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Briefing highlights

  • The hit to Toronto’s housing market
  • Fiat, Renault merger talks collapses
  • Stocks, loonie, oil at a glance
  • Canada’s trade gap narrows sharply
  • U.S. shortfall with China widens
  • Ford to close Wales engine plant
  • ECB to hold rates steady

Measuring the impact

Here’s another way of looking at the impact of government measures on Toronto’s housing market, which shows just how severe the hit has been.

We tend to focus on sales and price levels, but a look at the dollar value of all home sale transactions puts it in a starker light.

This is not to comment on the policies of the federal and Ontario governments, only to measure the fallout.

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To recap, the Office of the Superintendent of Financial Institutions, or OSFI, the federal bank regulator, brought in new mortgage-qualification stress tests at the beginning of 2018 to head off a credit bubble. Ontario had also moved, via tax and other measures, to cool the frothy Toronto area housing market.

And by many accounts, they succeeded in bringing about a soft landing.

Here’s what the numbers show in terms of impact:

The dollar value of all home sales in the Toronto area in the first five months of 2017, before the stress tests, was $41.4-billion.

That dollar volume, which reflects changes in both sales and prices, tumbled sharply in the same five-month period of 2018, amid the new guidelines, to $25.6-billion.

Total dollar value then picked up somewhat this year, according to numbers released Wednesday by the Toronto Real Estate Board, to $28.3-billion.

That, as The Globe and Mail’s Janet McFarland reports, comes amid a strong April and May. Indeed, sales surged 18.9 per cent last month from a year earlier.

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Monthly numbers also tell an interesting tale, particularly because the Toronto housing market was so much stronger in May.

The value of all transactions in May, 2017, was $8.8-billion. That declined to $6.8-billion in May, 2018, though perked up last month to $8.4-billion.

This has, of course, rippled through the economy, which the Toronto real estate group has pointed out.

“The fact that we have seen both sales and selling prices off the record May peak in 2016 explains why dollar volume is down,” said Jason Mercer, the group’s chief market analyst.

Total dollar volume for that month, for the record, was just shy of $10-billion.

“This has implications for the broader economy over and above dollars changing hands in real estate transactions,” Mr. Mercer said.

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Mr. Mercer cited a recent study, conducted for TREB, that suggested each home sale accounted for about $68,000 in spinoff spending.

“Demand for ownership housing, while edging up over the past two months, is still below average as home buyers have had to come to terms with the largely psychological impacts of the foreign buyers tax contained in the Ontario Fair Housing Plan and subsequently the real dollars and cents impact of the stricter mortgage qualification standard mandated by OSFI,” Mr. Mercer said.

“The end result is that housing is not having the same impact on the economy as it did three or four years ago,” he added.

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Merger collapses

The merger between Fiat Chrysler Automobiles and France’s Renault, a deal that would have created the third-largest car maker, has collapsed, European bureau chief Eric Reguly reports.

The merger, worth about €33-billion, was thought to have been on verge of success. But to the surprise of Renault and the French government, which owns 15 per cent of the car maker, FCA walked away from the deal and placed the blame firmly on the French state.

“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” FCA said in a statement.

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Markets at a glance

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Trade gap narrows

Canada’s trade deficit narrowed sharply in April as gold drove an increase in exports while imports declined.

Exports climbed 1.3 per cent while imports slipped 1.4 per cent, largely because of the aircraft industry, narrowing the trade gap to $966-million from $2.3-billion in March, Statistics Canada said.

That marks the lowest shortfall since October, 2018, the agency added.

“The good news on the Canadian economy keeps rolling in,” said CIBC World Markets senior economist Royce Mendes, adding the trade numbers suggest the second quarter “is off to a healthy start.”

Stripping out the impact of prices, exports rose 2 per cent by volume, and imports fell by 1.9 per cent.

“Statistics Canada reports that gold shipments were to banking centres in Hong Kong and the United Kingdom, presumably as uncertainty in markets has driven demand for the commodity,” said CIBC’s Mr. Mendes.

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“Agricultural exports also showed resilience, with an increase in wheat exports more than offsetting the decline in canola tied to tensions with China.”

Canada’s trade surplus with the U.S. dipped to $4.2-billion in April from $4.5-billion, while its deficit with the rest of the world eased to $5.2-billion from March’s record $6.8-billion.

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Ford to close Wales engine plant

From Reuters: Ford said it would close its plant in Bridgend, south Wales, next year because of falling demand for some if its engines, putting 1,700 jobs at risk in a further blow to Britain’s once booming car industry.

ECB to hold rates

From Reuters: The European Central Bank pushed back the timing of its first post-crisis interest rate hike again on Thursday and said it would continue paying banks for lending in its latest effort to revive a slowing euro zone economy. Responding to rapidly deteriorating inflation expectations, the ECB pledged to keep its interest rates at their current, record-low level at least through the first half of 2020, instead of the end of this year as it had said only in March.

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Google to buy Looker

From Reuters: Google said it would buy Looker, a big-data analytics company, for US$2.6-billion in cash, in the first major acquisition for new Google Cloud chief executive Thomas Kurian.

Tims eyes Thailand

From The Canadian Press: Tim Hortons says it will open coffee shops in Thailand as its parent company pushes for fast global growth. It said it signed an agreement with WeEat Co. to develop the brand in the Southeast Asian country.

Watch impact, Carney tells rich countries

From Reuters: Policy makers in rich economies such as the United States need to take more account of the impact that their policies have on emerging economies, Bank of England Governor Mark Carney told a meeting in Tokyo.

Required Reading

Ottawa announces auction plans

Ottawa has announced plans for upcoming auctions of wireless airwaves, detailing how it will take back some spectrum from companies currently using it to provide rural internet so it can be deployed in 5G networks. Telecom writer Christine Dobby reports.

Michigan presses Enbridge

Enbridge Inc. has been warned by the state of Michigan to set a date for shutting down a major crude oil pipeline, or face legal action, Megan Devlin writes.

Carrick on cars

And this, from personal finance columnist Rob Carrick: Buying new cars is bad personal finance, but I’m okay with that.

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