Predictions for the housing market, lower internet costs and stable stocks: Must-read business and investing stories

Getting caught up on a week that got away? Here’s your weekly digest of The Globe and Mail’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

High interest rates will continue putting pressure on Canada’s housing market

The Bank of Canada this week increased interest rates for the eighth consecutive time but said that it expects to hold off on further hikes to “assess whether monetary policy is sufficiently restrictive to bring inflation back to the 2-per-cent target.” As Mark Rendell reports, the central bank raised its benchmark rate by a quarter of a percentage point, bringing the policy rate to 4.5 per cent, the highest level since 2007. With borrowing costs and mortgage rates at their highest level in years, many potential homebuyers have been shut out of the real estate market, writes Rachelle Younglai. The typical home price across the country is already down 13 per cent from its peak last February amid the bank’s attempts to rein in runaway inflation by reducing access to cheap loans. As such, the bank is predicting home prices will decline further before sales pick up later in the year.

These stocks offer portfolio stability amid rising prices

Rising interest rates were the main contributor to the woes of the stock markets in 2022. Interest-sensitive securities such as REITs, utilities, telecoms and bonds all tumbled as rates steadily increased. Combined with the collapse of tech stocks as the economy that benefited from pandemic lockdowns dissipated, we ended up with all the major stock markets in the red, and the Canadian bond market experiencing its worst loss in four decades. But there were some inflation-beaters. Gordon Pape looks at a number of inflation-beating securities that thrived in a rising price environment and are still doing well, although momentum is slowing.

The clearest sign that inflation is declining

When assessing inflation, central bankers and economists will often exclude food and energy costs, but in a recent report, Karyne Charbonneau, executive director of economics at CIBC Capital Markets, said the Bank of Canada should consider the rapid climb in mortgage interest costs “when judging the underlying inflationary trend.” As Matt Lundy writes, while the bank is raising interest rates to cool demand and tamp down inflation, its efforts are having the opposite effect on mortgage payments, which have jumped 18 per cent in the past year. Although mortgages carry only 3-per-cent weight in how the Consumer Price Index is calculated, the increase is substantial enough that mortgages are now the largest contributor to annual inflation.

Could lower cellphone and internet costs be coming?

Lowering cellphone and internet bills is a top priority for Vicky Eatrides, the new chair of Canada’s broadcast and telecommunications regulator, Irene Galea reports. Unfortunately, Ms. Eatrides is inheriting a commission that is widely seen as slow to make decisions. The continuing legal proceedings of Rogers Communications Inc.’s takeover of Shaw Communications Inc. are attracting unprecedented attention to the inner workings of the telecom industry and the future of cellular service competition in Canada. Meanwhile, two CTRC policies, concerning industry rates for broadband and wireless networks, finalized during the previous chair’s term, are still being debated among industry players. Ms. Eatrides would not reveal specifics related to her plan to lower cellphone and internet costs, but added she hopes to speed up the commission’s decision-making process.

The real savings of owning an electric vehicle

With gas prices yo-yoing this past year, are the savings associated with the lower operating costs of purchasing an electric vehicle ultimately worth it? David Berman, a Hyundai Ioniq 5 owner, compares charging costs for EVs to gas-powered vehicle costs over the same travelling distance. “I’ve driven almost 10,000 kilometres – did I mention that I don’t drive much?” he writes. “I’ve saved about $780 over the past year. Over 10 years, these savings would rise, theoretically, to a total of $7,800.” Additionally, he got a $5,000 federal EV rebate when purchasing the car in Ontario in early 2022, whittling down the nearly $50,000 list price for his vehicle to about $37,200 compared with a hypothetical gas-burning version of itself.

Record-low rental vacancy rate

There are fewer apartments available to rent in Canada than at any time since 2001, according to Canada Mortgage and Housing Corp’s annual rental report released this week. As Rachelle Younglai reports, the country’s apartment vacancy rate dropped to 1.9 per cent in 2022 – down from 3.1 the year before and the lowest level in more than two decades – owing to higher net migration, the return of postsecondary students to the campus and the spike in borrowing costs. The country’s largest rental markets were under particular stress, with Toronto’s apartment vacancy rate dropping to 1.7 per cent last year from 4.4 per cent in 2021, Montreal to 2.3 per cent from 3.7 per cent and Vancouver to 0.9 per cent from 1.2 per cent. The national average monthly rental price for a two-bedroom rose 5.6 per cent to $1,258 last year, with Vancouver and Toronto commanding the highest rents at an average of $2,002 and $1,765 monthly.

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Now that you’re all caught up, prepare for the week ahead with the Globe’s investing calendar.

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