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CMHC sees shift to cheaper housing development in Toronto area Add to ...

These are stories Report on Business is following Thursday, Nov. 8, 2012.

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Housing starts ease
Canada's mortgage insurer sees shift in the Toronto area to cheaper housing developments as the building industry across the country feels the impact of a cooling real estate market.

According to fresh numbers from Canada Mortgage and Housing Corp. today, housing starts fell in October by almost 9 per cent to just over 204,000 on an annualized basis. And they're expect to slip further.

"It was simply a matter of time before homebuilders took their cue from the cooling nature of the resale housing market and underlying economic and demographic trends," said senior economist Sonya Gulati of Toronto-Dominion Bank.

"The last few months of data suggest that momentum in new home construction is beginning to wane. The 2011 Census revealed that household formation from 2006-2011 was 189,000. This represents a reasonable proxy for the appropriate pace of new home construction in Canada. In turn, construction levels should steadily, but gradually, gravitate toward this target."

There's an interesting side piece from CMHC on the widely watched Toronto market, where there's concern about overbuilding in the condo sector and where starts rose to 45,900 annualized from 39,900 in September.

“Construction activity is still being supported by the delayed impact of strong new home sales in 2011 and earlier this year," CMHC's Shaun Hildebrand said of Toronto and its neighbouring regions.

"A shift towards less expensive housing development was visible in the latest numbers, which showed that apartments in Toronto and singles in Brampton accounted for over half of all starts."

Work on detached homes in the Toronto area and construction on multiple units, like apartments and condos, was slightly below levels of October of 2011, But so far this year, starts of 40,540 are ahead of last year's numbers because of stronger multiples.

Strong pre-sale work over the past couple of years appeared to still be playing out in the condo market through the summer, said Robert Kavcic of BMO Nesbitt Burns, but demand is clearly flat-lining, as can be seen in Toronto, where condo sales fell by more than 20 per cent in September and October.

"While multi-unit starts are extremely volatile month-to-month, this downshift to the lowest level since February could be an early indication that momentum is fading in the sector," Mr. Kavcic said.

"If not, we’re still of the view that softer demand will ultimately translate into a moderation in Canadian homebuilding toward underlying household formation (about 180,000 units) over the next two years."

How exports stack up
Canada and the United States are looking better than the world’s biggest exporters when it comes to the key issue of global trade.

Canadian exports climbed 1.9 per cent in September, while imports were flat, narrowing Canada’s trade deficit to $826-million from $1.5-billion in August, Statistics Canada said today.

Now, export prices rose, on higher energy prices, and volumes gained 0.8 per cent. Import prices, on the other hand, fell but volumes climbed, cancelling out any gain.

Canada’s exports to the United States, its biggest trading partner, climbed 1.3 per cent, on the back of gains in aircraft and other transportation goods.

Exports to other countries rose 3.6 per cent, the federal agency said.

There were stronger signs in the United States, meanwhile, as its trade gap narrowed, surprisingly, and exports hit a record after three months of losses.

Its trade deficit now stands at $41.6-billion (U.S.).

Compare all this to Germany and Japan, the export giants of the world, whose numbers today were weak.

Germany exports fell 2.5 per cent, and Japan’s 3 per cent.

“While monetary policy and political developments might be providing reasons for optimism in Europe today, data from the real economy continue to point sluggishness on a global level,” said Derek Holt and Dov Zigler of Bank of Nova Scotia.

.”Both Japan and Germany released trade numbers for September that showed continued weakness in terms of exports from two of the world’s trading powerhouses,” they said.

“…That leaves Japan in a much weaker place than Germany as Japan’s export level is down 10.5 per cent from September 2011 with the deceleration so extreme that the three-month annualized percentage change through September is -25.8 per cent. While Germany’s export level is weak, it is still up slightly from one year ago (+1.4 per cent).”

Central banks hold the line
Both the European Central Bank and the Bank of England held back from any changes today.

The ECB held its key rate at 0.75 per cent, amid mounting gloom in the 17-member euro zone.

“There’s still intense pressure to provide more stimulus in coming months,” senior economist Jennifer Lee of BMO Nesbitt Burns said of the ECB.

“Just look at the data over the past week alone,” she added.

“German factory orders took a 3.3-per-cent dive in September, and German industrial production took a 1.8-per-cent drop in September. And this morning, it was reported that although Germany’s trade surplus unexpectedly widened in September to €16.9-billion, exports took a 2.5-per-cent hit, the largest drop in nine months. Of the three mentioned indicators, all were from one country: Germany.”

Manulife posts loss
Manulife Financial Corp. reported a $227-million third-quarter loss today, dragged down by a $1-billion charge, The Globe and Mail’s Tara Perkins reports.

The Canadian insurer lost $227-million or 14 cents a share in the quarter, and it backed away from its earlier target of a $4-billion profit by 2015.

“The quarter was not without its challenges,” said chief executive officer Donald Guloien.

“We incurred a $1-billion charge for basis changes, largely related to the impact of the current macro-economic climate on our actuarial assumptions as well as products and businesses that are not a substantial part of our go-forward business plans, and we wrote off $200-million of goodwill.”

Stronach backs further away from Magna
Frank Stronach, who founded Magna International Inc. in a Toronto garage in the late 1950s and guided its growth to a global powerhouse, is resigning from the company’s board of directors, The Globe and Mail’s Greg Keenan writes.

Mr. Stronach has started a political party in his native Austria and “I do not want my political views to be confused with my role on Magna’s board,” he said today.

Separately, Magna posted a sharply higher third-quarter profit of $390-million (U.S.) or $1.66 a share, compared to $102-million or 42 cents a year earlier.

Revenue rose to $7.41-billion from $6.97-billion.

Air Canada swings to profit
Air Canada rebounded to a profit in the third quarter, boosted by foreign-exchange gains, The Globe and Mail’s Bertrand Marotte reports.

The airline also said it has begun talks with the federal government for an extension of pension deficit funding relief.

Air Canada posted a quarterly profit of $429-million or $1.54 per share, compared to a loss of $124-million or 45 cents a year earlier.

Samsung boasts best-seller, for now
Samsung has knocked Apple Inc. out of top spot for boasting rights for the world’s best-selling wireless phone, highlighting the intense competition among the world’s tech giants as smartphones get smarter and tablets race ahead.

It also puts more heat on Research In Motion Ltd. as it prepares to launch its new BlackBerry 10 devices.

This doesn’t mean that Samsung overtook Apple when sales of the iPhone 4S and more recent iPhone 5 are added together, only that the former’s Galaxy S3 beat out its rival’s 4S in a quarterly reading.

Samsung’s S3 surged ahead of Apple’s iPhone 4S in sales in the third quarter of the year, Strategy Analytics said today as “a large touchscreen, extensive distribution and generous operator subsidies” put it over the top.

Apple, of course, has since launched the iPhone 5, and Strategy Analytics notes that Samsung’s crowning “is likely to be short-lived.” When you combine the iPhone 4S and the iPhone 5, Apple comes out ahead.

According to the research firm, Samsung shipped 18 million of the S3 devices in the quarter to take an 11-per-cent share of the market, becoming the best-selling smartphone for the first time.

That eclipsed Apple’s estimated 16.2 million 4S models “as consumers temporarily held off purchases in anticipation of a widely expected iPhone 5 upgrade at the end of the quarter,” said senior analyst Neil Shah.

Still, the Apple iPhone models combined command a market share of over 13 per cent.

Hu wants more reform
China needs to deepen its economic reforms, double its GDP by 2020 and pour more state money into key resources, its outgoing President Hu Jintao said in his last major speech before formally seceding the position of General Secretary of the Communist Party.

After 10 years of rule in which China roared into the position of the world’s second-largest economy, largely on the backs of factories supplying cheap goods abroad, Mr. Hu has also been criticized, along with Premier Wen Jiabao, for faltering on economic reforms to transform China’s economy away from its heavy dependence on investment– and export-driven growth, Carolynne Wheeler reports from Beijing.

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