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Briefing highlights

  • What housing market rankings show
  • Stocks, Canadian dollar, oil at a glance
  • Rogers reports flat profit, trims outlook
  • Caterpillar posts lower profit, cuts outlook
  • Boeing profit slumps
  • What analysts are saying today
  • Required Reading

New rankings

A new ranking of global housing markets shows just how much the fortunes of cites like Ottawa, Montreal and Vancouver have changed.

As in, the hot markets of Ottawa and Montreal now stand about 100 spots ahead of Vancouver, which once sat near the top of such rankings.

These recent findings from global real estate consulting group Knight Frank show some improvement in affordability in Vancouver, though the city is still out of reach for many buyers. They also show how home owners in some other cities, including Ottawa and Montreal, are getting richer.

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The ranking is determined by what percentage each market’s housing prices have risen – or declined – over the past 12 months.

The Knight Frank study for the second quarter put Ottawa-Gatineau as the top Canadian region, and No. 37 in its global ranking, with a rise in prices of 6.3 per cent from a year earlier.

Montreal ranked No. 45 of the 150 cities measured, with price growth of 5.4 per cent.

Up next were Hamilton, at No. 48 and 4.8 per cent, Toronto, at No. 83 and 2.8 per cent, Halifax, at No. 87 and 2.7 per cent, and Quebec City, at No. 102 and 1.5 per cent.

Then came the losers, including Winnipeg at No. 123 with a drop in prices of 0.4 per cent, Edmonton, at No. 134 with a price loss of 2.6 per cent, Calgary, at No. 137 and a decline in prices of 3.8 per cent, and the laggard Vancouver, at No. 142 and a 4.9-per-cent price drop.

“Market fundamentals vary from city to city, whether due to demand (local economic performance, demographic demand, etc.) or due to supply (the shrinking or expanding of new supply and inventories),” Knight Frank partner Kate Everett-Allen said of the Canadian markets.

“These factors, together with the introduction of property market regulations in a number of Canada’s tier one cities, explain the mixed performance in the year to June, 2019,” she added.

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“Canada is not unique, however, several Western economies are seeing a divergence in their cities’ performance.”

Canadian cities are in the midst of a rebound from B.C. and Ontario measures meant to cool the Vancouver and Toronto markets, and federal mortgage-qualification stress tests that came into effect at the beginning of 2018.

The top five regions in the Knight Frank ranking included China’s Xi’an at No. 1 and Wuhan at No. 5, with price gains of between 14.6 and 25.1 per cent. Sandwiched between them were Budapest, Hyderabad and Ahmedabad, with increases between 15.3 and 24.2 per cent.

Near the bottom with Vancouver were two Australian cities, Melbourne and Sydney, in the No. 148 and 150 spots, respectively, each with losses of more than 9 per cent.

The mixed performance of Canadian cities in the global ranking comes as the new Liberal minority government and New Democratic Party may push housing affordability measures, Bank of Montreal economists said.

“Whether the policies tilt more toward boosting demand over supply will determine how successful they are in actually achieving this goal,” BMO chief economist Douglas Porter and senior economist Robert Kavcic said in a post-election report.

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“The NDP proposal to ‘create’ a half million affordable units over a decade (50,000 per year) would boost annual housing starts by about one quarter, so it’s a material pledge,” they added.

“But the question is: How can that be accomplished, and would it involve subsidizing builders or buyers? If the latter, the boost to demand could neutralize the restraining effect on prices of new supply.”

Mr. Porter and Mr. Kavcic ran through several Liberal and NDP pledges, including a promise by the former to raise the threshold on the first-time buyer incentive in the costly centres of Vancouver, Victoria and Toronto, while taxing vacant homes owned by foreigners.

Besides those 500,000 homes, the NDP wants a raft of changes, including a 30-year amortization for first-time buyers and a hefty tax on foreigners buying local real estate.

“All told, there is enough overlap here to roll out further meaningful measures on the housing front,” Mr. Porter and Mr. Kavcic said.

Toronto-Dominion Bank senior economist Brian DePratto has a different scenario.

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“Housing affordability remains a major concern for Canadians in the Toronto and Vancouver markets (among others),” Mr. DePratto said.

“However, the measures in the Liberal platform are only likely to add further fuel to prices at a time when the market has already been gaining strength,” he added.

“The federal government is by and large limited to demand-related measures. Some parts of the Liberal platform, such as a 1-per-cent annual foreign buyer vacancy/speculation tax (echoing B.C.’s measures on this front), may help to moderate demand, but others appear set to stoke it.”

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Markets at a glance

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Rogers posts flat profit

Rogers Communications Inc. posted a relatively flat third-quarter profit, boasting of 1 million wireless subscribers to its “Rogers Infinite” data plans.

Rogers reported quarterly profit of $593-million, or $1.14 a share, diluted, compared to $694-million or $1.15 a year earlier.

On an adjusted basis, earnings per share dipped to $1.19 from $1.21.

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"Last quarter, we led the market by introducing unlimited data and I am pleased to share that 1 million customers have already signed up for these very popular plans with no overage fees," chief executive officer Joe Natale said in releasing the results.

"Customer adoption is three times higher than originally expected.”

Rogers also lowered its revenue outlook, now projecting a decrease of 1 per cent to an increase of 1 per cent. It also trimmed its forecast for adjusted EBITDA to an increase of 3 to 5 per cent.

“The downward adjustment primarily reflects faster-than-expected adoption of our new Rogers Infinite unlimited data plans and the related reduction in overage revenue, lower wireless equipment revenue resulting from the highly competitive environment, and certain efficiencies recognized this year on capital expenditures,” the company said.

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What analysts are saying today

“Caterpillar delivered sour results that saw a big miss with earnings with their outlook getting slashed due to global economic uncertainty. This was the first drop in quarterly earnings for Caterpillar in almost three years. Mining equipment sales were down 12 per cent and sales in the Asia Pacific regions saw significant declines due to softening demand from China. The trade war has weighed on Caterpillar and the cautious commentary mirrors Texas Instruments warning from yesterday.”

— Edward Moya, senior market analyst, Oanda

“It was one step forward and one step backwards for the Brexit process as yesterday MPs backed Prime Minister Johnson’s deal, but then rejected the move to approve the plans within three days. It seems as if an extension is likely, which is why sentiment in the markets this morning is subdued. The slight pullback in sterling is assisting the FTSE 100, as internationally focused firms tend to benefit from a weaker pound.” David Madden, analyst, CMC Markets

“Looking at earnings season thus far, we have seen a rather predictable trend of outperformance driven by low expectations rather than improved earnings. The pattern of stocks with lower earnings that beat market estimates is likely to continue as we move through earnings season.” Joshua Mahony, senior market analyst, IG

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“Microsoft will likely restate the strong demand for its cloud portfolio amid SAP’s announcement of a three-year cloud competing deal aiming to facilitate its customers’ move to the Microsoft’s cloud. Meanwhile, a one-off tax payment should temper the rise in [earnings per share when it reports results today]. Ipek Ozkardeskaya, senior market analyst, London Capital Group


Caterpillar posts lower profit, trims outlook

From Reuters: Caterpillar Inc. reported a 13.5-per-cent fall in quarterly profit, hit by weak demand in its construction and resources units, and cut its 2019 profit forecast. Profit attributable to common stockholders fell to US$1.49-billion, or US$2.66 a share, in the third-quarter ended Sept. 30, from US$1.73-billion, or US$2.88, a year earlier. Total sales and revenue fell 5.6 per cent to US$12.76-billion. The world’s biggest construction and mining equipment maker cut its 2019 earnings expectation to US$10.90 to US$11.40 per share, compared with its previous estimate of US$12.06 to US$13.06.

Boeing profit slumps

From Reuters: Boeing Co. reported a 53-per-cent drop in quarterly profit on Wednesday as the world’s largest plane maker was hurt by the grounding of its best-selling 737 Max jets. Core operating earnings fell to US$895-million or US$1.45 a share, from US$1.89-billion or US$3.58 a year earlier.

Google sees quantum breakthrough

From The Associated Press: Google said it has achieved a breakthrough in quantum computing research, saying an experimental quantum processor has completed a calculation in just a few minutes that would take a traditional supercomputer thousands of years. The findings, published in the scientific journal Nature, show that “quantum speedup is achievable in a real-world system and is not precluded by any hidden physical laws,” the researchers wrote.

Why Aramco IPO was delayed

From Reuters: Oil giant Saudi Aramco’s much-vaunted stock market listing was delayed after deal advisers said they need more time to lock in cornerstone investors, three sources with direct knowledge of the matter told Reuters.

Heineken updates profit outlook

From Reuters: Heineken, the world’s second-largest brewer, forecast operating profit this year would be at the lower end of its previous guidance after an unexpected dip in third-quarter sales in the Americas partly offset strong growth in Asia. The Dutch maker of Heineken, Europe’s top-selling lager, as well as Tiger, Sol and Strongbow cider, said operating profit before one-offs would rise by about 4 per cent on a like-for-like basis in 2019.

Required Reading

Oil patch anxiety

The election of a Liberal minority under Justin Trudeau has deepened longstanding anxieties within Alberta’s oil patch, amid fears that a weakened government will need to lean heavily on parties that are hostile to the energy industry. Justin Giovannetti, Kelly Cryderman and Emma Graney report.

Foreign investors bail

Foreign investors are bailing on Canada at a pace typically reserved for times of global economic distress, Tim Shufelt writes. Inflows into Canadian stocks from international investors have declined by about 75 per cent over the past year, as the appetite for resource investments has waned amid heightened economic anxieties.

Could it happen again?

A major cause of the last two downturns in housing prices was an oversupply of properties for sale. Could it happen again? Rob Carrick examines the issue.

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