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Business Briefing Home ownership dream alive but ‘impossible obstacle’ in Toronto, Vancouver, RBC warns

Briefing highlights

  • Housing affordability improves
  • But Vancouver, Toronto out of reach
  • Stocks, loonie, oil at a glance
  • Transat agrees to Air Canada deal
  • Xi to present Trump with terms
  • Required Reading

Affordability improves

Affordability may be improving but home ownership in Toronto and Vancouver is still an “impossible obstacle” for most potential buyers, Royal Bank of Canada warns.

Indeed, “affordability is still dreadful in Vancouver, Toronto and Victoria,” RBC senior economist Robert Hogue said in a study being released today.

“Minor signs of strain are apparent in Montreal and Ottawa, but conditions are normal in all other markets we track.”

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RBC’s affordability measure improved in the first three months of the year for the second straight quarter as prices eased modestly in Western and parts of Atlantic Canada, and incomes rose.

This, of course, is what B.C., Ontario and federal policy makers had aimed for with tax and other measures, notably mortgage-qualification stress tests, designed to cool frothy markets and head off severe debt troubles.

Be that as it may, Vancouver and Toronto are still out of reach.

“Only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in both the Toronto area and Victoria,” Mr. Hogue said.

In Vancouver, Mr. Hogue’s measure shows, homeowners need 82 per cent of their income to cover their costs. In Toronto, that’s 66 per cent.

It’s much lower elsewhere: 39.7 for Calgary, 34.3 for Edmonton, 41.1 for Ottawa and 44.3 for Montreal. Nationally, it’s 51.4 per cent.

When you strip out Toronto, Vancouver and Victoria, the dream of owning a home is still “alive” in most markets, Mr. Hogue said.

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And he projected it would get better, still.

“We see more room for ownership costs to fall in the near term,” he said.

“Interest rates are no longer set to rise and property values are still under downward pressure in Western Canada.”

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Markets at a glance

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Transat agrees to Air Canada deal

Airline and travel company Transat AT Inc. has agreed to be bought by Air Canada, in a $520-million deal between Canada’s largest and third-biggest carriers.

The all-cash takeover worth $13 for each Transat share comes after 30 days of exclusive talks between the two airlines, and is expected to be completed by 2020, the companies said in a joint statement on Thursday morning.

The deal requires approval by two-thirds of Transat investors, as well as court and government approvals.

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The news follows public criticism from large Transat shareholders that the initial proposed price of $13 a share was too low and ill-timed.

The price announced on Thursday is unchanged from the first proposal announced by the two airlines.

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Ticker

Xi to present Trump with terms

From Reuters: Chinese President Xi Jinping plans to present U.S. President Donald Trump with a set of terms the United States should meet before Beijing is ready to settle their trade dispute, the Wall Street Journal reported. Beijing is insisting that the U.S. remove its ban on the sale of U.S. technology to Chinese telecommunications giant Huawei Technologies Co., the Journal said, citing Chinese officials with knowledge of the plan.

Ford cutting jobs

From Reuters: Ford said it will have cut 12,000 jobs in Europe by the end of next year to try to return the business to profit, part of a wave of cost reductions in an auto industry facing stagnant demand and record-level investments to build low emission cars.

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Oil slips

From Reuters: Brent crude slid to around US$66 a barrel on Thursday, pressured by concerns over whether the G20 summit will produce a breakthrough on trade and perceptions that supply is ample despite the prospect of continued OPEC curbs.

Required Reading

Ottawa seeks police probe

Ottawa has called in police to investigate a falsified export certificate after China banned imports of Canadian meat over the discovery of a banned substance in frozen pork. Ann Hui and Nathan VanderKlippe report.

Scotiabank sells units

Bank of Nova Scotia is unloading its operations in Puerto Rico and the U.S. Virgin Islands at a loss as the bank continues to shrink its sprawling global footprint, Tim Kiladze writes.

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Little comfort for investors

If investors are concerned about Bombardier Inc.’s high level of debt, David Berman writes, they won’t take much comfort from the company’s deal to sell its money-losing regional jet program: Bombardier’s balance sheet will improve only by a smidgen, and at a time when economic clouds are gathering.

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