B.C. home prices won’t hit bottom until 2020, TD says

Briefing highlights

• B.C. home prices to hit bottom in 2020
• Stocks, loonie, oil at a glance
• Activist pressures HBC’s Baker
• Total manufacturing sales slip
• Ottawa expected to approve TMX
• Facebook plans cryptocurrency
• Required Reading

TD sees B.C. bottom next year

Home prices in British Columbia aren’t expected to hit bottom until next year, Toronto-Dominion Bank says.

On Monday we reported that economists are seeing positive signs in housing markets across the country, notably in B.C., where Vancouver and Victoria scored an impressive gain in sales in May from April.

Of course, that’s only one month, and, as The Globe and Mail’s Brent Jang reports, the Vancouver area was hit hard by a combination of provincial measures, aimed at hosing down house prices, and new federal mortgage-qualification stress tests meant to head off any big trouble on the credit side.

As Bank of Montreal chief economist Douglas Porter noted, price recovery in housing markets lags a sales rebound.

So with that in mind, and sales activity still uncertain after a strong month, here’s what TD chief economist Beata Caranci and a team of observers at the bank said in a much broader forecast for provincial economies:

“B.C.’s economy and job market are still expected to advance this year despite a deep slowdown in housing activity,” they said.

“We look for stabilization in home sales during the second half of 2019, with prices likely to reach a bottom during 2020,” they added.

“Continued solid prospects for non-residential investment should provide some offset to weakness on the residential side.”

Of course, any decline in prices would be a welcome relief for many in the Vancouver area, where costs are still out of sight despite the slump.

Housing aside, by the way, TD projected B.C.’s economy will expand 1.5 per cent this year, and 2 per cent next.

Read more

• ‘Green shoots’ in the housing market: A cross-Canada look that shows if you’re in buyers’ or sellers’ territory
• CREA hikes forecast as Canadian home sales post biggest annual increase since 2016
• Canada’s housing market tumbles in global ranking, but ‘opportunistic buyers’ are afoot
• Carolyn Ireland: A fickle housing market with price-sensitive buyers
• Janet McFarland: Toronto home sales surge nearly 19 per cent in May
• Hitting market bottom: A five-year forecast for house prices in 33 Canadian cities
• Brent Jang: Vancouver home sales hit 19-year low as price decline continues
• How Toronto’s housing market shrank by billions

Markets at a glance

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Activist pressures HBC’s Baker

Pressure is mounting on Richard Baker, executive chairman of Hudson’s Bay Co., to increase his bid to take the retailer private, or put the entire company up for sale, The Globe and Mail’s Marina Strauss reports.

U.S. activist investor Land & Buildings Investment Management LLC, which last year owned an estimated 3 per cent of HBC shares, said the $9.45-a-share proposal by Mr. Baker and his HBC majority shareholder group to take the retailer private is “woefully inadequate.”

Land & Buildings called on the department-store company to explore “strategic alternatives,” including a sale, and hire an independent investment bank to evaluate the value of HBC’s potentially lucrative real estate and retail banners.

Read more

• Marina Strauss: Activist investor slams HBC chairman’s proposal to take retailer private as ‘woefully inadequate’

Manufacturing sales slip

Total Canadian manufacturing sales slipped 0.6-per-cent in April.

If you strip out the hit from falling shipments in the transportation equipment sector, though, sales rose 0.8 per cent, Statistics Canada said today.

“A 7-per-cent drop in motor vehicle and parts sales appears to have been due to temporary plant shutdowns that will be reversed,” said Royal Bank of Canada senior economist Nathan Janzen.

“Excluding the transportation sector and a price-led increase in the petroleum and coal component, sales were up 0.5 per cent from April and 3 per cent from a year ago,” he added.

“And a very strong month of economic data for the prior month in March, including growth in the manufacturing sector, still leaves overall GDP growth tracking at a slightly above 2-per-cent rate for Q2.”

TMX to reportedly get green light

The Trudeau government is poised to approve the expansion of the Trans Mountain pipeline as early as this week, Reuters reports.

Ottawa purchased the project from Kinder Morgan Canada for $4.5-billion last year amid severe troubles in the oil patch and difficulties moving crude from Alberta.

Read more

• Ottawa expected to approve hotly-debated Trans Mountain pipeline expansion, Trudeau unlikely to benefit
• Tim Shufelt: What a go-ahead on Trans Mountain will mean for long-suffering TSX energy investors
• Leah George Wilson: Trans Mountain is not in the public’s interest - and must not be approved

Facebook plans cryptocurrency

From Reuters:

Facebook Inc. revealed plans to launch a cryptocurrency called Libra, the latest development in its effort to expand beyond social networking and move into e-commerce and global payments.

Facebook has linked with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin set to launch in the first half of 2020, according to marketing materials and interviews with executives.

Facebook has also created a subsidiary called Calibra, which will offer digital wallets to save, send and spend Libras. Calibra will be connected to Facebook’s messaging platforms Messenger and WhatsApp, which already boast more than a billion users.

Read more

• Facebook plans its own cryptocurrency, to launch in 2020 with lofty goals

Ticker

• China to suspend pork imports from Canada’s Frigo Royal

Required Reading

GMP no surprise

Tim Kiladze looks at why the sale of GMP’s capital markets arm to Stifel Financial Corp. should surprise absolutely no one.

Industry skeptical

Mortgage-industry officials say the government’s First-Time Home Buyer program is likely to fall far short of its goal of making real estate more affordable to many new buyers, Bill Curry and Janet McFarland report.

Brewers worried

Independent craft brewers in Ontario are worried reforms allowing beer in convenience stores could spell trouble for their businesses, Tara Deschamps writes. Without a minimum percentage of shelf space mandated for their products, they worry multinational beer giants may swallow up most – if not all – convenience-store space dedicated to alcohol.