Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
A report by Scotiabank analyst Himanshu Gupta identifies ‘cash flow compounders’ in the domestic real estate sector,
“We now have three cash flow compounders under our coverage namely Colliers (CIGI), FirstService (FSV) and StorageVault (SVI). All three names combined account for approximately 25 per cent of the S&P/TSX Real Estate Index … All three are roll-up stories. All three are market leaders in their respective highly-fragmented markets and enjoy competitive advantage which translates into superior organic growth. All three are Corporations and not REITs. All three have higher insider ownership.
“All three names have printed double-digits earnings growth over the last five years. We expect superior growth in the next two years as well.
“All three are the top performers within our entire coverage universe (Exhibit 59). We looked at total returns since June 2015 (since CIGI’s incorporation), and Summit Industrial (SMU) is the only other name within the top #4 performers list (apart from SVI, FSV and CIGI). Recall – SMU was privatized by a JV comprising GIC and DIR in Feb’23. We have SO-rating on CIGI and SVI, and initiated coverage on FSV with SP-rating. Our pecking order is CIGI, SVI and FSV. With CIGI, we expect acceleration in earnings growth in 2023-25E at +17.2% CAGR [compound annual growth rate] (vs +11.9% CAGR in 2016-23A). For FSV and SVI, we expect nearly double-digit earnings growth in the next two years but a bit slower than what they have achieved in the last several years”
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BofA Securities investment strategist Michael Hartnett’s weekly report was even more strident than usual (my emphasis),
“The Biggest Picture: 10-year annualized return of US Treasuries at 65-year low (0.6%); 2020s era of war, protectionism, fiscal excess, scarce energy/housing/labor = higher inflation & higher cost of capital until recession sparks “buy bond humiliation.” Tale of the Tape: “ABB” (Anything But Bonds) Bull inciting greed for inflation hedges & monopolistic cash flows (new highs gold & Magnificent 7) + fear of leverage (see REITs, KRE [S&P Regional banking ETF] , RTY [Russell 2000]) & duration (XBI [S&P Biotech SPDR] ); “no landing” probability rising…rare for tech & commodities both top-of-the-price , but consistent with no landing and very 1999″
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BMO senior economist Robert Kavcic tackled the announced changes to domestic mortgages,
“Canada announced a few new housing affordability measures on Thursday, ahead of next week’s budget, including an extension to 30- year amortizations for some buyers. The extension will apply to first-time homebuyers of a new build, with an insured mortgage. We don’t have a precise estimate on the share of housing activity that this will cover, but suffice it to say that the policy change drills down into a small segment. First-time buyers are just under half of transaction activity, with their share falling in recent years while investors and moveup buyers have gained. At the same time, insured mortgages have fallen to just around 15% of new originations recently. As for affordability in this sliver of the market, a switch from 25 to 30- year amortization will add about 8% to buying power at a 5% mortgage rate with a fixed downpayment. This could shift some incremental activity toward new builds among first-time buyers (until prices adjust), but the overall market impact should be limited. And that’s a good thing, as juicing demand is rarely the right prescription for a market already struggling with excess demand”
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Diversion: “New Boeing Whistleblower Claims Certain Planes Could ‘Break Apart’ Midair” – Gizmodo
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
