 --> 00:32:36,252
The other one is from payrolls.

899
00:32:36,352 --> 00:32:38,023
So the actual payroll data,
they're slightly different

900
00:32:36,584 --> 00:32:38,300
measures because labor force
includes self-employed and farm

901
00:32:38,860 --> 00:32:39,900
workers and that kind of thing.

902
00:32:39,980 --> 00:32:41,337
So the payrolls data, I think it's

903
00:32:41,337 --> 00:32:44,069
mostly just what we call business
payrolls versus self-employed and

904
00:32:44,069 --> 00:32:44,690
farm payrolls.

905
00:32:44,690 --> 00:32:47,014
So there's a bit of a difference.

906
00:32:47,014 --> 00:32:50,951
If you call up someone who's
self-employed and says, do you

907
00:32:50,951 --> 00:32:55,003
have a job have a job they're like
yeah but they're not going to show

908
00:32:55,003 --> 00:32:57,151
up necessarily on businesses right
you know so there's obviously some

909
00:32:57,250 --> 00:33:01,517
room for error but you know if
this is the average that it's been

910
00:33:01,517 --> 00:33:04,614
and it's trending yeah there was a
time in bc where like that we'll

911
00:33:04,614 --> 00:33:08,160
call sef data so the survey of
employment payrolls and hours some

912
00:33:08,160 --> 00:33:11,959
of this sef versus lfs anyway in
bc there was a point like when i

913
00:33:11,959 --> 00:33:15,144
first started like maybe it's like
in 2013 or something where like

914
00:33:15,144 --> 00:33:18,704
one of them was saying that
employment was growing like three

915
00:33:18,704 --> 00:33:21,076
percent and the other was saying
that employment had like declined

916
00:33:21,076 --> 00:33:24,883
so it's like all right cool like
what kind of an economy is it then

917
00:33:24,883 --> 00:33:30,040
like is it terrible or really good
yeah there's always going to be

918
00:33:30,140 --> 00:33:30,343
noise.

919
00:33:30,343 --> 00:33:30,597
Yeah.

920
00:33:30,597 --> 00:33:33,543
Moving into kind of the next few
months, I'm going to rephrase this

921
00:33:33,543 --> 00:33:36,349
question because I know last time,
you know, you had the economist

922
00:33:36,349 --> 00:33:37,039
stance kind of.

923
00:33:37,035 --> 00:33:39,043
You used up your dumb question.

924
00:33:39,043 --> 00:33:39,738
Yeah, I know.

925
00:33:39,738 --> 00:33:42,201
No, this is a really smart

926
00:33:42,101 --> 00:33:42,309
question.

927
00:33:42,309 --> 00:33:44,787
What would you do if you were TIF

928
00:33:44,787 --> 00:33:46,850
at the next Bank of Canada
announcement?

929
00:33:46,850 --> 00:33:50,855
I mean, having the data we have
now, would you make a cut?

930
00:33:50,755 --> 00:33:54,886
Based on what we're seeing in
inflation and the job market, I

931
00:33:54,986 --> 00:34:01,143
would cut by 25 basis points in
June and July and to the end of

932
00:34:01,143 --> 00:34:01,855
the year.

933
00:34:01,855 --> 00:34:04,256
Like one per or like just one?

934
00:34:04,256 --> 00:34:05,420
Each 25 basis points each.

935
00:34:06,000 --> 00:34:08,485
I mean, here's the thing a lot of

936
00:34:08,485 --> 00:34:09,480
people don't maybe necessarily
get.

937
00:34:09,739 --> 00:34:12,232
Like, you know, we talk about
monetary policy is that everything

938
00:34:12,232 --> 00:34:15,322
is in reference to where the bank
wants rates to be long term.

939
00:34:15,322 --> 00:34:20,302
So even if they cut by 100 basis
points by the end of the year,

940
00:34:20,302 --> 00:34:21,940
that's still an overnight rate of
4%.

941
00:34:22,400 --> 00:34:23,775
That's still pretty restrictive.

942
00:34:23,775 --> 00:34:25,346
That's higher than their neutral

943
00:34:25,346 --> 00:34:27,768
2.75, right?
So ending above 2.75 right now,

944
00:34:27,768 --> 00:34:29,505
they're still pressing on the
break.

945
00:34:29,405 --> 00:34:31,013
They're just not pressing on it as
hard.

946
00:34:31,013 --> 00:34:34,635
So until rates get down to 2.75,
we're still in pretty restrictive

947
00:34:34,635 --> 00:34:35,225
monetary policy range.

948
00:34:35,225 --> 00:34:37,324
It's not like, oh, rates went down

949
00:34:37,324 --> 00:34:42,263
25 basis points, and now it's a
free for all in the economy, and

950
00:34:42,263 --> 00:34:43,900
inflation's going to start heating
up, right?

951
00:34:43,900 --> 00:34:44,331
This is still having a dampening
effect on the economy.

952
00:34:44,318 --> 00:34:44,547
As long as rates are above
neutral, you would expect growth

953
00:34:44,516 --> 00:34:44,815
to be below trend.

954
00:34:44,658 --> 00:34:45,056
You'd expect inflation to be, it's

955
00:34:44,868 --> 00:34:46,474
going to be falling, I know
they're mandated by keep inflation

956
00:34:46,373 --> 00:34:48,502
at their target range, but let's
say, you know, unemployment

957
00:34:48,502 --> 00:34:50,792
continues to go up and we're at
10, 12, 13%.

958
00:34:50,790 --> 00:34:53,063
Is there something in there that
they're like, okay, we need to

959
00:34:53,063 --> 00:34:53,621
stimulate the economy.

960
00:34:53,621 --> 00:34:55,318
Like who cares that inflation's,

961
00:34:55,318 --> 00:34:56,973
you know, where it's at, but.

962
00:34:56,973 --> 00:34:59,301
I mean, it'd be pretty wild if we

963
00:34:59,301 --> 00:35:00,388
had 13% unemployment and still had
inflation.

964
00:35:00,388 --> 00:35:02,393
That'd be like an absolute
nightmare scenario for everyone i

965
00:35:02,393 --> 00:35:07,479
guess it's not dissimilar to what
we had in the 70s we had yeah i

966
00:35:07,379 --> 00:35:12,494
was say a supply side shock from
oil prices that drove inflation

967
00:35:12,494 --> 00:35:15,814
really high we're not really in
that same kind of economy now but

968
00:35:15,814 --> 00:35:20,155
you i guess you could draw some
scenario where like, well, kind of

969
00:35:20,234 --> 00:35:22,173
like the pandemic where we have a
huge supply shock that causes

970
00:35:22,152 --> 00:35:23,666
prices to rise at the same time.

971
00:35:23,666 --> 00:35:24,295
People get thrown out of jobs

972
00:35:24,283 --> 00:35:25,362
where you could have spike in
both.

973
00:35:25,362 --> 00:35:26,480
We didn't necessarily see that
during the pandemic.

974
00:35:26,480 --> 00:35:28,829
The inflation effect was after.

975
00:35:28,829 --> 00:35:31,179
But yeah, in that situation, they

976
00:35:31,179 --> 00:35:32,623
lowered rates, right?
In that situation, you think,

977
00:35:32,623 --> 00:35:33,999
well, this supply shock is
temporary.

978
00:35:33,999 --> 00:35:36,375
So we need to address the demand
All right.

979
00:35:36,375 --> 00:35:38,726
Since we used to get dumb
questions, I have one.

980
00:35:38,726 --> 00:35:41,023
was That was like a fourth-year
macro.

981
00:35:41,023 --> 00:35:41,813
It was self-rated.

982
00:35:41,813 --> 00:35:43,497
The story question was pretty

983
00:35:43,497 --> 00:35:43,652
smart.

984
00:35:43,652 --> 00:35:44,428
It was great.

985
00:35:44,428 --> 00:35:45,204
It was self-rated.

986
00:35:45,204 --> 00:35:47,209
When it comes to house pricing and

987
00:35:47,209 --> 00:35:48,807
the housing market, what is the
goal?

988
00:35:48,807 --> 00:35:51,540
Does the government want house
prices to rise with inflation a

989
00:35:51,540 --> 00:35:53,412
little higher?
Do they want them to stay the

990
00:35:53,412 --> 00:35:55,062
same?
Do they want them to lower?

991
00:35:55,062 --> 00:35:58,114
It feels like depending on who you
ask,'s a different answer what

992
00:35:58,114 --> 00:36:01,777
they want like what's the here for
the house like long i don't think

993
00:36:01,777 --> 00:36:05,211
they'd ever tell you what they
want like home price growth to be

994
00:36:05,311 --> 00:36:09,215
the makeup can certainly won't at
least past the point of saying we

995
00:36:09,115 --> 00:36:13,050
want prices to fall which i think
a couple of at least a premier or

996
00:36:13,032 --> 00:36:16,807
maybe house minister said at some
point yeah they don't tend to say

997
00:36:16,807 --> 00:36:17,260
that anymore.

998
00:36:17,260 --> 00:36:18,337
What I would like, what I think

999
00:36:18,337 --> 00:36:21,234
that the government would like, is
that if we could have prices

1000
00:36:21,234 --> 00:36:24,472
growing in line with incomes or in
line with inflation, it would be

1001
00:36:24,472 --> 00:36:24,593
great.

1002
00:36:24,593 --> 00:36:26,207
The historical average increase in

1003
00:36:26,107 --> 00:36:27,987
prices over the past 30, 40 years
is like 6.5%.

1004
00:36:27,987 --> 00:36:30,918
And if prices grow 6.5% on average
every year, they double every 10

1005
00:36:30,918 --> 00:36:31,090
years.

1006
00:36:31,090 --> 00:36:32,593
That's really unhealthy to have

1007
00:36:32,593 --> 00:36:33,649
prices doubling that quickly.

1008
00:36:33,749 --> 00:36:35,377
If we could get 6.5% on average

1009
00:36:35,377 --> 00:36:38,090
every they year, double every 10
years.

1010
00:36:37,990 --> 00:36:40,298
That's really unhealthy to have
prices doubling that quickly.

1011
00:36:40,298 --> 00:36:44,223
If we could get 6.5% growth down
to like 2% to 3%, then that's like

1012
00:36:44,223 --> 00:36:45,741
maybe home prices double every 30,
35 years.

1013
00:36:45,741 --> 00:36:46,571
That's much more sustainable.

1014
00:36:46,571 --> 00:36:48,390
I think given where prices are at,

1015
00:36:48,390 --> 00:36:53,225
like we need prices to move kind
of sideways and allow incomes to

1016
00:36:53,225 --> 00:36:54,099
catch up.

1017
00:36:54,199 --> 00:36:56,083
It's pretty unhealthy where we're

1018
00:36:56,083 --> 00:36:58,944
at right now with where
affordability is at.

1019
00:36:58,944 --> 00:37:01,009
You know, self-interestingly, I
have teens, 16 and 18.

1020
00:37:01,009 --> 00:37:05,068
Eventually, they're going to need
to move out of my house.

1021
00:37:05,068 --> 00:37:08,455
And even if they wanted to rent,
like, that's crazy expensive

1022
00:37:08,455 --> 00:37:10,418
everywhere, right?
So, like, there's just no good

1023
00:37:10,318 --> 00:37:10,515
options.

1024
00:37:10,515 --> 00:37:11,630
So, we need to have enough.

1025
00:37:11,630 --> 00:37:13,497
I mean, and the answer is no
surprise.

1026
00:37:13,497 --> 00:37:16,614
I'm going to say, like, we just
need a lot more housing.

1027
00:37:16,614 --> 00:37:20,640
We need a lot more of a lot more
of housing then this wouldn't be

1028
00:37:20,640 --> 00:37:23,544
such an issue so since we don't
like i know that the projections

1029
00:37:23,544 --> 00:37:28,101
are we just can't build enough
houses like it's just not possible

1030
00:37:28,101 --> 00:37:32,529
like are we going to see six and a
half percent appreciation

1031
00:37:32,529 --> 00:37:36,060
obviously not this year but like
in a few years it's like a

1032
00:37:36,060 --> 00:37:38,339
forecast if you had no other
information what would your

1033
00:37:38,439 --> 00:37:41,103
forecast be like growing
population and especially a lot of

1034
00:37:41,103 --> 00:37:43,439
people that are forming households
for the first time, 27% of the

1035
00:37:43,439 --> 00:37:44,440
population are millennials.

1036
00:37:44,440 --> 00:37:46,546
You guys, I think you're both

1037
00:37:46,546 --> 00:37:46,836
millennials.

1038
00:37:46,836 --> 00:37:48,216
Yeah, we are.

1039
00:37:48,216 --> 00:37:52,413
There's a lot of you in Kelowna, a
lot of you all over the province.

1040
00:37:52,413 --> 00:37:53,710
Yeah, but we're the best.

1041
00:37:53,710 --> 00:37:53,926
Yeah.

1042
00:37:54,287 --> 00:37:57,786
They would probably like to have
their own home in some way.

1043
00:37:57,786 --> 00:37:58,464
Yeah, yeah.

1044
00:37:58,463 --> 00:37:59,818
That demand is pretty relentless.

1045
00:37:59,818 --> 00:38:01,948
We just need somehow to get supply
to keep up.

1046
00:38:01,948 --> 00:38:04,710
Most recent government modeling is
they think they can build 550,000

1047
00:38:04,710 --> 00:38:07,602
units over 10 years, which would
be about 250,000 more units than

1048
00:38:07,602 --> 00:38:09,053
is currently kind of the baseline.

1049
00:38:09,053 --> 00:38:10,163
That would be great.

1050
00:38:10,163 --> 00:38:10,758
That would work.

1051
00:38:10,758 --> 00:38:12,646
It would take a very long time to

1052
00:38:12,546 --> 00:38:15,938
work because it takes five or six
years to build an apartment

1053
00:38:15,938 --> 00:38:19,173
building or a bunch of row houses,
but it would work eventually,

1054
00:38:19,173 --> 00:38:21,060
right?
That would cut the rate of price

1055
00:38:21,060 --> 00:38:21,782
growth down considerably.

1056
00:38:21,881 --> 00:38:24,104
Whether or not we can do it, we

1057
00:38:25,700 --> 00:38:27,663
start to really dig into the
particulars, like about 8% of the

1058
00:38:27,651 --> 00:38:30,129
current workforce works in
construction.

1059
00:38:30,129 --> 00:38:33,635
That would probably have to rise
to build that much more housing.

1060
00:38:33,635 --> 00:38:36,454
The problem being 50% or so of the
construction workforce is 55 or

1061
00:38:36,454 --> 00:38:36,654
over.

1062
00:38:36,636 --> 00:38:38,940
So a lot of them are going to be

1063
00:38:39,100 --> 00:38:39,328
retiring.

1064
00:38:39,328 --> 00:38:39,498
Interesting.

1065
00:38:39,498 --> 00:38:42,800
So we need to either encourage
young people to get into trades

1066
00:38:42,940 --> 00:38:44,442
because there's going to be a lot
of jobs available, or we need to

1067
00:38:44,442 --> 00:38:49,968
ramp up immigration specifically
of people in skilled trades.

1068
00:38:49,968 --> 00:38:51,099
But of course, that adds to
housing demand.

1069
00:38:51,023 --> 00:38:51,767
So it's a pretty difficult
situation.

1070
00:38:51,767 --> 00:38:52,805
The other thing is on the
construction productivity is

1071
00:38:52,791 --> 00:38:54,939
falling, which means we getdp out
of each hour of labor worked in

1072
00:38:54,939 --> 00:38:56,845
the construction sector generally
because we're just really

1073
00:38:56,845 --> 00:38:59,103
inefficient at let's ask one
question on that like because we

1074
00:38:59,103 --> 00:39:01,249
have our codes are just getting
crazy that we have this

1075
00:39:01,249 --> 00:39:03,292
inefficiency you're like overall
productivity in canada is really

1076
00:39:03,292 --> 00:39:05,947
low i'm sure there's all kinds of
regulatory reasons why that might

1077
00:39:06,047 --> 00:39:06,948
be true in the construction
sector.

1078
00:39:06,948 --> 00:39:10,698
Some of it is like, sometimes I
equate and I'm far from an expert.

1079
00:39:10,698 --> 00:39:12,147
I can barely swing a hammer.

1080
00:39:12,094 --> 00:39:12,939
Probably couldn't tell you what

1081
00:39:12,939 --> 00:39:15,585
types of hammers there are.

1082
00:39:15,585 --> 00:39:16,905
So sometimes I think about

1083
00:39:17,005 --> 00:39:17,825
building houses like toasters.

1084
00:39:17,825 --> 00:39:19,216
The technology hasn't really

1085
00:39:19,216 --> 00:39:19,668
changed.

1086
00:39:19,668 --> 00:39:21,700
A toaster still toasts and it

1087
00:39:21,860 --> 00:39:24,047
still takes just as long as it
always has and like building a

1088
00:39:23,989 --> 00:39:25,024
house and still like there were
people building a house behind us

1089
00:39:24,836 --> 00:39:27,701
and it was just like two guys
would show up at the work site and

1090
00:39:27,601 --> 00:39:30,628
they were just there all day
hammering and whatever it's like

1091
00:39:30,628 --> 00:39:33,705
man like there's got to be some
like technological improvement

1092
00:39:33,705 --> 00:39:37,200
here where this could have been
done way you didn't get ty

1093
00:39:37,200 --> 00:39:38,476
pennington to move that bus.

1094
00:39:38,476 --> 00:39:38,841
That's not.

1095
00:39:38,841 --> 00:39:40,907
What's there in construction?
Like, that's going to suck.

1096
00:39:40,907 --> 00:39:41,758
Because I am.

1097
00:39:41,758 --> 00:39:43,903
I don't know what I'm talking

1098
00:39:43,903 --> 00:39:45,189
about, except just like that
observation.

1099
00:39:45,189 --> 00:39:48,573
Like, it seems like there's not a
Yeah, yeah.

1100
00:39:48,673 --> 00:39:52,051
I'm just thinking, going back to
the supply and demand issue, do

1101
00:39:52,051 --> 00:39:54,996
you think that there's a risk at
all that we're so unaffordable in

1102
00:39:54,896 --> 00:39:58,019
the housing sector that
immigration is going to

1103
00:39:57,919 --> 00:40:01,286
essentially come to a halt and
we're actually going to catch up

1104
00:40:01,186 --> 00:40:01,988
with supply?
Because how does population

1105
00:40:01,988 --> 00:40:04,007
continue to grow at this pace if
somebody lands in the country and

1106
00:40:04,007 --> 00:40:05,640
they're like, I can't afford to be
here.

1107
00:40:05,640 --> 00:40:07,013
I'm going to a different Yeah, it
hasn't stopped yet.

1108
00:40:07,013 --> 00:40:09,723
Vancouver is kind of known to be
pretty expensive and we still have

1109
00:40:09,702 --> 00:40:10,730
very high levels of immigration.

1110
00:40:10,730 --> 00:40:12,092
We will have though, because the

1111
00:40:12,071 --> 00:40:13,745
government announced they would
like to get the share of

1112
00:40:13,745 --> 00:40:15,909
non-permanent residents in the
population down to its current

1113
00:40:15,909 --> 00:40:18,862
level of six and a half percent,
down to five percent like in the

1114
00:40:18,862 --> 00:40:19,358
next three years.

1115
00:40:19,358 --> 00:40:21,776
Which means like we had an inflow

1116
00:40:21,776 --> 00:40:23,820
of about 850,000 non-permanent
residents in 2023.

1117
00:40:23,820 --> 00:40:26,926
To get down to five percent of the
population, we need an outflow of

1118
00:40:26,926 --> 00:40:29,286
like 150 to 200,000 people every
year.

1119
00:40:29,386 --> 00:40:31,140
So instead of all of those
students and temporary foreign

1120
00:40:31,220 --> 00:40:32,630
workers coming into the country,
now they're leaving.

1121
00:40:32,530 --> 00:40:33,487
It's a swing of like a million
people.

1122
00:40:33,487 --> 00:40:35,490
That should have some real
implications for the rental

1123
00:40:35,476 --> 00:40:35,709
market.

1124
00:40:35,709 --> 00:40:37,067
Like it shouldn't be as hot over

1125
00:40:37,036 --> 00:40:40,386
the next few years as it's been
with a lot of people leaving that

1126
00:40:40,386 --> 00:40:41,139
tend to rent.

1127
00:40:41,139 --> 00:40:43,606
So, you know, part of it, we'll

1128
00:40:43,606 --> 00:40:46,551
start to see that in the next year
or two.

1129
00:40:46,551 --> 00:40:50,118
We'll see if what the effect on
like permanent residents is,

1130
00:40:50,118 --> 00:40:53,189
though we still have a very high
target for them, right?

1131
00:40:53,289 --> 00:40:54,065
Till 2027, so.

1132
00:40:54,165 --> 00:40:55,526
I got one more dumb question to

1133
00:40:55,526 --> 00:40:57,796
finish up and then we probably got
to let you go.

1134
00:40:57,796 --> 00:40:59,559
This is is your third one, man.

1135
00:40:59,559 --> 00:41:00,896
going to stop saying the dumb

1136
00:41:00,896 --> 00:41:01,447
questions though.

1137
00:41:01,547 --> 00:41:03,666
My wife has trained me well yeah

1138
00:41:03,666 --> 00:41:06,995
yeah okay if you could tell david
eb one thing for a policy change

1139
00:41:06,995 --> 00:41:09,906
like brendan augmentson gets to
make one policy in 2024 what would

1140
00:41:09,906 --> 00:41:13,620
it be uh the bank of grizzlies
yeah honestly like the stuff that

1141
00:41:13,620 --> 00:41:17,317
they're doing right now with the
supply reforms are exactly what I

1142
00:41:17,317 --> 00:41:19,843
would have said two, three, ten
years ago.

1143
00:41:19,843 --> 00:41:23,177
God, they're kind of late, but I
think they are doing the right

1144
00:41:23,177 --> 00:41:24,147
things.

1145
00:41:24,047 --> 00:41:26,130
And we should have been doing them

1146
00:41:26,130 --> 00:41:28,104
ten years ago, but better late
than never.

1147
00:41:28,104 --> 00:41:28,837
Yeah, I'd agree with that.

1148
00:41:28,837 --> 00:41:30,485
All right, Brendan, want to stick

1149
00:41:30,485 --> 00:41:34,114
around for our few questions that
we have?

1150
00:41:34,114 --> 00:41:36,069
I think we have four.

1151
00:41:36,069 --> 00:41:37,914
Those are not dumb questions.

1152
00:41:38,014 --> 00:41:38,865
No, no, these are.

1153
00:41:38,865 --> 00:41:41,581
By the way, that question that you

1154
00:41:41,581 --> 00:41:42,774
asked was awesome.

1155
00:41:42,774 --> 00:41:45,196
That was definitely a smart no,

1156
00:41:45,196 --> 00:41:45,552
are.

1157
00:41:45,552 --> 00:41:46,976
It's only because I've set the

1158
00:41:46,976 --> 00:41:51,700
expectation that it's dumb and
then it comes off not so dumb.

1159
00:41:51,700 --> 00:41:51,817
Yeah.

1160
00:41:52,518 --> 00:41:52,811
Yeah.

1161
00:41:52,811 --> 00:41:54,740
All of our guests get to say one
policy.

1162
00:41:54,740 --> 00:41:56,276
Man, we've had some wild shit.

1163
00:41:56,276 --> 00:41:58,107
We already got the Grizzlies back.

1164
00:41:58,107 --> 00:41:59,111
There you go.

1165
00:41:59,111 --> 00:42:00,797
That would definitely help the

1166
00:42:00,797 --> 00:42:01,407
economy for sure.

1167
00:42:01,407 --> 00:42:02,017
Yeah, yeah.

1168
00:42:02,017 --> 00:42:03,909
of Well, it's such a different
time.

1169
00:42:03,909 --> 00:42:06,145
Like, you know, now, like,
Vancouver's pretty basketball

1170
00:42:06,045 --> 00:42:06,289
crazy.

1171
00:42:06,289 --> 00:42:07,510
Like, basketball's gotten so much

1172
00:42:07,510 --> 00:42:08,731
bigger in the last 20 years.

1173
00:42:08,731 --> 00:42:10,440
I think that they would easily be

1174
00:42:10,540 --> 00:42:12,480
able to sell off those arenas.

1175
00:42:12,480 --> 00:42:12,780
totally.

1176
00:42:12,780 --> 00:42:16,866
All right, Brendan, if you could
buy one property in the Okanagan,

1177
00:42:16,866 --> 00:42:20,340
what would it be?
Like, down to the address?

1178
00:42:20,340 --> 00:42:23,589
You asked one of my This is how
Matt sells houses.

1179
00:42:23,589 --> 00:42:25,100
I that much of a question.

1180
00:42:25,100 --> 00:42:26,120
I don't know.

1181
00:42:26,120 --> 00:42:27,277
Waterfront would be fun.

1182
00:42:27,277 --> 00:42:28,910
Would you answer anything else?

1183
00:42:28,910 --> 00:42:30,271
Does anyone ever I don't know.

1184
00:42:30,271 --> 00:42:31,573
like, Does anyone ever I don't

1185
00:42:31,573 --> 00:42:31,673
know.

1186
00:42:31,673 --> 00:42:32,980
like, We've had a lot of different

1187
00:42:32,980 --> 00:42:33,231
answers.

1188
00:42:33,231 --> 00:42:34,538
Like we've had big white

1189
00:42:34,538 --> 00:42:34,739
waterfronts.

1190
00:42:34,739 --> 00:42:36,410
I don't ski and I don't really do

1191
00:42:36,410 --> 00:42:40,082
anything on the water, but I do
like to look at it.

1192
00:42:40,345 --> 00:42:43,319
You just need a house with a view
then.

1193
00:42:43,419 --> 00:42:43,769
Yeah.

1194
00:42:43,669 --> 00:42:48,130
If you could tell your 20 year old

1195
00:42:48,130 --> 00:42:50,514
self one thing, what would it be?
Oh my God.

1196
00:42:50,510 --> 00:42:53,979
They asked me this, maybe one of
my first times on the vancouver

1197
00:42:53,979 --> 00:42:58,238
real estate podcast i think i just
said like relax like a pretty

1198
00:42:58,238 --> 00:43:00,577
uptight 20 year old so yeah i
think that's probably good advice

1199
00:43:00,577 --> 00:43:03,964
for younger birth that is are
there any charities around that

1200
00:43:03,964 --> 00:43:07,471
you support or that supports yeah
know personally we support the dan

1201
00:43:07,471 --> 00:43:09,302
syndrome research foundation a
resource foundation i guess

1202
00:43:09,302 --> 00:43:12,053
they've changed the name and
children's hospital and there's

1203
00:43:12,053 --> 00:43:15,174
also a really great one a mother
who provides gift baskets to new

1204
00:43:15,174 --> 00:43:17,425
parents with kids with dan
syndrome which is so like with

1205
00:43:17,425 --> 00:43:20,771
like you know all types of
information and toys specifically

1206
00:43:20,771 --> 00:43:22,652
designed for kids with dan
syndrome so what's called baskets

1207
00:43:22,652 --> 00:43:26,090
of love that's a great one if
anyone's looking for a really good

1208
00:43:26,090 --> 00:43:29,896
very a really good very cool how
can our listener connect with you?

1209
00:43:29,896 --> 00:43:32,735
I mean, obviously you're pretty
vocal on lots of platforms, but

1210
00:43:32,735 --> 00:43:34,487
yeah, what's the best way?
Only vocal on LinkedIn.

1211
00:43:34,487 --> 00:43:36,360
I'm not on any other social media.

1212
00:43:36,360 --> 00:43:38,466
I think LinkedIn is like the least

1213
00:43:38,466 --> 00:43:38,622
toxic.

1214
00:43:38,622 --> 00:43:41,820
It can get a little ridiculous

1215
00:43:42,340 --> 00:43:45,689
sometimes, but it's easier to
avoid that stuff on LinkedIn than

1216
00:43:45,689 --> 00:43:46,192
anywhere else.

1217
00:43:46,192 --> 00:43:48,573
So, you know, that tends to be

1218
00:43:48,573 --> 00:43:53,659
like a good place where like a lot
of people, you know, like to read

1219
00:43:53,659 --> 00:43:56,658
posts up and seemingly migrated a
lot of stuff there.

1220
00:43:56,658 --> 00:43:57,635
So it's high frequency.

1221
00:43:57,735 --> 00:43:59,366
So you're not scrolling through.

1222
00:43:59,366 --> 00:44:02,829
I heard a stat that the average
person scrolls through the

1223
00:44:02,829 --> 00:44:04,427
equivalent of 350 feet of text
every day.

1224
00:44:04,427 --> 00:44:06,732
If you like printed it out, that's
what it would be like.

1225
00:44:06,732 --> 00:44:09,742
So like the size of like a
skyscraper you're just i think

1226
00:44:09,742 --> 00:44:12,730
that may be correlated to the
inefficiency of art that's what

1227
00:44:12,730 --> 00:44:16,220
what everyone's doing post like i
don't know once or twice a week

1228
00:44:16,220 --> 00:44:19,310
sometimes less sometimes more on
linkedin so i don't think i've

1229
00:44:19,210 --> 00:44:21,742
ever said no to a request on
linkedin so connect don't tell

1230
00:44:21,742 --> 00:44:23,506
them our secret that's how I got
you on the show the first time.

1231
00:44:23,606 --> 00:44:24,156
Oh my God.

1232
00:44:24,116 --> 00:44:25,018
This guy actually said yes.

1233
00:44:25,018 --> 00:44:25,684
Yeah.

1234
00:44:25,784 --> 00:44:26,303
Okay.

1235
00:44:26,203 --> 00:44:28,127
Well, no, this has been another
great one.

1236
00:44:28,127 --> 00:44:30,214
We look forward to having you back
and yeah.

1237
00:44:30,214 --> 00:44:31,036
Thanks for your time.

1238
00:44:31,036 --> 00:44:31,447
Yeah.

1239
00:44:31,447 --> 00:44:33,298
Thank you so much.

1240
00:44:33,298 --> 00:44:35,173
I'm voting for you for next bank

1241
00:44:35,173 --> 00:44:36,033
of Canada.

1242
00:44:36,033 --> 00:44:38,517
We'll get you in there.

1243
00:44:38,517 --> 00:44:43,663
Oh, I don't think it's a Well, no,
this think it's a vote.

1244
00:44:43,663 --> 00:44:45,165
I know it is.

1245
00:44:45,165 --> 00:44:45,390
Yeah.

1246
00:44:45,390 --> 00:44:46,967
We're making a it is.

1247
00:44:46,967 --> 00:44:47,268
Yeah.

1248
00:44:47,368 --> 00:44:49,890
We're making a campaign out of
this.