Briefing highlights
- Housing enjoys some stability
- Analyst sees loonie at 70 cents
- A Cheech & Chong scene I’d love to see
- Constellation pumps billions into Canopy
- Canopy shares surge on deal
- Markets at a glance
- Banks better prepared for housing shock
- U.S. retail sales up sharply
- Metro’s quarterly profit slips
National housing market gains
Canada’s housing market is suddenly enjoying some stability.
The housing market is, of course, the sum of its parts, meaning not every region is doing so well. Vancouver, for example, is slumping, while the Toronto area rebounds.
Home sales across the country rose 1.9 per cent in July from June, the Canadian Real Estate Association said today, though they were still down 1.3 per cent from a year earlier.
“July was a good month for housing markets,” said Toronto-Dominion Bank economist Rishi Sondhi.
“This lends further credence to our view that markets have shaken off the bout of policy-induced weakness in the earlier part of the year,” he added.
The average sales price climbed 1 per cent from a year earlier to $481,500. What’s notable there is that it’s the first annual increase since January.
Of course, the Vancouver and Toronto areas skew that, CREA said. If you strip them out, the average price for the rest of Canada is more in the $383,000 range.
Notable, too, is the annual jump of 2.1 per cent in the MLS home price index, which is seen as a better measure.
“This represents the first acceleration in year-over-year home price growth since April, 2017,” CREA said in unveiling the numbers.
“It also suggests that the dip in home prices last summer and their subsequent rebound in an around the GTA may contribute to further year-over-year gains in the months ahead.
Change in MLS HPI Benchmark Price
Percentage change, July, 2018
1-month
6-month
12-month
Fraser Valley
Vancouver Island
Lower Mainland
Victoria
Ottawa
Greater Vancouver
Greater Montreal
Greater Moncton
Guelph
Aggregate
Oakville-Milton
Greater Toronto
Edmonton
Calgary
Saskatoon
Barrie & District
Regina
-6
-3
0
3
6
9
12
15%
THE GLOBE AND MAIL, SOURCE: CREA
Change in MLS HPI Benchmark Price
Percentage change, July, 2018
1-month
6-month
12-month
Fraser Valley
Vancouver Island
Lower Mainland
Victoria
Ottawa
Greater Vancouver
Greater Montreal
Greater Moncton
Guelph
Aggregate
Oakville-Milton
Greater Toronto
Edmonton
Calgary
Saskatoon
Barrie & District
Regina
-6
-3
0
3
6
9
12
15%
THE GLOBE AND MAIL, SOURCE: CREA
Change in MLS HPI Benchmark Price
Percentage change, July, 2018
1-month
6-month
12-month
Fraser Valley
Vancouver Island
Lower Mainland
Victoria
Ottawa
Greater Vancouver
Greater Montreal
Greater Moncton
Guelph
Aggregate
Oakville-Milton
Greater Toronto
Edmonton
Calgary
Saskatoon
Barrie & District
Regina
-6
-3
0
3
6
9
12
15%
THE GLOBE AND MAIL, SOURCE: CREA
Markets eased, of course, in the wake of new mortgage-qualification rules and measures by the B.C. and Ontario governments to tame frothy prices.
“This year’s new stress test on mortgage applicants continues to weigh on home sales but its effect may be starting to fade slightly in Toronto and nearby markets,” the group’s president, Barb Sukkau, said in releasing the data.
The report showed “an extraordinary mix of calm figures, considering the wild swings the market has witnessed in recent years,” said Bank of Montreal chief economist Douglas Porter.
“It also masks some serious regional shifts grinding away beneath the placid surface,” he added.
“Essentially, stabilization in the Toronto region has been offset by a pullback in other areas, notably much of Western Canada. From an overall macro standpoint, the main take-away is that the housing market has ceased to be a major source of concern for policy makers (neither too hot, nor too cold) - at least for now.”
Mr. Porter noted later, though, that the MLS index still dipped in July, and has been essentially flat for three months.
“So I don’t get the sense that prices are actually turning higher in a big way,” he said.
“One of the reasons that the average transactions price measure has bounced is because sales in the GTA have bounced from the lows - and more sales in that expensive region means that the reported average price will rise.”
There was much to chew on in this report. Some other tidbits:
1: New listings declined by 1.2 per cent in July, and are below monthly levels set over most of the last eight years. That was driven by Calgary, Edmonton and Vancouver, and “fewer new listings in these markets more than offset an increase in new supply in the GTA.”
2: The sales-to-new-listings ratio tightened to 55.9 per cent, but “remains within short reach” of the longer-term average for that reading of market balance.
3: The number of months of inventory, or a measure of how long it should take to sell everything on offer, eased to 5.3 from 5.4, also near its longer-term average.
4: Condo units led the way for prices, up 10.1 per cent, with townhomes gaining 4.7 per cent. Single family home prices fell from a year earlier, but “the declines were noticeably smaller than in recent months,” CREA said.
So what’s next?
“Rising interest rates and this year’s stress test on mortgage applicants will likely prove to be difficult hurdles to overcome for many would-be first-time and move-up homebuyers heading into the second half of the year and beyond,” said CREA’s chief economist Gregory Klump.
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Loonie to 70 cents?
Stephen Brown believes the Canadian dollar will slump to about 70 US cents next year, even if the uncertainty over NAFTA ends with a deal.
“A quick NAFTA deal is an upside risk to our forecast for the loonie to remain near its current rate against the U.S. dollar this year,” said the senior Canada economist at Capital Economics in London.
“But our forecasts for various commodity prices to decline and interest rate differentials to move against Canada imply that the loonie will nevertheless depreciate in 2019.”
Prospects for the currency have suffered since President Donald Trump was elected, and pledged to remake the North America free-trade agreement or kill it outright.
“That is, the heightened risk of a U.S. withdrawal [from NAFTA] has directly caused investors to demand a higher premium to hold Canadian assets, while the negative implications of uncertainty for the economic outlook has weighed on interest rate prospects and thereby the currency,” Mr. Brown said.
Now at about 76.5 US cents, Capital Economics expects the loonie to end 2018 at 75, but then erode further to around the 70-cent mark - though it could get a short-term bump should NAFTA be resolved, Mr. Brown added in an interview.
Indeed, a NAFTA deal could bump his forecast up by three cents or so.
“Even if a deal is reached, it is unlikely to be as positive for Canada as the current one and it would still take at least three months for it to be fully signed off, during which its future would remain in doubt,” he noted in his report.
“In any case, absent any safeguards, investors and firms are likely to remain wary of Canadian assets and the loonie while Trump is in charge, and perhaps even longer.”
For comparison, CIBC World Markets said in its latest outlook that it expects the loonie to trade between about 74 and 78 US cents through next year.
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A Cheech & Chong scene I’d love to see
Buzz kill
Photo illustration
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- Christina Pellegrini: Marijuana stocks plummet in wake of Ontario’s private-sector sales delay
- Marina Strauss, Christina Pellegrini: Drugstores, in-store pharmacies push for right to sell recreational cannabis
Constellation pumps up Canopy
The marriage of booze and bud is going deeper.
Constellation Brands, the beer, wine and alcohol company, is pumping $5-billion into Canopy Growth by boosting its stake in the cannabis concern, sending Canopy’s shares surging.
Constellation is buying 104.5 million additional shares at $48.60 each, which, when all is said and done, would bring its ownership to about 38 per cent.
Constellation is also getting additional warrants that, if it exercises them, would mean a further $4.5-billion, the companies said.
“Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space,” Constellation chief executive officer Rob Sands said in a statement.
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Markets at a glance
- Follow our Inside the Market
- Matt Lundy: How a U.S. dollar debt binge can lead to a ‘vicious cycle’
- Scott Barlow: Canadian stocks at risk from emerging-market turmoil if it intensifies beyond Turkey
- What a ‘textbook currency crisis’ looks like (and why you shouldn’t shrug off Turkey’s troubles)
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