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business briefing

Briefing highlights

  • ‘Spring fling’ for housing
  • Markets at a glance
  • Starlight, KingSett to buy Northview
  • Morgan Stanley to buy E*Trade
  • China cuts key rate
  • What to watch for today

‘Spring fling’

Expect a "spring fling" that could fuel Toronto's housing affordability crisis.

Bank of Montreal senior economist Robert Kavcic projected this fling could be Canada-wide, though Toronto is the city to to watch given its history with inflated home prices and the rebound in the market.

And, of course, Ottawa's changes to the mortgage-qualification stress test this week will feed into that.

"The biggest markets are starting to percolate again, and could be setting themselves up for a very strong spring selling season," Mr. Kavcic said, citing lower mortgage rates and "heated" demand.

On top of that is "limited" supply as listings tumble, notably in the Toronto region.

“We could very well be in a situation where potential sellers are sensing a firming market and holding off listing until the spring – if we get a listing bump, that could help contain price growth,” Mr. Kavcic said in a report titled “spring fling coming.”

"But, if not, the recent acceleration in prices might only ramp up further."

Royal Bank of Canada senior economist Robert Hogue agreed on the issue of supply and demand.

“More supply of new and existing homes is needed now, and will continue to be required in the period ahead to meet this quickly rising demand,” he said.

"Otherwise, housing costs risk spiking in some of Canada’s largest markets, threatening affordability."

Toronto-Dominion Bank economist Rishi Sondhi also projected strong gains in Canadian home prices.

"A lack of available supply will have a significant impact on markets, both through restraining sales growth and upwardly pressuring prices," he said.

"Indeed, Canadian home prices are likely to expand at their fastest annual pace since 2016 this year."

And here's some interesting research from BMO economist Erik Johnson: Families are leaving Toronto as home prices climb.

"Though out-migration in Toronto has stabilized somewhat at around 48,000 in the past three years, that’s still three times the outflow of the mid-00s," Mr. Johnson said.

"Notably, many young families with children are fleeing the region. The near majority (47.5 per cent in 2019) of the out-migration is comprised of children under 15 and persons aged 25 to 39."

This could speed up, Mr. Johnson said.

“Current price trends will only exacerbate the affordability crisis for new households in Toronto – and the flight of potential buyers out of the [Greater Toronto Area].”

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Markets at a glance

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Starlight, KingSett to buy Northview

Starlight Investments and KingSett Capital announced plans to buy Northview Apartment for $4.8-billion, in an all-cash deal that would give the two private Canadian real estate companies control over thousands of residential rental units across the country, The Globe and Mail’s Rachelle Younglai reports.

The private Canadian companies are offering $36.25 for every unit of Northview Apartment Real Estate Investment Trust, they said in a press release early on Thursday. That is a 12-per-cent premium over the trust’s closing price on Wednesday.

The proposal gives unitholders the option of keeping a stake in Northview’s portfolio of apartments and commercial property, by offering them units in a publicly listed fund that will be created if the deal is approved.

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Morgan Stanley to buy E*Trade

From Reuters:

Morgan Stanley is buying discount brokerage E*Trade Financial Corp. in an all-stock deal worth about US$13-billion, the biggest deal by a Wall Street bank since the financial crisis.

The deal will help Morgan Stanley boost its wealth management unit, a business that chief executive officer James Gorman has been trying to grow to help it ride out weak periods for trading and investment banking.

E*Trade has over 5.2 million client accounts with over US$360-billion of retail client assets, adding to Morgan Stanley’s existing 3 million client relationships and US$2.7-trillion of client assets.

E*Trade shareholders will receive 1.0432 Morgan Stanley shares for each share as part of the deal.

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China cuts key rate

From Reuters:

China cut the benchmark lending rate on Thursday, as widely expected, as the authorities move to lower financing costs for businesses and support an economy jolted by a severe coronavirus outbreak.

The epidemic has upended global supply chains and caused widespread disruption to businesses and factory activity in China, prompting authorities to deliver a steady stream of policy measures over recent weeks to cushion the blow to growth.

The one-year loan prime rate, the new benchmark lending gauge introduced in August, was lowered by 10 basis points to 4.05 per cent from 4.15 per cent at the previous monthly fixing.

The five-year rate was lowered by 5 basis points to 4.75 per cent from 4.80 per cent.

What to watch for today

Watch for quarterly results from Cott Corp., Gildan Activewear Inc. and Loblaw Cos Ltd.