The great divide

On Bay Street, big banker bonuses flow as quarterly profits gush. On Main Street, meh. It’s no secret wealth continues to flow up, not down.

All the banks just sailed past analysts’ expectations with major boosts in earnings. Look at TD, for example. Last year it was humbled by a huge fine for not halting money laundering in the US. Now, in just three months, it earned $4 billion – up from a mere $2.7 billion last time. Ditto RBC. And Scotia. BeeMo, too. And the penguin guys.

CIBC stock in fact, is up 13%. BMO gained 11%. National 9%. And this comes on top of a 30+% blow-out for the financials on the TSX last year. Investors made juicy capital gains. They collected dividends. And, at 32% of the stock market, the bankers helped punch the entire index higher.

Pick any ETF pacing Bay Street last year and see what happened. For example, the BMO S&P/TSX capped composite fund gained just under 32%. That was more than double the return on the iShares S&P fund mirroring the American market.

Own the banks, baby. Better still, own the index and prosper from our country’s riches – as the energy and materials sectors meet rising global demand. If the Canadian market can do this when we’re under assault from the White House and Auston Matthews is a bum Trojan horse, just imagine where we’ll be after the orange one is gone.

Now, all is not ponies and gummies everywhere. While folks with liquid portfolios prosper, those who buried their net worth in property cringe. It’s even worse for those creating real estate assets. New evidence emerged this week that these are historic times. Not in a good way.

As we’ve been detailing here lately, times are tough for builders. Actually, they’re apocalyptic. In a market of almost seven million people just 269 new homes sold last month. The. Worst. Ever. That’s 80% below normal levels. The developers know why: ““The sustained nature of the new home slowdown has been underpinned by the combination of affordability concerns and failing consumer confidence.”

Chew on this – there are 14,731 new condo units available right now in the GTA (not counting resales on MLS). Of that total, just 85 sold in January. At this rate it would take 14 years to clear up existing inventory – until the year 2040.

Currently there are 20,557 new homes available – the greatest number since men in leopard loin cloths were scratching pictures of bison on their cave rock walls. It’s a mess. The industry is croaking before our eyes, even while the finance guys are frolicking.

BTW, cratered sales have not crushed prices. New condos are hanging in there with an average ask of $1,027,486, “at an apparent price floor,” the industry says. Singles, in contrast, are down 10% from last year, sitting at just under $1.4 million.

And how are things on the resale market?

They suck, too. Recent buyers have been creamed as valuations fall far faster than new units.

Source: Canadian Real Estate Association, CBC

Prices in the GTA (as in Van and the LM) have catapulted lower as investors bail out of money-losing rental units and pr-con buyers come up to closing on properties worth less than they paid. Valuations have faded by a quarter since 2022, making it hard for a lot of people to secure financing from those plump banks. Their appetite for risk has fallen faster than a hippo on Ozempic.

The assignment market is also under stress. Listings piling up. Closing days looming, Buyers gone. Pre-con purchasers who are unable to complete their deals on time will be sued. They will lose.

Well, at least things are better for real estate here than in China, right? That country’s housing collapse and price-squishing has made global headlines.

Oops. Not so fast.

An analysis from the Bank of International Settlements (the bank for 63 global CBs, like the Bank of Canada) concludes that real estate in this country has seen the largest decline in the developed world.

Prices in Canada, the bank reckons, were down 18% by last autumn (and another 5% since), which compares with 17.8% in China and (in third place) South Korea’s 6.8% drop. In contrast, US property values grew about 12% – even with mortgage rates almost twice as high as ours.

Without a doubt, we’re paying for the FOMO which swept Canada during the pandemic, government policies pandering to home ownership, too-easy mortgage credit, lax monetary policy, financial illiteracy and politicians of all colours who simply don’t understand real estate. The drop in collective net worth could be epic. And we’re not done yet.

A society of property debt. A nation of happy banks.

About the picture: “Serious question.  Who moves the markets the most, individual day traders or large portfolio managers?” asks Jeff (it’s the big guys).  “My curiosity is piqued,  if it’s portfolio managers obviously they don’t stick to a balanced and diversified portfolio.  They are trying to time the market.  Scary thought if you’re invested with them. Best move I made was turning my hard earned money over to Turner Investments.  Thanks for all you do not only for me but also for everyone you educate daily with your blog. Here is my best friend Roxy.  She is never far away and that’s OK with me.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/02/26/the-great-divide/