These are stories Report on Business is following Wednesday, Dec. 5, 2012.
Vancouver, Toronto hit
Homeowners looking to sell are pulling back or holding out - and buyers are taking a breather - in the fast-cooling Vancouver and Toronto markets.
Both cities, the focus of concern as Canada’s housing market slows, are feeling the heat, as the latest numbers show.
As The Globe and Mail’s Brent Jang reports today, sales fell almost 29 per cent in November from a year earlier, to 1,686, while prices declined by 1.7 per cent.
“Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties,” said the realtor group’s president, Eugen Klein.
“On the other hand, buyers appear to be expecting prices to moderate.”
Indeed, new listings fell more than 14 per cent last month, and were almost 13 per cent below the 10-year average for the month of November.
“Sales are down 42 per cent from the past-decade norm, a victim of excessive valuations, tougher mortgage rules and the temporary suspension of the Immigrant Investor Program,” said senior economist Sal Guatieri of BMO Nesbitt Burns.
“Price declines have quickened, too, down 1.7 per cent year-over-year and off 4.5 per cent from the spring peak. Vancouver’s market is on the downslope of its historical roller-coaster ride, though low interest rates are keeping it on the tracks.”
According to the Toronto Real Estate Board today, sales in November fell 16 per cent from a year earlier to 5,793, with condos particularly hard hit. Average prices rose 1.6 per cent.
New listings fell 1.3 per cent, while active listings climbed almost 18 per cent.
“Stricter mortgage lending guidelines, including a reduced maximum amortization period and a purchase price ceiling of $1-million for government insured mortgages, have prompted some buyers to move to the sidelines,” said the group’s president, Ann Hannah.
“This situation has been exacerbated in the City of Toronto because the additional upfront Land Transfer Tax takes money away from buyers that otherwise could be used for a larger down payment.”
The cooling of Canada’s housing market is expected to play out across the country, and most observers expect a soft landing.
“Moderating home sales are expected to slow the pace of residential building, particularly in the overbuilt condo markets in Vancouver and Toronto,” Bank of Nova Scotia economists said in a new forecast.
Group bids for Primaris
A group of big players is looking to buy and break up a major Canadian retail real estate concern.
KingSett Capital today, along with the Ontario Pension Board, unveiled a hostile bid worth $4.4-billion, or $26 a unit in cash, for Primaris Retail REIT.
The group behind KingSett and the Ontario Pension Board include RioCan Real Estate Investment Trust, Alberta Investment Management Corp., Ivanhoe Cambridge and others.
If successful, the Primaris properties would be broken up, with RioCan Real Estate Investment Trust, Canada’s biggest shopping mall manager, grabbing $1.1-billion worth. That would include five regional malls and three open shopping centres anchored by grocery outlets.
"This transaction provides significant and immediate value to Primaris' unitholders and is fully aligned with our strategy to increase our exposure to private market investments, such as real estate, private equity, and infrastructure, by partnering with leading institutions,” said Ontario Pension Board chief executive officer Mark Fuller.
Britain's troubles deepen
Britain is headed from gloom to gloomier, according to new forecasts unveiled today by the country’s finance minister and Office for Budget Responsibility.
In his autumn statement, Chancellor of the Exchequer George Osborne said the key ratio of debt to gross domestic product now won’t decline until the 2016-17 fiscal year, meaning he has pushed back the target by a year.
At the same time, the OBR cut the forecast for economic growth this year, projecting a contraction of 0.1 per cent rather than the expansion of 0.8 per cent forecast earlier.
Growth for next year has been trimmed to 1.2 per cent from 2 per cent, and for 2014 to 2 per cent instead of 2.7 per cent.
Mr. Osborne also said it will take his government longer to bring down its deficit.
As our European correspondent Eric Reguly writes today, the new forecasts will pose a big challenge for Bank of Canada Governor Mark Carney when he takes the helm of the Bank of England in mid-2013.
Citi cuts deep
Citigroup Inc. is slashing 11,000 jobs and taking a hit of about $1-billion (U.S.) in the fourth quarter.
The U.S. banking giant today announced cutbacks to its institutional clients group, where 1,900 jobs will be lost, and its global consumer banking business, where 6,200 positions will be cut. Other units will also feel the heat.
Citigroup said it plans to get out of, or scale back in, retail banking in Pakistan, Paraguay, Romania, Turkey and Uruguay.
It also plans to consolidate in Brazil, Hong Kong, Hungary, Korea and the U.S.
“While we are committed to - and our strategy continues to leverage - our unparalleled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns,” said chief executive officer Michael Corbat.
“And we will further increase our operating efficiency by reducing excess capacity and expenses, whether they center on technology, real estate or simplifying our operations.”
Another hour of sleep
The Bank of Canada is pushing back the timing of its rate policy announcements next year, to 10 a.m. ET from the existing 9 a.m.
The central bank said that will happen with the next scheduled announcement Jan. 13.
At the same time, it said, it will publish its quarterly monetary policy reports at the same time, rather than later.
Those are scheduled for January, April, July and October.
NHL deputy commissioner Bill Daly, yesterday: “Everybody is working hard. I think everybody wants to get a deal done, so that’s encouraging. We look forward to hopefully making more progress tomorrow.” Euro group of finance ministers, Nov. 27: “Ministers commended Greek policy actions and agreed on a package of measures to ensure Greek debt will be sustainable.”
Colour commentary of the day, from analyst Chris Beauchamp at IG: “Some 200 years after the beginning of the last Anglo-American conflict (the war of 1812), Tesco has shown how difficult it is for an empire based in the Old World to hold onto its possessions in the New. The departure of the head of the Fresh & Easy division has signalled a general review of Tesco’s U.S. business that could mean the end of its five-year attempt to challenge the Wal-Mart behemoth. Tesco shareholders appeared relieved, with the shares gaining 3 per cent in morning trading.”
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