Briefing highlights
- Foreign buyers less picky?
- Manulife boosts dividend
- Thomson Reuters posts higher profit
- Twitter reports slowest revenue growth since IPO
- Telus profit misses
- Precision Drilling posts quarterly loss
Rich and less picky?
Sal Guatieri raises an interesting point: What if foreign buyers of Toronto real estate have more money and are less picky than their home-grown counterparts?
It’s not the only question, but it’s certainly a key one, as the Toronto market grows hotter and hotter, particularly after foreign money was chased out of Vancouver by a new tax.
Mr. Guatieri, a senior economist at Bank of Montreal, cited a recent poll of Toronto realtors that indicates foreigners were involved in 4.9 per cent of transactions in the 12 months to last November.
This was a survey commissioned by the Toronto Real Estate Board, rather than hard statistics, aimed at backing up the group’s warning against a foreign-buyer tax similar to the 15-per-cent levy that the B.C. government introduced in August in the Vancouver area.
Vancouver sales have now slumped by about 40 per cent from year-earler levels, though the pricey market was showing signs of cooling even before the tax.
Observers now wonder if some of that foreign money is moving to the Greater Toronto Area, which is still on fire and growing ever hotter, with prices surging by more than 20 per cent.
Which brings us back to BMO’s Mr. Guatieri.
“We still need a lot more information on the role of foreign investment in the GTA, especially with respect to the impact on pricing,” Mr. Guatieri said.
“If foreign investors are wealthier and less discriminating buyers compared with domestic residents, then their purchases could put undue upward pressure on prices that’s disproportionate to their share of sales,” he added in an outlook for the Canadian and U.S. economies.
“Not surprisingly, Toronto’s rapid price gains have spilled into surrounding regions and condos where affordability is still decent (though this won’t last if double-digit price gains continue).”
The Canadian government has also brought in mortgage and tax measures aimed at taming housing markets, and when all is said and done, including the issue of affordability, observers believe the Toronto market will ease, though not contract.
One of the Toronto Real Estate Board’s points is that governments are trying to cool demand, rather than aiming policies at the lack of supply.
Regardless, the price surge in Toronto and its surrounding communities has led to several warnings about overstretched home buyers, most recently in the Bank of Canada’s review of the financial system.
This, warned Mr. Guatieri, is a risk in his economic outlook.
“Escalating house prices in Toronto could encourage households to take on more debt,” Mr. Guatieri said.
“According to the latest Financial System Review from the Bank of Canada, the proportion of highly-indebted households is rising quickly in the GTA and surrounding areas,” he added.
“In addition, escalating condo prices in Toronto (19 per cent year over year to January) risk fanning overconfidence among developers and investors, resulting in overbuilding and increased speculation.”
Mr. Guatieri’s colleague, BMO chief economist Douglas Porter, said separately that the Vancouver tax appears to be working well, questioning the Toronto group’s warning that a similar tax would wreak havoc. “To which we would simply respond: Is a 22-per-cent surge in prices not already havoc? It’s certainly not healthy, except perhaps to the finances of said realtors.”Manulife boosts dividend
Manulife Financial Corp. boosted its dividend by 11 per cent as it posted a weaker fourth quarter but stronger year.
The giant Canadian insurer posted a fourth-quarter profit of $63-million, or a penny a share, down from $246-million or 11 cents a year earlier. The latest quarter included a hefty charge.
For the year, Manulife profit came in at $2.9-billion, or $1.41 a share, up from $2.2-billion or $1.05.
The quarterly dividend goes up by 2 cents to 20.5 cents.
Earnings parade
Other earnings are also pouring in.