Do you earn more than your house does?
Bank of Montreal’s chief economist poses a question reminiscent of the Toronto housing market’s heyday in the late 1980s: Who makes more, you or your house?
“One quip during the late 1980s housing boom in Toronto was: ‘Last year, my house made more than I did, and it just sat there and did nothing all day,’” Douglas Porter says in a look at real estate prices vs. weekly earnings.
“Well, that was nearly the case for many folks again in 2013.”
Mr. Porter noted that average house prices in the Toronto area rose by some $43,000 last year. Compare that to average weekly earnings in Ontario, which amount to $48,000 a year on an annual basis.
“The old quip still has a bit of a bite of reality,” he said.
Mr. Porter deliberately did not look at Vancouver because of the big difference between average prices and the so-called benchmark value, which is deemed a more representative reading given how those rich homes can skew measures.
That benchmark value was up just 2.1 per cent last year. But if you look at last month alone, just as an example, average prices were up by $86,000. Last year, average earnings in British Columbia came in at $45,600.
As The Globe and Mail’s Brent Jang reports, Vancouver prices soared in February amid a surge in sales.
Just as an example, detached properties hit an average $1.36-million last month, which represents an increase of almost $140,000 over the course of the year.
- Tara Perkins: Home prices to cool with warm weather
- Vancouver, Calgary home prices set records in 'east-west' Canadian divide
- Brent Jang: Vancouver real estate prices break records
- Video: The truth about Canada's housing market
- Tara Perkins: Why the doomsayers are wrong about Canada's housing market
What awaits Oliver
Canada’s new finance minister inherits a struggling economy and a currency that’s on the ropes.
Which should help.
Prime Minister Steven Harper today tapped Natural Resources Minister Joe Oliver to fill the shoes of Jim Flaherty, who announced his departure late yesterday.
Mr. Oliver, then, faces several issues, from concerns over the country’s housing market to Bank of Canada Governor Stephen Poloz’s new normal of modest economic growth.
Then there’s the Canadian dollar, which continued to sink this morning, though, arguably, that’s good news for Mr. Oliver.
In a speech in Halifax yesterday, Mr. Poloz said that a combination of demographics and the hangover from the financial crisis will restrain economic growth in Canada.
Older folks, he said, are saving their money, thus holding back consumer spending, which has helped drive Canada’s recovery.
All of this suggests that, as expected, the central bank isn’t about to hike its benchmark interest rate any time soon. Indeed, in a question-and-answer session after his speech, Mr. Poloz again left the door open to a rate cut, sending the Canadian dollar sharply lower.
The loonie, as Canada’s dollar coin is known, went as low as 89.43 cents U.S., and was still below 89.5 cents early today.
The decline, said chief currency strategist Camilla Sutton of Bank of Nova Scotia, was entirely Poloz-related and had nothing to do with the resignation of Mr. Flaherty, who is respected globally because of Canada’s fiscal standing.
Mr. Flaherty’s government is one of the few that can still boast a triple-A rating.
But, as Mr. Poloz noted, it may not be able to boast strong growth.
Here’s the thing: The erosion of the loonie is expected to help juice the economy this year and next. A weak currency makes a country’s exports cheaper, and thus more attractive.
“A weaker Canadian dollar enhances the competitiveness of Canadian goods in the U.S. market – historically, a 10-per-cent depreciation boosting export volumes by 3.3 per cent in the follow two years,” Royal Bank of Canada’s chief economist, Craig Wright, said today in a new economic forecast.
By the end of last year, Mr. Wright noted, Canadian exports were 5 per cent below the pre-crisis peak.
RBC believes the loonie will sink to the 87-cent level by the end of this year, and 85 cents by the end of 2015. That’s different from the projections of some other economists: Both Bank of Montreal and Ms. Sutton’s Scotiabank forecast about 87 cents by mid-2014, and a pickup to the 90-cent level by the end of the year.
RBC also projects today that the economy will expand by 2.5 per cent this year, and 2.7 per cent in 2015 as the export sector weighs in.
The OECD forecasts economic growth of just 0.5 per cent in the current quarter of the year.
- David Parkinson in ROB Insight (for subscribers): Is Flaherty leaving Canada in the lurch?
- Tavia Grant: Slower growth, lower rates new normal as boomers age, Poloz says
- Stephen Poloz's 'headache' sends the Canadian dollar tumbling
- Bill Curry, Shawn McCarthy and Steven Chase: Oliver to take over Finance portfolio from Flaherty
- Tim Kiladze, Tara Perkins and Kevin Carmichael: Flaherty's exit leaves unfinished business
- Globe editorial: A mixed legacy for the Conservatives' only finance minister
- Steven Chase and Bill Curry: Flaherty's decision to leave was made months before, sources say
- Campbell Clark in Politics Insider (for subscribers): Flaherty proved to be a steady hand in an economic crisis
Toyota said to reach deal
U.S. officials today unveiled a settlement with Toyota Motor Corp. over the massive recall of vehicles because of unexpected acceleration.
The deal with the U.S. Justice Department topped $1-billion, described by Reuters as the fattest penalty by the U.S. on an auto maker ever.
Toyota thus escapes criminal charges.
“Toyota has co-operated with the U.S. attorney’s office in this matter for more than four years,” spokesperson Julie Hamp told The Wall Street Journal.
“During that time, we have made fundamental changes to become a more responsive and customer-focused organization, and we are committed to continued improvements.”
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