'Trifurcation'
Home prices climbed in Canada in May for the fifth month in a row, though Calgary suffered the sharpest tumble in the history of the Teranet-National Bank house price index.
Today’s reading of the index underscores what the Bank of Canada said yesterday is “apparent trifurcation” of the country’s housing market.
Nationally, home prices rose 0.9 per cent from April, and 4.6 per cent from a year earlier.
Notable in that annual measure were a 7.6-per cent surge in Toronto, a 6.2-per-cent jump in Vancouver, and a similar rise in Hamilton.
“The 0.9-per-cent rise was slightly below the May average of 1.1 per cent over the last 14 years,” senior economist Marc Pinsonneault said in releasing the numbers.
“This was because Calgary prices fell 3.3 per cent from April, the largest monthly drop recorded for that region, subtracting 0.3 percentage points from the gain of the composite index,” he added.
“The monthly slide left Calgary prices the lowest since April of last year. By contrast, all 10 of the other metropolitan markets entering into the composite index were up on the month, a breadth last seen in August 2014.”
The index dates back to early 1999, though earlier for some cities.
As for the two most eyebrow-raising Canadian markets, on a month-over-month basis, Toronto prices rose 1.6 per cent, and those in Vancouver 1.3 per cent.
The latest measure put the national index at a record high, and the same is true of prices in Toronto, Vancouver, Hamilton and Quebec City.
Prices in Calgary are down 1.4 per cent from a year ago, and 5 per cent from their peak of last October.
The decline in Calgary, Mr. Pinsonneault noted, was concentrated in houses rather than condominiums.
“This is consistent with anecdotal evidence that, so far, Calgary’s market for high-end expensive homes has borne the brunt of the collapse in oil prices,” he said.
“Historically low mortgage rates mostly support demand for lower-priced homes.”
Just yesterday, the Bank of Canada again raised a red flag about the housing market, though it stressed in its financial system review that it does not foresee a crash.
“Regional divergences in resale activity and house price growth have become more evident, with an apparent trifurcation of the national market,” the central bank said in the semi-annual document.
“Although house price growth on a national basis has slowed modestly, it continues to outpace income growth, and overvaluation in the Canadian housing market remains a concern.”
The wealth of many Canadians, notably the middle class, “remains vulnerable to a decline in house prices,” it added.
Sales and price increases are sharpest in British Columbia and Ontario, the Bank of Canada said, while Alberta and Saskatchewan have suffered in the wake of the oil shock.
Home price increases have slowed to about 4.5 per cent from 5 per cent in the Bank of Canada's December reading, and the central bank still sees home prices inflated by between 10 per cent and 30 per cent.
“As the economy gains strength and interest rates begin to normalize, the most likely scenario is one in which house prices stabilize in line with economic fundamentals,” the central bank said.
Word of the day
Trifurcation
When something divides into three branches.
If Justin Trudeau were Marlon Brando
"I coulda been a contender."
Wealth rises
Canadians are becoming ever wealthier, but are still juggling huge debts.
The net worth of the country’s households rose 3.2 per cent on a per-capita basis in the first quarter to $241,800, Statistics Canada said today.
At the same time, the measure of household credit market debt to disposable income inched down to 163.3 per cent from 163.6 per cent in the fourth quarter.
The debt service ratio, or interest paid compared to disposable income, “continued to hover at a historic low.”
A currency I'd love to see. Oh, wait, it's real
'Trillion has 12 zeroes'
What else do you do with a pointless currency but “demonetise” it?
And that’s just what the Reserve Bank of Zimbabwe is doing.
Under a previously announced plan, the central bank said today it will, on Monday, begin allowing banknotes to be swapped for U.S. dollars.
Zimbabwe has been using a system of several currencies.
So, for example, anyone holding the 2008 $100-trillion note can convert for 40 cents.
“NB trillion has 12 zeroes,” the central bank said in its statement today.
The 2009 series of notes is worth more. You get the same 40 cents for $100.
“Banks will exchange ZW$ cash for US$ equivalent for walk-in cash customers at an exchange rate of Z$250-trillion to US$1 for 2008 note series and Z$250 to US$1 for 2009 series,” the central bank said.
Anything that hasn’t been swapped by the end of September “shall be considered demonetised or decommissioned.”
Central bank warns
The Bank of Canada is sounding particularly anxious about the people of Alberta in the wake of the oil shock.
They have more debt, a more strenuous juggling act when it comes to that debt, and a bruised housing market, the central bank says in its latest review of the country’s financial system.
Consumer debt and housing are a concern for the country as a whole, but the Bank of Canada took time in its semi-annual report to highlight the vulnerabilities in the province that is home to the country’s oil industry.
“Indebted Alberta households have relative low levels of liquid financial assets, carry more debt and have a higher debt-service ratio than indebted households in other areas of the country,” the central bank said.
“Moreover, the proportion of highly indebted households in Alberta – those with a ratio of debt to gross income above 250 per cent – is among the highest in the country,” the review added.
“In addition, unlike other provinces in Canada, a sizable proportion of mortgages in Alberta (and Saskatchewan) permit no recourse against individual borrowers in the event of default. With a slowing regional economy and a relatively high proportion of their income at risk (e.g., through job losses and reductions in bonuses and overtime), some Alberta households could become financially strained.”
Unemployment in Alberta has spiked higher since the collapse in oil prices, though the Bank of Canada noted that “automatic stabilizers” like jobless benefits could help.