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Toronto home sales plunge, prices hold up for now Add to ...

These are stories Report on Business is following Friday, Jan. 4, 2013.

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Toronto home sales plummet
Home sales in Toronto plunged 19.5 per cent in December, capping 2012 with an over all decline of 3.8 per cent.

The city’s frothy condo market was particularly hard hit, according to numbers released today by the Toronto Real Estate Board.

Today’s numbers come just a day after Vancouver realtors reported they, too, took it on the chin.

The Toronto and Vancouver markets are a particular source of concern as Canada’s housing market cools, partly because of moves by the federal government to cool things down.

Sales in the wider Toronto area fell in December to 3,690 from 4,585 a year earlier. For 2012 as a whole, sales slipped 3.8 per cent to 85,731.

Average prices, however, were still up 6.5 per cent in December, to $478,739. For the year, the average price climbed almost 7 per cent to $497,298.

Toronto’s condo market, which Finance Minister Jim Flaherty cited when he brought in the new rules effective in July, saw a sales drop of almost 27 per cent over the course of December, with average prices down 0.9 per cent. Prices for detached, semi-detached and townhomes still held up.

The group said that sales over 2012 were “quite strong” when compared to the norm, but that was front-loaded, with strong growth in the first six months and declines in the second half, partly because of the government’s new rules.

“Robust annual rates of price growth were reported through most months of 2012,” said Jason Mercer, the real estate board’s senior manager of market analysis.

“Price growth was strongest for low-rise homes, including singles, semis and townhouses. Despite a dip in sales, market conditions remained tight for these home types with substantial competition between buyers.”

As The Globe and Mail’s Brent Jang reports, sales in Greater Vancouver plunged 22.7 per cent last year, while prices edged down.

Canadians have been on a borrowing binge amid ultra-low borrowing rates. And while debt growth has slowed recently, the key measure of debt to disposable income sits at a record high.

Indeed, The Globe and Mail’s Tara Perkins writes in an exclusive report today, the Bank of Canada has been taking an in-depth look at how competition among the country’s lenders has helped to drive those debt loads.

Canadian jobless rate dips
Canada's labour market continues to fire on many fronts, with a surprising 40,000 jobs created in December and a dip in the unemployment rate to 7.1 per cent, the lowest in four years.

Today's numbers from Statistics Canada mark the second consecutive month of exceptional jobs growth, after November's 59,000, all the more surprising given the recent weak pace of economic growth.

In another strong showing, all of the positions added last month were full-time, and all in the private sector as corporate Canada continued to pull its weight, The Globe and Mail's Bertrand Marotte reports.

The report is exceptionally bright in that most economists had expected that the labour market had petered out in December, with job creation more in the area of 5,000.

Over the course of the year, employment in Canada rose by 1.8 per cent, or 312,000 jobs, full time at that. Private sector employment rose by 2.2 per cent, and public sector jobs at 2.6 per cent. The ranks of the self-employed were little changed.

The labour market for the country's young people remains a sore spot, with absolutely no employment gains and a jobless rate now at 14.1 per cent, up slightly from November.

"Who’s hiring in Canada?" said chief economist Avery Shenfeld of CIBC World Markets.

"Just about everyone it seems, December showed broad-based employment gains that continued a trend of solid hiring. A near 40,000 rise in employment was much better than expected, and once again seems out of line with the weak GDP numbers seen in recent quarters," he said in a research note.

"The December gains included strong hiring in construction, a decent rise in manufacturing, and gains across all service groups except government and professional services."

Canada's labour market has now exhibited strength in four of the past five months, though, as deputy chief economist Douglas Porter of BMO Nesbitt Burns noted, total hours worked have not been as strong. That, he said, helps account for the "seeming divergence" between the hiring and the slowing economy.

"Still, the steady job gains hint that there is a bit more underlying vigour in the economy than many other reports would suggest, especially in Ontario - which is likely benefitting from the gradual U.S. turnaround," he said, referring to the fact that the country's most populous province gained almost 33,000 jobs in December.

There are questions, though, as to how much further the jobs market can go given the weak pace of the Canadian economy. That suggests, too, that the Bank of Canada still isn't going anywhere fast where interest rates are concerned. Having said that, many observers expect a pick-up in economic growth by mid-year.

"The economy's lacklustre performance is likely to curb any further decline in the unemployment rate in the near term," said assistant chief economist Dawn Desjardins of Royal Bank of Canada.

"However with the cloud on the global economic outlook lifting somewhat after the U.S. Congress agreed to maintain the Bush tax cuts for all but high-income households dampening the risk of another U.S. recession, the prospects for stronger growth in Canada in early 2013 have also risen. In the near term, the Bank of Canada will likely keep monetary conditions accommodative to ensure that growth picks up pace."

In the United States, some 155,000 jobs were created, and, according to the Labor Department, the jobless rate held steady at 7.8 per cent. It had earlier been pegged at 7.7 per cent in November, but was revised up today.

That 7.8 per cent is also a four-year low and, as The Globe and Mail's Kevin Carmichael writes, suggests the economy held up during the fierce political fight over fiscal policy.

"The 155,000 increase in U.S. non-farm payrolls in December is yet another month of job growth that is just about enough to keep pace with the underlying growth in the labour force, but not enough to drive the unemployment rate markedly lower," said Paul Ashworth of Capital Economics in Toronto.

"This has been the story throughout the recovery that began more than three years ago."

Remember that the Federal Reserve has pledged to hold its benchmark rate at its emergency low near zero until unemployment eases to 6.5 per cent.

CIBC rates HBC
CIBC World Markets has started covering Hudson’s Bay Co., with a rose report.

Analyst Perry Caicco gave HBC, which includes The Bay in Canada and Lord & Taylor in the United States, a rating of “sector outperformer” and a price target of $22.

“Both divisions, particularly the former, are in the midst of profound business transformations,” he said of The Bay.

“Costs have been reduced by developing shared back offices, while gross margins have been stabilized by better promotional planning,” Mr. Caicco added of the company, which recently returned to public markets.

“The primary goal is to improve sales productivity, which lags industry standards. New and expanded brands, and partnerships, such as Topshop, will be key. Despite the headwind of the Target openings in Canada and a sluggish Canadian consumer, we believe that HBC can produce $439-million of EBITDA and $1.41 of [earnings per share] in F2013. There is also untapped real estate value (suitable for REIT conversion) worth about $1.6-billion.”

Dempsey wins coffee business
McDreamy looks to be on his way to saving a small Seattle coffee chain.

According to The Associated Press today, actor Patrick Dempsey of TV’s Grey’s Anatomy, which is set in Seattle, told a news reporter that his company won an auction to buy Tully’s Coffee out of bankruptcy for $9.2-million (U.S.).

“Seattle has been very good to me over my career, and I am honoured to have the privilege to own Tully’s and work closely with the company’s employees,” Mr. Dempsey said.

Tully’s runs 47 coffee shops, and employs some 500 people.

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