Briefing highlights
- Royal LePage warns against housing speculation
- How home prices compare across Canada
- Canadian Tire names old CEO new CEO
- Global markets on the rise
- About The Tenors and that all-star game
- Video: Can you protect your job from robots?
LePage warns against speculation
Amid mounting concerns over the Vancouver and Toronto housing market comes a warning and a forecast from Royal LePage on two key issues:
The warning: Speculating on real estate is unwise. The forecast: Expect more foreign buyers to jump into those hot cities.
And this, of course, as economists project interest rates will stay lower for longer: “We don’t see even a mild correction for either the Toronto or pistol-hot Vancouver markets in 2016.”
Froth in Vancouver and Toronto is a huge concern in Canada, so much so that, as The Globe and Mail’s Mike Hager reports, the B.C. government is trying to get a handle on foreign home ownership while Ottawa has struck a multi-level committee to study the two cities.
Affordability is a key issue, as is the threat of a correction, which economists don’t see happening at this point.
The Royal LePage house study showed an annual increase of 9.2 per cent in the second quarter, to $520,223, and it projected prices would end the year with a gain of 12.4 per cent compared last year.
But that hardly tells the story, given the regional nature of Canada’s housing markets, particularly as those in the oil-shocked provinces fare differently than B.C. and Ontario, which are forecast to lead the country in economic growth this year.
“Economic and social disruptions have rocked the world once again, introducing new risks and making it very likely that the Bank of Canada will leave interest rates as-is for now,” Royal LePage CEO Phil Soper said in the report.
“Few industries are as rate sensitive as real estate.”
Mr. Soper also warned against speculating in the markets, though he didn’t link that to the ongoing rise in prices.
“A home is ill-suited as a buy-and-flip investment,” Mr. Soper said.
“People that engage in this kind of activity are inevitably burned when a market slows and the time it takes to sell the property increases substantially,” he added, also praising the actions of the various governments to try to get a handle on it all.
As for foreign buyers, he cited a recent survey of Royal LePage advisors who believe such ownership has increased in the Vancouver and Toronto areas, though some think it accounts for less than 10 per cent of those markets.
BMO Nesbitt Burns senior economist Robert Kavcic also cited both issues recently, suggesting that in Vancouver, the price spiral “screams of late-cycle dynamics, with speculation and foreign capital likely playing a growing role now at the margin.”
Economists agree that home prices aren’t about to come down immediately, but affordability could improve next year.
“Affordability has become incredibly stretched and price increases at these levels are simply unsustainable,” Toronto-Dominion Bank said in its most recent forecast.
“This sets up a backdrop for cooler markets in Toronto and Vancouver next year.”
And here’s a final warning from BMO’s Mr. Kavcic, which followed this week’s report of surging construction starts in Vancouver:
“The run-up clearly comes on the back of condo prices accelerating to an unsustainable rate, and the concern is that more speculative activity is helping to bring units to construction, well in excess of what is needed to meet demographic demand.”
Prices at a glance
Here’s how housing markets fared across the country in the second quarter, according to Royal LePage:
Greater Vancouver, up an aggregate 24.6 per cent from a year earlier to a median price of $1.1-million.
Calgary, down 1.8 per cent to $454,790.
Edmonton, down 1.2 per cent to $377,337.
Saskatoon, down 0.2 per cent to $370,125.
Regina, down 1.7 per cent to $323,612.
Winnipeg, up 2 per cent to $285,358.
The Toronto area, up 10.2 per cent to $656,365.
Ottawa, up 2.3 per cent to $401,288.
The Montreal area, up 3.5 per cent to $344,620.
Fredericton, up 3.8 per cent to $235,425.
Moncton, up 3 per cent to $193,154.
Halifax, flat at $298,753.
Charlottetown, up 0.7 per cent to $223,087.
St. John’s, down 1.5 per cent to $336,131.
Royal LePage also projected prices would rise 27 per cent in Greater Vancouver this year from last, 1 per cent in Calgary, 2 per cent in Regina, 2.6 per cent in Winnipeg, 14.9 per cent in Greater Toronto, 2.5 per cent in Ottawa, 3 per cent in Greater Montreal and 1 per cent in Halifax.
Prices are expected to dip 1 per cent in Edmonton.
According to the just-released Teranet-National Bank home price index, the housing market took another leap forward last month, with costs rising 2.3 per cent from May to mark the fastest June pace since readings began in 1999.
Leading the way were Victoria, up 4.4 per cent, Halifax, up 3.7 per cent, Toronto, up 3.3 per cent, and Vancouver, up 2.6 per cent.
“For Vancouver, it was the 18th consecutive month without a decline, with the index setting a record each month,” the group said.
“For Toronto, it was the 13th rise in 14 months, with new records set in each of the last five months.”
About The Tenors and Tuesday's all-star game ...
“Let's see if we can hit a new low.”
Bank of Canada cuts outlook
Canada’s economy is taking a short-term hit from the Alberta wildfires, “volatile” trade and “uneven” consumer spending.
But we’ll get some juice as Fort McMurray rebuilds, oil production picks up and the Canada Child Benefit puts more spending money in our pockets, the Bank of Canada says.
As The Globe and Mail’s Bill Curry reports, the central bank trimmed its estimate of second-quarter economic growth, now seeing a contraction of 1 per cent, but a third-quarter rebound, to the tune of 3.5 per cent, is expected.
As it held its benchmark rate steady at 0.5 per cent, the central bank also gave these estimates for growth in gross domestic product: 1.3 per cent this year, 2.2 per cent next, and 2.1 per cent in 2018.
“Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth,” the central bank said.
“Despite recent volatility, the bank expects the underlying trend of export growth to continue, leading to a pick-up in business investment. Higher global oil prices are helping to stabilize Canada’s energy sector and household spending is expected to increase moderately.”
Rotating the tires
Canadian Tire Corp. is bringing in a new chief executive officer, who just happens to be an old chief executive officer.
The retail giant named Stephen Wetmore to the post, effective immediately, to replace Michael Medline, CEO for the past couple of years, The Globe and Mail's Bertrand Marotte reports.
“The board has taken a unanimous decision to change the leadership of the company at a time of unprecedented change in the retail industry,” chair Maureen Sabia said in a statement.
“While our short-term priorities are delivering results, the board’s responsibility is the long-term success of Canadian Tire.”
Mr. Wetmore was Canadian Tire’s chief from early 2009 until late 2014, when Mr. Medline took over.
“Every day our customers are demanding more control over their shopping experience,” Mr. Wetmore said.
“We must continue to rapidly evolve the Tire to exceed both our customers’ and our shareholders’ expectations.”