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Briefing highlights

  • Housing: Buyers versus sellers
  • Stocks, loonie, oil at a glance
  • Jason Kenney’s issues
  • Inflation rate spikes in March
  • Trade gap narrows in February
  • China growth at 6.4 per cent
  • Morgan Stanley profit slips
  • Required Reading

Location, location, location

You can see where buyers or sellers hold the upper hand by scouring the latest report on Canadian home sales and prices.

This week’s report from the Canadian Real Estate Association generally showed the broader market subdued after the engineered slowdown by the B.C. and Ontario governments and in the wake of federal mortgage-qualification stress tests now more than a year old.

The national market picked up somewhat in March, from February’s depressed volumes, but remained well below year-earlier levels. But Canada is a series of regional markets with extreme differences.

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At the same time, the MLS home price index fell 0.5 per cent in March from a year earlier, the steepest decline in almost a decade.

Here’s how Royal Bank of Canada senior economist Robert Hogue sees things:

Where buyers rule

“Buyers hold a strong hand in several of Canada’s large markets at this stage, while policy makers will view lower prices as (good) signs of improving affordability that require no further intervention,” Mr. Hogue said in a report.

Those cities include Vancouver, Calgary and Edmonton, he added in an interview.

“If it wasn’t already apparent, March data provided clear evidence that some of Canada’s largest western markets are in a pretty deep slump,” Mr. Hogue said.

“Home resales (seasonally adjusted) fell to a 10-year low in Vancouver and near eight-year lows in Calgary and Edmonton.”

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Prices, too, are falling, with the MLS home price index sinking more than 7.5 per cent in Vancouver, 5 per cent in Calgary and almost 4.5 per cent in Edmonton.

Mr. Hogue expects no rebound in those three cities any time soon.

“Policy actions and extremely poor affordability will continue to weigh on Vancouver prices in the near term,” he said.

“The story in Calgary and Edmonton is one of heightened economic uncertainty.”

Where sellers rule

Sellers are “still in charge” in Ottawa, Montreal and Halifax, Mr. Hogue said in the report, adding that “Canada’s ‘hotter’ markets remained quite vibrant in March.”

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Indeed, the MLS home price index climbed 7.6 per cent in Ottawa from a year earlier for the best showing in Canada, while Montreal weighed in at 6.3 per cent. Because CREA doesn’t cite an index for Halifax, Mr. Hogue look at the average price, which shot up 12.7 per cent.

“Importantly, demand-supply conditions continue to be very tight in Ottawa, Montreal, as well as Halifax,” he said.

“The sales-to-new-listings ratio far exceeded 0.70 in all three markets, which suggests that sellers hold significant sway over prices at this stage.”

And then there’s Toronto

The Toronto market, Mr. Hogue said, is “really spotty,” with higher end properties sitting on the market for longer.

Sales rose 1.8 per cent in March but you’ve got to remember they had tumbled 9 per cent a month earlier, he noted.

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“Yet the rebound potentially could have been stronger had it not been for a sixth straight monthly decline in new listings – which constrained options for buyers,” Mr. Hogue said.

“The fact that the MLS HPI accelerated to 2.6 per cent from 2.3 per cent in February suggests that buyers quite possibly had to bid more aggressively in the face of limited supply.”

What comes next is key, of course, given that we’re into the spring market.

Mr. Hogue, for one, expects a “quiet” spring season.

“The absence of a snapback in March activity clearly points to the mortgage stress test, market-cooling measures in B.C., economic uncertainty in Alberta and stretched affordability as continuing to exert significant restraint on home-buyer demand this winter in Canada,” Mr. Hogue said.

“In the coming months, we’ll watch closely the extent to which recent declines in mortgage rates ease the stress test for some buyers and whether first-time home buyers decide to put their plans on hold until more details on the federal government’s First-Time Home Buyer Incentive become available,” he added.

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Bank of Montreal chief economist Douglas Porter noted some “crucial caveats” when interpreting the latest numbers, among them the stark regional differences.

“Second, fundamentals actually look to become a bit more supportive in the year ahead, with the policy tightening likely having run its course,” Mr. Porter said in a report.

“And, finally, the weather can’t get any worse … right? We continue to contend that prices, sales and starts are likely to hold broadly stable nationally in 2019 amid the many moving parts for the market.”

Just as a little aside here, BMO senior economist Sal Guatieri, Mr. Porter’s colleague, noted a variety of factors that played a role in the market slump and the pullback in mortgage borrowing, including higher rates.

The “policy medicine,” he argued, was the proper dosage.

“Before we all start rushing to reverse the policy medicine, let us at least acknowledge that the changes did what they set out to do: 1) cool the speculative fever that once gripped the Vancouver and Toronto housing markets, and 2) prod households to borrow at more sustainable rates in line with incomes. Long term, the patient is likely healthier than before.”

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Are you a homeowner worried about debt? If you would like to share your story with The Globe and Mail, contact reporter Rachelle Younglai at

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Markets at a glance

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Kenney’s issues

The Globe and Mail’s Shawn McCarthy writes that oil industry executives are counting on Jason Kenney to be their champion in taking on the federal government and the industry’s critics. But the Alberta premier-elect faces a divided industry on some key issues in his home province.

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Inflation spikes

Inflation spikes

Canada’s annual inflation rate spiked in March to 1.9 per cent, up from February’s 1.5 per cent.

If you strip out energy, consumer prices rose 2.2 per cent, Statistics Canada said.

On a monthly basis, consumer prices rose 0.7 per cent in March from February as gas pump prices spiked.

The annual rise in inflation is also “largely an energy story, though, as the decline in gasoline prices late last year (driven by lower global oil prices) continues to be reversed,” said RBC senior economist Josh Nye.

“Rising rent and mortgage interest costs are also serving to boost headline inflation.”

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Trade gap narrows

Canada’s trade deficit narrowed slightly in February as a drop in imports outpaced the decline in exports.

Imports fell 1.6 per cent, Statistics Canada said, while exports fell 1.3 per cent, narrowing the trade shortfall to $2.9-billion from January’s $3.1-billion.

The drop in imports was led by gold, while the fall in exports was more broadly based.

Statistics Canada revised the January numbers because of revisions to oil exports, so what had originally been a trade gap of $4.3-billion eased to $3.1-billion.

But the narrower shortfall in February wasn’t “a good story, since it came on weaker exports and imports, with exports down 1.3 per cent nominally and 4.1 per cent in real terms, on broad-based weakness,” said CIBC World Markets chief economist Avery Shenfeld.

“Alongside yesterday’s factory data, we’re off to a weak start for February GDP components.”

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China growth at 6.4 per cent

Beijing’s stimulus measures appear to be doing the trick.

China’s economy expanded in the first quarter by 6.4 per cent from a year earlier, according to official numbers, a touch better than analysts had expected.

That, said Capital Economics, was largely because of a stronger March, buoyed by industrial output.

“Admittedly, the latest surge in industrial production is hard to take at face value and is likely to be partially reversed in the coming months,” said Julian Evans-Pritchard, the group’s senior China economist.

“And some downside risks to broader growth remain. But the big picture is that policy stimulus is clearly working and should help to shore up China’s economy in the coming quarters.”

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Morgan Stanley profit slips

From Reuters: Morgan Stanley profit attributable to common shareholders fell to US$2.34 billion, or US$1.39 per share, in the first quarter, from US$2.58 billion, or US$1.45 per share, a year ago.

Metro profit rises

Metro Inc. posted a stronger second-quarter profit, buoyed by its takeover of Jean Coutu.

EU lists imports

From Reuters: The European Commission published a list of US$20-billion of U.S. imports it could hit with tariffs in a transatlantic aircraft subsidy dispute. The list, now subject to public consultation, includes fish, tobacco, suitcases, planes, helicopters, tractors and video game consoles.

Required Reading

Ontario to tighten rules

Ontario plans tighter regulations for financial planners and advisers by moving against people who shouldn’t be using those monikers, Clare O’Hara reports.

Secret weapon

Investment writer John Heinzl looks at portfolio manager Srikanth Iyer and his secret weapon: Big data.

Rebuilding Notre-Dame

From The Associated Press: Two of France’s richest men, long locked in a very public rivalry, are once again pitted against each other – this time over flashy and competing donations to rebuild Notre-Dame.

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