These are stories Report on Business is following Tuesday, March 17, 2015.
Location, location, location
A new Bank of Montreal report highlights the sudden shift in Canada’s regional housing markets, notably the “very weak” nature of those on the Prairies.
As The Globe and Mail’s Tamsin McMahon has chronicled, the plunge in crude prices has put a damper on the markets in oil-sensitive regions like those in Alberta.
“While Canada’s housing market balance has turned slightly weaker overall, location has become increasingly important,” said senior economist Robert Kavcic of BMO Nesbitt Burns.
“Market balance on the Prairies is very weak (resource prices), and prices in most markets there have begun to slip alongside elevated supply and a drop in confidence,” he added.
“Ditto for Atlantic Canada, though poor demographics are playing a bigger role there (at least outside Newfoundland).”
Which, as Mr. Kavcic put it, means British Columba and Ontario have to “carry the weight.”
Those markets found to be very weak, at 10, outnumber those in the other categories. There are three markets found to be weak, two that are very strong, one that is strong and six that are balanced.
Whether a market is strong, weak or balanced is based on current conditions against a 20-year average.
Here’s what he found, as of February:
- Vancouver’s market is balanced, with average prices on a three-month basis up 3.3 per cent from a year earlier, resales up 13.6 per cent and the average home price 11 times greater than the estimated median family income for 2015. Sales are 14.3 per cent above the 10-year average, again on a three-month basis.
- Using the same measurements, Victoria prices are up 0.4 per cent, and prices 14.4 per cent, and the price-family income ratio stands at 5.4 per cent in a balanced market. Sales are 3 per cent below the 10-year average.
- Calgary and Edmonton are, of course, taking a hit from the oil rout.
- Calgary prices are down 0.7 per cent, and sales are down 27 per cent, with a price-family income ratio at 4 in a very weak market. Sales are almost 18 per cent below the 10-year average.
- Regina, Saskatoon and Winnipeg also fall into the very weak category. As do Ottawa, Kingston, Ont., Halifax and the provinces of Prince Edward Island and Newfoundland and Labrador.
- Montreal, St. John and Kitchener-Waterloo, Ont., are deemed just weak.
- Then there are the “very strong” centres of St. Catharines and Windsor, Ont., and the Hamilton-Burlington as simply strong.
- Among those found to be balanced, besides Vancouver and Victoria, are Toronto and the Ontario centres of Sudbury and Thunder Bay.
- In Toronto, average prices are up 6.6 per cent and resales 8.6 per cent. Sales vs. the 10-year average are up 5.2 per cent, and the price-family income ratio is at 7.5.
“Note that Vancouver’s market balance is within rounding error of being classified as ‘strong,’ while Toronto’s balanced market reflects an extremely tight detached segment, offset by much more supply in the condo sector,” Mr. Kavcic said.
And just today, the Toronto Real Estate Board reported that resales in the first two weeks of this month climbed 11.8 per cent from a year earlier, with the average selling price up 10.6 per cent to $620,106.
- Tamsin McMahon: Alberta's construction industry facing three years of job losses
- The 'hyper-competitive' Toronto home market: I feel like a million bucks
- Tamsin McMahon: Canada's rental unit landscape witnessing a resurgence
Nexen cuts jobs
Nexen Energy is slashing some 400 jobs, the bulk of them in North America.
The Canadian energy company, now owned by China’s CNOOC Ltd., said today that 340 jobs will be cut in North America, and the rest in the U.K., The Globe and Mail's Jeffrey Jones reports.
"In response to the recent industry downturn that has affected all companies in the energy sector, a decision was made to conduct a thorough review of our organization to ensure our long-term viability and sustainability," said chief executive officer Fang Zhi.
"While regrettable, these organizational changes are necessary to align the company with our reduced capital spending program."
The company added it is “fully compliant” with the pledges made when CNOOC acquired it.
BMO cuts rates
Bank of Montreal didn’t just study the housing market today.
As The Globe and Mail's David Berman reports, BMO also renewed the mortgage war among Canada’s banks, slashing the posted rate on its five-year fixed mortgage to 2.79 per cent from 2.99 per cent.
Toronto-Dominion Bank quickly rushed to match BMO’s rate special, saying it will drop its five-year fixed mortgage rate from 3.09 per cent to 2.79 starting tomorrow.
The big banks had slashed their mortgage rates in January, soon after the Bank of Canada unexpectedly lowered its key rate in an effort to provide stimulus to the economy. Those cuts took posted rates as low as 2.84 per cent.
Bombardier strikes deal
Bombardier Inc.’s new C Series airplane has gained a toehold in the crucial Southeast Asia region with a letter of intent for the sale of 20 CS100s to a new Malaysian airline, The Globe and Mail's Bertrand Marotte writes.
Montreal-based Bombardier and Fly Mojo Sdn Bhd said today they have signed an agreement for 20 of the smaller versions of the C Series, with options for an additional 20 planes.
Value of the purchase and sale agreement is about $1.47-billion (U.S.), based on the list price of the CS100 aircraft. That could rise $2.94-billion if all of the options are exercised.
Oil and coal are doing a number on Canada’s manufacturing sector.
Manufacturing shipments fell 1.7 per cent in January, Statistics Canada said today, driven lower by a “price-induced decline” of almost 12 per cent in those two industries.
Sales fell in 14 of the 21 industries measured, accounting for just shy of half of the entire sector.
January marked the seventh straight month for losses in the petroleum and coal products sectors.
“An 11.4-per-cent drop in prices, as measured by the industrial product price index, coupled with a small decline in volumes, led to lower sales,” the statistics agency said.
“Sales in the industry dropped 35 per cent in the last seven months, reaching their lowest level since May 2009.”
Sales of transportation equipment surged, while those of computers and electronics also gained.
“After getting a bounce back in manufacturing output to end last year, we started 2015 with a thud in the factory sector,” said CIBC World Markets economist Nick Exarhos.
“But the weakness wasn’t just all on falling commodity prices, since manufacturing volumes fell by a significant 1 per cent,” he added.
“That doesn’t bode well for January’s monthly GDP tally, with expected weakness in other sectors … likely to leave Q1 just keeping pace with the [Bank of Canada’s] 1.5-per-cent forecast.”
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