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Canadian house prices slip for fifth month in a row

These are stories Report on Business is following Wednesday, Feb. 20, 2013.

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Home prices slip
Home prices in Canada slipped again in January from December, marking the fifth consecutive month of easing.

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Prices dipped 0.3 per cent on the month, and climbed 2.7 per cent from a year earlier, but that, according to the Teranet-National Bank house price index, was the smallest annual increase since November of 2009.

Of the six major centres measured, prices fell in four from December. But, aside from Vancouver, all registered year-over-year increases.

In Vancouver, prices fell 0.81 per cent in January from December, and were down 2.54 per cent from a year earlier.

Prices in Calgary slipped 0.1 per cent on the month, but rose 4.29 per cent on the year.

Toronto, which with Vancouver has been the focus of Canada's cooling real estate market, saw prices dip 0.37 per cent between December and January, but register a gain of 5.31 per cent from a year earlier.

Montreal also suffered a monthly decline, of 0.18 per cent, though prices were up 2.6 per cent from January 2012.

Only Halifax and the Ottawa-Gatineau region saw increases in both the month and the year, the former by 1.69 per cent and 6.61 per cent, the latter by 0.47 per cent and 2.72 per cent.

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The Teranet-National Bank measure, different from the monthly report from the Canadian Real Estate Association, also studies 12 cities. On that count, January marked the 14 consecutive month of slowing growth in prices.

B.C.'s triple-A rating 'wobbles' after budget
Economists are questioning the outlook for British Columbia's triple-A credit rating this morning after a fiscal program that may never see the light of day.

The province is moving in the right direction, observers say, but May's election could derail, or at the very least change, the pre-campaign measures unveiled yesterday by Liberal Finance Minister Mike de Jong. At this point, the Liberals lag in the polls.

Mr. de Jong's budget calls for tax increases, asset sales and spending restraint to achieve a surplus of $197-million in the 2013-14 fiscal year from a projected deficit of $1.2-billion this year.

The government's credit rating was already under threat. The province boasts a triple-A from both Standard & Poor's and Moody's, though the latter just recently slapped on a "negative" outlook given mounting debt and weaker economic forecasts.

"Given Budget 2013's projection of a growing surplus beginning in FY 13/14 (as targeted) and stabilization in relative debt levels the year after, it would appear that the province is taking the requisite initial steps to see its stable outlook restored," said senior economists Michael Gregory and Robert Kavcic of BMO Nesbitt Burns, noting the debt is "stabilizing" and that B.C. now boasts one of the top ratings among the provinces.

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"However, with a provincial election looming, this fiscal plan is unlikely to be passed by the legislature and any post-election plan could look materially different from the one tabled today," they said in a report on the budget, which included a section on how the province's rating "wobbles a little bit" given the budget and the outlook.

"As such, uncertainty about the 'resolve to achieve fiscal redress' and the ability 'to stabilize and then reverse the accumulation in debt' lingers, and the wee wobble persists," they added, referring to the Moody's report.

What's interesting is how the BMO economists would otherwise have called it a "Mission Accomplished" budget, but for the fact that it's a pre-election plan.

Energy prices: How the West was lost
While B.C. was unveiling its budget, Alberta was releasing a fiscal update made bleaker by the outlook for oil prices.

In the first three quarters of the current fiscal year, Alberta's deficit was some $500-million above what was forecast, and the government is now looking at a full-year gap of $3.5-billion to $4-billion, again beyond what was expected.

"Resource revenues have been the key downside factor through the first three quarters, coming in $2.4-billion below the budget plan," said BMO's Mr. Kavcic.

He noted that Alberta now projects the average price of West Texas Intermediate, the U.S. benchmark, at $91.82 a barrel in this fiscal year, down from an earlier projection of $99.25.

A difference of $10, he added, eats into Alberta's revenues to the tune of $2.2-billion.

Not only that, but the update projects that the annoying spread between WTI and Alberta crude will be $21.20, compared to the earlier budget forecast of a discount of below $16.

"With the current fiscal year's finances under duress, Alberta's FY 13/14 budget (March 7) will be one of the most hotly anticipated in the country," Mr. Kavcic said.

Savers, fear not
Savers looking for high interest options now that Royal Bank of Canada is shutting down the high-rate accounts it acquired in the purchase of Ally can switch to Bank of Nova Scotia-owned ING Bank with no fear, Streetwise columnist Boyd Erman writes today.

ING quickly sent out tweets trying to lure Ally grumpy customers with a special offer. Anyone taking ING up on the offer should have no worries that ING will similarly end its high rate business now that Scotia is in charge.

BHP chief downplays takeovers
The new chief executive of mining giant BHP Billiton PLC says mergers and acquisitions will not be a major part of his strategy, The Globe and Mail's Paul Waldie reports.

Andrew Mackenzie, who is taking over as chief executive officer from Marius Kloppers, said during a media conference call today that his main priority will be to "run our very impressive ore bodies extremely well."

He added that while BHP won't completely rule out mergers, they are "not central to my strategy." Instead, he plans to concentrate on cutting costs and improving the company's "capital discipline."

BHP announced late Tuesday that Mr. Kloppers will resign in May after a near 20-year career at the miner including nearly six as CEO.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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