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Briefing highlights

  • Condo rents spike in Toronto
  • Markets, loonie at a glance
  • What to expect from the Fed today
  • Facebook results in the spotlight
  • U.S.-China trade talks resume
  • McDonald’s reports strong performance
  • Boeing beats profit estimates
  • From today’s Globe and Mail

When it costs more, choose less

Whether you’re renting or buying, the cost of a condo is spiking in the Toronto area, where many can’t afford a house and now are scaling back on apartment size.

Rental costs moderated in the fourth quarter of 2018, compared to the third, but were up sharply from a year earlier, numbers from the Toronto Real Estate Board’s MLS system show.

The average rent for a bachelor rose 9 per cent, while that for a one-bedroom climbed 8.8 per cent and for a two-bedroom 5.5 per cent.

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The rental cost for a three-bedroom unit, however, dipped 4.5 per cent.

“The Greater Toronto Area has seen significant growth in its economy throughout 2018,” TREB president Garry Bhaura said in releasing the numbers this week.

“It has become a primary destination for companies in various industries who are attracting younger talent who have a desire to live in the region,” he added.

“This desirability has contributed to the continuation of historically low vacancy rates, strong competition between renters for available units and, as a result, very strong growth in average rents.”

The realtor group cited as encouraging that listings surged 16.6 per cent in the last three months of 2018 from a year earlier, but nonetheless urged further action from the province.

“While TREB certainly supports the recent rent control exemptions announced by the provincial government, this change does not benefit all investor-owners of condominium apartments, who have provided much of the new rental stock over the past decade,” said Jason Mercer, its director of market analysis.

“It is conceivable that rent controls could prompt some investors to consider selling their units and investing the proceeds in another asset class. This scenario could obviously compound an already problematic rental supply issue in the GTA.”

The trend cited by TREB matches the findings of Urbanation, which tracks Toronto’s condo market and which cited a more moderate pace in the second half of last year.

“Part of the reduced rate of growth can be attributed to a decline in the average size of a unit rented in Q4-2018 to a record low of 709 square feet, and a shift in leasing activity to less expensive markets outside the core,” Urbanation said in its recent report.

Nonetheless, it said, when measured by the cost of a square foot, rents surged in the fourth quarter at a record annual pace of 11.3 per cent to $3.26.

Over the course of 2018, it added, average rents rose 9.3 per cent, which eclipsed 2017’s 8.3 per cent and marked “the highest rate of increase since Urbanation began tracking condo rental transactions in 2010.”

Renters are “making adjustments” as costs rise.

For example, leases of lower-priced studio apartments, at an average $1,793 in 2018, surged 44 per cent. “Small one-bedroom units without dens,” at an average $2,024, rose 31 per cent.

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Renters were also moving to outlying areas such as North York, Etobicoke and Scarborough, where leases surged 40 per cent in the quarter from a year earlier and where average rental costs were 13-per-cent lower than in the downtown area.

Sales of condo units fell 9.9 per cent in the fourth quarter from a year earlier, according to TREB, while average prices rose 8.3 per cent to $558,728.

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Markets at a glance

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What to watch for today

The Federal Reserve takes centre stage with its afternoon rate decision, followed by chair Jerome Powell’s news conference.

"We will get to hear from chair Powell at a post-meeting press conference, as the Fed moves to holding a press conference at every meeting," said Toronto-Dominion Bank senior economist Leslie Preston.

"The Fed is widely expected to keep rates steady, consistent with recent speeches, which emphasized the ability to be patient to see how the economy fares in the wake of slower global growth and the deterioration in sentiment."

Fed chair Jerome Powell

Jim Young/Reuters

All eyes will be on Washington, too, as American and Chinese trade negotiators get back to the table. And, notably, China’s vice-premier Liu He is scheduled to join the talks.

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"Those talks have taken on an added urgency after the U.S. Commerce Secretary suggested [last] week that the two sides were still 'miles and miles' away from a deal," said Paul Ashworth, chief U.S. economist at Capital Economics.

There are also several earnings reports on tap, including the latest from Facebook Inc., which seems to be frequently caught up in controversy.

“This has raised concerns that the brand has become tarnished, a view that isn’t helped by CEO Mark Zuckerberg’s somewhat aloof demeanour when it comes to accounting for the company’s actions,” said CMC Markets chief analyst Michael Hewson.

"Its margins have also been shrinking, due to higher costs, which doesn’t help the top line, and the share price plunge since last summer has been painful for shareholders. Profits are expected to come in at US$2.19 a share."

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