Canada column for Sunday, June 12/16
THE CANADIAN REPORT
(c) By Jim Fox
Soaring double-digit house price increases in Vancouver and Toronto are putting many buyers out of the market and are being called “unsustainable.”
Bank of Canada Governor Stephen Poloz expressed concern for the economy as the average price for single-family houses in the two cities is more than $1 million.
Fueled by foreign buyers seeking safe havens for their wealth, the climbing real estate prices have outpaced local economic fundamentals such as job creation, immigration and income growth, the central bank governor warned.
There is growing evidence prices are reacting to “self-reinforcing” expectations among prospective buyers and lenders that property values will keep rising, Poloz said.
In reality, there is the “possibility” that prices could decline in these circumstances, he said while releasing an assessment on the state of Canada’s financial stability.
Evidence “continues to accumulate” of a coming market correction but the possibility of it triggering a severe recession remains low, Poloz said.
Year-over-year house prices have risen 30 percent in the greater Vancouver area while Toronto prices are up 15 percent in the past six months as household debit is increasing, the bank said.
Another impact of the massive wildfire that ravaged Alberta has shown up in unemployment numbers, with the loss of 24,100 jobs.
The fire last month forced 80,000 people to leave Fort McMurray and destroyed 2,400 houses and businesses.
Statistics Canada said the blaze caused production to be halted in the area’s oil sands region, with the largest job losses in resources and construction sectors.
It pushed Alberta’s jobless rate to 7.8 percent from 7.2 percent while across Canada, the rate dropped to 6.9 percent from 7.1 percent, the lowest level since last July.
News in brief:
- Saskatchewan-born Gordie Howe, known as “Mr. Hockey,” has died at age 88. The Canadian hockey legend played 32 seasons after debuting with the Detroit Red Wings in 1946. He is said to be the most influential player in popularizing hockey in the U.S. In his National Hockey League career, Howe scored 801 goals and had 1,049 assists, third to Wayne Gretzky and Mark Messier. Along the way, he spent 40 hours and 19 minutes in the penalty box.
- VIA Rail, Canada’s passenger railway service, is being threatened by a strike as early as Monday by Unifor. The union represents 1,800 VIA employees who work in railway stations, telephone sales offices, maintenance centers and administrative offices. VIA said it’s business as usual and the two sides continue to negotiate a new contract agreement.
Facts and figures:
The Canadian dollar is higher at 78.53 cents U.S. while the U.S. dollar returns $1.272 in Canadian funds, before bank exchange fees.
The Bank of Canada’s key interest rate remains at 0.5 percent while the prime-lending rate is 2.7 percent.
Markets are mixed, with the Toronto Stock Exchange index lower at 14,070 points and the TSX Venture index higher at 719 points.
The average price for gas nationally has risen to $1.10 a liter or $4.18 (Canadian) for a U.S. gallon.
Lotto 6/49: (June 8) 6, 23, 34, 35, 38 and 44; bonus 21. (June 4) 3, 4, 6, 10, 18 and 26; bonus 14. Lotto Max: (June 3) 12, 21, 28, 37, 40, 43 and 47; bonus 11.
- Saskatchewan Premier Brad Wall will push the merits of the proposed Energy East pipeline when he visits Quebec to meet with Premier Philippe Couillard on Thursday. The project has been opposed by Quebec politicians and environmentalists over potential ecological risks. The pipeline would transport more than a million barrels of western Canadian oil a day to refineries in Eastern Canada and a marine terminal in New Brunswick for shipment overseas.
- It is expected to take several weeks to repair a major sinkhole that swallowed up three lanes of a major downtown Ottawa street, the sidewalk and a parked minivan. Mayor Jim Watson said crews have poured the equivalent of about 300 truckloads of concrete into the hole that opened up near Parliament Hill. No one was injured by the incident in the area where workers have been digging a tunnel for a light rail transit line.
Jim Fox can be reached at email@example.com