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Business Briefing Vancouver, Toronto home prices could ‘end badly,’ BMO says. (But not yet)

About those home prices

BMO Nesbitt Burns looks today at what it would take to halt the rapid advance of the Vancouver and Toronto housing markets.

And of the five potential factors, senior economist Robert Kavcic sees not a single one on the horizon.

“Odds are that if this kind of price growth (especially Vancouver) continues, it will end badly - but that still looks to be sometime down the road,” he said in a research note.

Home prices in Vancouver and Toronto show no signs of slowing down, sparking concern about their frothy behaviour, though no Canadian economist is calling for a meltdown.

Both the federal and B.C. governments have moved to deal with the run-up in mortgage debt with some measures, though nothing like past moves at the Ottawa level.

In the wake of new statistics this week from real estate boards in Vancouver and Toronto, Mr. Kavcic says BMO has been asked what it would take to slow down those price gains. His answers:

A slowing economy or rising unemployment: “Not likely anytime soon, with growth in B.C. and Ontario leading the country.”

A jump in interest rates: “Umm, no.”

More detached homes for sale: “Condo supply is coming to market in these cities, but detached supply ... is drum tight and not changing.”

Affordability: “The concern is that rising prices don’t slow activity, but rather beget even higher prices. The Vancouver condo market might be heading down this road now.”

Government measures: “That’s a no. At least not the variety (i.e., marginal changes to down payment requirements) most recently introduced by Ottawa.”

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CPPIB buys agriculture stake

There’s now a little bit of farmer in each of us.

The Canada Pension Plan Investment Board today struck a $2.5-billion (U.S.) deal for a 40-per-cent stake in Glencore PLC’s agricultural products unit, a global player in grain and oilseeds.

“As an asset class, agriculture is an excellent fit for a long-term investor like CPPIB,” said Mark Jenkins, the group’s global chief of private investments.

Glencore Agricultural Products boasts a network of more than 200 storage and 31 processing facilities, among other assets.

Pfizer-Allergan merger dead

Pfizer Inc. is calling off its mega-takeover of Allergan PLC in the wake of new U.S. rules aimed at scaling back tax inversions.

“The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an ‘adverse tax law change’ under the merger agreement,” Pfizer said, adding it will pay Allergan $150-million (U.S.) for expenses.

RBC scours

Royal Bank of Canada is scouring documents related to the use of a Panama-based law firm used to set up offshore tax havens,chief executive officer Dave McKay said after telling shareholders today that financial institutions should be a “force for good.”

“If you’ve read Michael Lewis’s best-selling book Flash Boys, in which RBC played a central and very positive role, you’re among the millions who now appreciate how Financial Services can and should be a force for good,” Mr. McKay said.

As The Globe and Mail’s David Berman and Bertrand Marotte report, the remarks follow a week in which leaks from a Panama-based law firm revealed the murky world of offshore tax havens, including wealthy and powerful individuals who use such havens and the financial firms that set them up.

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