As the Bank of Canada continues to hike rates in order to curb inflation, housing prices in Canada could fall 15 per cent from its peak by the end of next year, a new report says.
The average price of a home in Canada peaked at just over $790,000 in February 2022, marking a 50 per cent increase over two years. But the report, published on Wednesday by Desjardins, says by December 2023, the average national home price could fall to around $675,000.
Since the Bank of Canada began to raise interest rates in order to combat inflation, home prices has steadily declined. Desjardins says that average price of a home in Canada fell 2.6 per cent month-to-month in March and 3.8 per cent in April.
But despite the expected drop, Desjardins notes that $675,000 is still nearly 30 per cent above what it was in December 2019, when the average price of a home was $530,000 in Canada. Jimmy Jean, chief economist and strategist for Desjardins, says he expects the decline in home prices to be “fairly manageable” before stabilizing, citing increasing levels in immigration and a continuous shortage of housing supply amid strong demand.
“Our expectation is for the housing market to cool to moderate, but we’re not expecting any collapse by any measure,” Jean told CTV News on Thursday.
For most homeowners who intend to keep living in their homes for decades to come, including those who jumped into the market near the peak, Jean says this housing correction will only be a small “blip.”
“Housing is an investment normally you make for the long-term,” Jean said. “Ultimately, you’re buying a product to raise a family, to live into. So, over the long term, things will stabilize and pick up again. So, it’s not a major concern from that perspective.”
But it’s a different story for real estate investors who were expecting huge gains from rising housing prices.
“If you rent out a property, sometimes, if you don’t collect enough in terms of rent to make up for the mortgage costs or the utility costs, those decisions were still justified by the idea that prices would keep appreciating,” he said. “Now it’s another story.”
The Bank of Canada is expected to raise rates again by another 50 basis points in July, and bank governor Tiff Macklem has indicated that interest rates may have to spike to 3.0 per cent.
But Desjardins economists believe Macklem won’t have to go all the way to 3.0 per cent and say 2.25 per cent will be enough to slow inflation.
“The Canadian economy is highly rate sensitive,” Jean said. “We think this moderation will be significant and will cause economic growth, and therefore inflation, to slow, and that will remove the necessity for Tiff Macklem and the Bank of Canada to hike all the way to three per cent.”
HOUSING CORRECTION TO BE MOST SEVERE IN MARITIMES
While a 15 per cent drop is what Desjardins forecasts nationally, some regions may experience even bigger corrections, particularly in parts of Canada that saw that steepest pandemic-era home price increases.
After years of population declines, the Maritime provinces saw an explosion in population growth from 2020 and onwards, as the advent of remote work enabled more Canadians from big cities to flock to the east coast, seeking larger and more affordable living spaces.
In turn, P.E.I., Nova Scotia and New Brunswick saw the highest housing price increases in the country. Compared to December 2019 levels, the average price of a home in these provinces rose 62 to 70 per cent in February 2022.
These provinces are also expected to see the largest corrections; Dejardins says housing prices could drop between 18 to 20 per cent.
The Prairies and Newfoundland and Labrador saw the smallest pandemic-era spikes in housing prices. These provinces rely heavily on oil, and crude prices took a nosedive in the early months of the pandemic. Home prices in these regions are only expected to fall between two to 10 per cent by December 2023, the Desjardins report says.
B.C.’s home prices are also expected to fall 15 per cent, closely mirroring the national average, while prices in Quebec will fall 12 per cent thanks to its “much greater housing affordability and less overvalued market,” the report states.
Ontario’s home prices are expected to decline 18 per cent, but these drops will vastly differ across regions. Much like the Maritimes, the communities within a few hours drive from Toronto saw home prices jump 70 per cent between December 2019 and February 2022 as many Canadians began to work from home. Desjardins says outside of the Greater Toronto Area, home prices could fall 20 per cent, with the biggest declines expected in Bancroft, Chatham Kent and Windsor-Essex.
With files from CTV National News Parliament Hill Correspondent Kevin Gallagher.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
