The toll that rising interest rates are taking across Canada’s housing markets became even more apparent this past week as reports from local real estate boards revealed the downturn was deepening from coast to coast.
“Prices are sliding fast, and the exuberance that permeated these markets earlier this year is being replaced by fear,” wrote RBC assistant chief economist Robert Hogue in a recent note.
“In the Toronto and Vancouver areas, the decline in activity is quickly becoming one of the deepest of the past half a century.”
Meanwhile, inventories are climbing quickly, up 58% from a year ago, and buyers are now managing to get “meaningful price concessions” from sellers, he said.
Since March the composite MLS Home Price Index has shed $178,000, or 13%, falling to $1.16 million. In July alone prices declined 3.9% or $47,000.
Toronto is not a buyer’s market yet, according to the sales to new listings ratio, but RBC expects home hunters in the GTA to continue to find better deals, especially in the 905 areas outside of the core where prices soared during the pandemic.
Vancouver, where home sales are down 40% over the past four months, is also experiencing a big chill. July saw an estimated 9% decline.
Home prices have fallen 4.5% since April, or more than $57,000, but RBC thinks the correction here is still in its early stages.
It expects prices to fall more rapidly in coming months, especially in the detached home sector.
The heavy hit to Canada’s two most expensive cities was predictable, but signs of the correction are now cropping up in more affordable cities as well.
“The downturn may be more contained in other markets but unmistaken nonetheless,” wrote Hogue.
Home sales in Montreal this year have been slowing gradually and by July had declined to 17% below pre-pandemic levels. That and a rise in inventories have returned the market to balance, said Hogue.
Previously this had just slowed the growth in prices, but July could be a turning point, with both single-family homes and condo prices actually declining.
“This development took place across the region, suggesting a board-based price correction may be underway,” said Hogue.
Even in Calgary, this year’s real estate star, there are signs the market is softening. Home sales remain at historically high levels, but have calmed since the buying frenzy seen at the beginning of the year.
Higher interest rates are pushing buyers to more affordable options, like condos, and demand for more expensive detached homes is down.
Calgary’s composite MLS HPI peaked in May and has slipped lower since, he said.
A speedy rise to interest rates are the reason for the cross-country correction and with rates expected to go even higher (RBC forecasts another 75 basis by the fall) it will only get worse.
“We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates,” said Hogue.
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THE TEAM BEHIND THE ‘NUMBER’Canadians are in a historic, inflationary moment — the likes of which some have never seen in their lifetime. The drumbeat of grim, inflation statistics has been steadily pounding for over a year now, pushing the consumer price index to a high of 8.1% in June. But have you ever wondered who calculates “the number” and how they do it? The Financial Post’s Joe O’Connor goes behind the scenes at Statistics Canada’s Consumer Price Division and meets economists like Andrew Barclay, above, to get the scoop on the price “nerds.” Photo by Statistics Canada
Wayne Eyre, Canada’s chief of the defence staff, will hold a media one-on-one call back on the topic of Arctic security and international collaboration following discussions with representatives from Denmark, Finland, Iceland, Norway and the United States regarding the evolving security environment in the Arctic, opportunities for enhanced co-operation as well as Canada’s Arctic defence capabilities and initiatives Meeting requested by four members of the Transport, Infrastructure and Communities committee to discuss their request to undertake a study of airport delays and cancellations
Vic Fedeli, Ontario minister of economic development, job creation and trade, will make an announcement
A fireside chat with Katie Keita, Shopify Inc. senior director of investor relations, at the KeyBanc technology leadership forum in Vail, Colorado
Canada’s job numbers Friday surprised economists who had been expecting a gain in employment. Instead the economy shed almost 31,000 positions after losing 43,000 jobs in June. Many saw this as a sign that the economy is cooling, but don’t think that will stop the Bank of Canada from hiking rates. “For the Bank of Canada, the takeaway will be that while growth is clearly cooling, conditions remain drum-tight and wages are stirring,” wrote BMO chief economist Douglas Porter after the data came out Friday. “We believe this backdrop is consistent with another rate hike at the September meeting, but of a less aggressive nature than the mega 100 bp move in July. We look for a 50 bp hike at that time.”
The rise in food prices is pushing 10% and more than two in five Canadians say they’ve been affected by rising costs.
With inflation impacting the prices of everyday goods, finding ways to save money on your grocery bill is more than welcome.
From planning ahead to buying “ugly food,” our content partner MoneyWise has six strategies to help you lower your costs the next time you go to the grocery store.
Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.
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MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
