Briefing highlights
- TD cuts home price outlook
- Canada's economy stalls in February
- U.S. growth weakest in several years
- Home Capital bleeds millions more
- GM profit jumps
- Thomson Reuters revenue up
TD cuts home price outlook
Toronto-Dominion Bank has cut its short-term outlook for home prices in Toronto and across Ontario in the wake of the province’s measures to cool down its super-heated markets.
The bank now sees slower average price growth this year and an outright, though modest, contraction in 2018 after Ontario introduced a tax on foreign property speculators and expanded rent controls, among other moves in its 16-point plan.
“These policies are likely to dampen housing activity in the short term,” said TD economist Diana Petramala.
“Using Vancouver as a guide, the non-resident buyer’s tax may push both non-resident and speculators out of the market, bringing home sales across Ontario more in line with historical averages,” she added in a report.
“Meanwhile, rent controls will put pressure on already depressed rates on return on rental properties, and prices will likely have to adjust lower to encourage further investment.”
Royal Bank of Canada, meanwhile, said in a new report that the Ontario plan is a “positive step for the most part,” noting the threat to the market’s stability from fast-rising prices.
“While this is generally a positive development, the effectiveness of these measures is uncertain at this point,” said RBC chief economist Craig Wright and senior economist Robert Hogue.
“The broadening of rent control to all rental units in the province, however, could have perverse effects on the market.”
Ms. Petramala also questioned the longer-term fallout from the rent-control measure.
“Over the long term, the mix of policy offers some incentives for increased housing supply,” she said.
“But, our view is that the overriding impact of rent control will be to restrict future investment in both condo and purpose-built rental development.”
Where Vancouver’s concerned, by the way, the RBC economists noted how the market has “adjusted in an orderly fashion” to the tax on foreign buyers, but noted that “its dampening effect on homebuyer demand may be waning,” however.
This will also take something of a toll on the economy, of course.
Citigroup’s North America economist, Dana Peterson, said the “Toronto housing correction” should shave 0.1 of a percentage point from Canada’s economic growth this year, and 0.2 of a point in 2018.
That puts Citi’s economic growth projections at 2.6 per cent for 2017 and 2 per cent for next year.
“The biggest reductions in output would be concentrated in residential investment – from lower transactions costs from sales, and from scaled-back construction of new homes, and renovations for the upscale market,” she said.
“There might also be some residual dampening of household spending.”
Economies weak
Canada’s economy stalled out in February, registering no growth after January’s bounce.
More importantly for markets, the U.S. economy expanded at an annual pace of just 0.7 per cent, the slowest in a few years.
In Canada, February’s stall ended a three-month string of gains. Growth in services industries rose, while the goods sector saw a decline.
Perhaps no surprise here, but housing continues to prop up the economy, according to Statistics Canada.
“The real estate and rental and leasing sector grew 0.5 per cent in February, led by a 5.3-per-cent gain in output of real estate agents and brokers, mainly as a result of notable gains in activity in and around the Greater Toronto Area,” the agency said.
“One can’t be too disappointed in an economy that takes a one-month breather after a stunning three-month run,” CIBC World Markets chief economist Avery Shenfeld said of the Canadian numbers.
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