Ottawa's housing measures
Canada’s new government took a unique approach to cool down the Toronto and Vancouver housing markets, but the measures will go only so far, analysts say.
Finance Minister Bill Morneau didn’t, for example, take a page from New Zealand’s playbook and target foreign investors.
This is an issue in Vancouver, in particular, where there’s much controversy over the question of foreign money property and driving housing costs to unaffordable levels.
As The Globe and Mail’s Tamsin McMahon reports, Mr. Morneau has doubled the minimum down payment in some circumstances in a bid to take some of the froth off Toronto and Vancouver.
Economists say it will have some impact, at least initially, and that it seems to have been a good approach to dealing with the two scorching hot Canadian markets.
That’s not to suggest Mr. Morneau’s moves weren’t a good start. Indeed, our personal finance columnist Rob Carrick calls it a “welcome development.”
But it will only go so far.
“The bigger-picture fundamentals driving home price gains in Toronto and Vancouver - restricted detached-home supply, demographic demand, low mortgage rates and inflows of foreign wealth - remain firmly in place,” said BMO Nesbitt Burns senior economist Robert Kavcic.
On the issue of foreign buyers, there may have been a question of actual hard numbers, rather than just community concerns.
“The government elected to not directly target investor activity, such as recent changes undertaken in New Zealand,” noted Toronto-Dominion Bank economists Derek Burleton and Diana Petramala.
“The lack of hard data on speculation and investor activity could have been an impediment to action on that front.”
Just this morning, the Teranet-National Bank home price index showed costs rising for the 11th month in a row, all because of strong gains in Vancouver and Victoria.
Prices rose 0.2 per cent in November from a month earlier, and 6.1 per cent from a year earlier, the annual figure driven by a surge of 11.3 per cent and Vancouver and 9.7 per cent in Toronto. Victoria and Hamilton have also been strong.
“Some believe that the story in Vancouver and Toronto is all about speculation and demand from foreigners, and nothing is fundamental,” National Bank economist Marc Pinsonneault said as he released today’s numbers.
“This is not what regional labour markets tell us,” he added.
“Job creation has actually been strong in Toronto and Vancouver in recent quarters.”
Debt at another high
Canada’s household debt burden hit another record high in the third quarter of 2015, as debts grew faster than incomes, The Globe and Mail’s David Parkinson reports.
The ratio of household credit-market debt to disposable income rose to 163.7 per cent in the three months ended Sept. 30, up from 162.7 per cent in the second quarter, Statistics Canada said today.
It marked the highest-ever reading in this key ratio for gauging consumer debt loads, topping the previous record 163.0 per cent in the fourth quarter of 2014.
Hits just keep on coming
Two more Canadian energy firms are in the spotlight today, each noting the hit from the energy shock.
Encana Corp.unveiled its 2016 plans, citing 2016 spending that will be about $600-million below this year, with a continued focus on four key North American projects.
The energy giant said its “highly disciplined” 2016 capital program will see a cut of 10 to 15 per cent in drilling and completion costs, and a trim to corporate costs of more than 10 per cent, with an expected 12-per-cent gain in production from those four assets.
It has also cut its dividend.
Calfrac Well Services Ltd., in turn, unveiled a deal with lenders to change its credit facilities.
“We believe that we have been able to agree upon a covenant relief package that will provide for significant financial flexibility to manage our business during this industry downturn,” said chief executive officer Fernando Aguilar.
Among the changes is a “voluntary reduction” in the lending commitment to $300-million from $400-million, along with various shifts in certain financial ratios.