Month: April 2019

MONTREAL — For months now, the real estate industry has been telling us that Canada’s mortgage stress test is the primary cause of the housing slowdown in Greater Toronto and Greater Vancouver.

The test is never far from the top of any real estate board press release announcing another decline in home sales, and groups like Mortgage Professionals Canada have warned that the rule risks shutting an entire generation out of home ownership.

They’re calling on the government to remove or loosen the test, which requires borrowers to qualify at an interest rate two percentage points higher than the one they’re being offered.

But a report issued by the Bank of Canada (BoC) paints a very different picture of what happened in the overheated real estate markets around Toronto and Vancouver over the past several years.

Watch: Canada’s high house prices may actually be harming the job market. Story continues below.

The report never uses the word “bubble,” preferring the more neutral-sounding term “froth,” but it paints a clear picture of housing markets where excessive enthusiasm led to runaway house price growth, followed by the inevitable snap-back once there weren’t enough buyers to keep the party going.

And while the mortgage stress test did play a role, it was a minor one, the BoC concluded.

A lot of things happened in 2016 and 2017 to slow down what was at the time an overheated housing market:

• British Columbia and Ontario introduced foreign buyers’ taxes
• Canada’s banking regulator, OSFI, progressively toughened mortgage lending rules
• The Bank of Canada began raising interest rates.

To get an idea of just which of these changes actually affected housing, and how, the BoC’s analysts analyzed “loan-level micro data to decompose movements in housing resales.” In other words, they attempted to track the actual flow of money through mortgage markets, to see how each change successively affected people’s decisions.

What they found was a housing market where prices grew way out of affordability range for buyers. Between 2015 and 2018, the rising cost of home ownership would have lowered annual home sales nationwide by a hefty 56,000, the BoC’s report estimated.

Only a fraction of that — 10,000 sales — would have been due to the mortgage stress test, the bank found. All the rest would have been due to rising prices and hikes to mortgage rates.

But Canada got lucky: The affordability crisis happened about the same time as a jobs boom, which pushed up incomes and increased demand for housing by almost enough to offset the jump in home ownership costs. Hence, a housing slowdown, but no bust.

The BoC flagged another classic sign of a housing bubble: Around 2015 and 2016, Toronto and Vancouver saw a spike in home sales, well beyond what you would expect at that level of employment and income. The increase in sales in that time was 10 times as large as it should have been, given economic conditions, the BoC estimated.

“Much of the previous strength in resale activity was influenced by extrapolative expectations. … These expectations quickly faded following the policy measures,” the report stated.

In other words, people panicked. Expecting house prices to keep growing rapidly, they jumped into the market as soon as they could, and so further pushed up prices and home sales.

Then, when new taxes and mortgage rules took hold, expectations went from too optimistic to too pessimistic. Sales fell below where they should be, given economic fundamentals, and that’s where they remain today.

Much as we’d like to blame foreign buyers or government policy, it seems we kind of did this to ourselves.

And a rapid rebound seems unlikely. The BoC’s report suggests sales will likely remain sluggish until prices align better with incomes.

But so far, affordability isn’t improving, or at least not much. Prices remain elevated even as sales remain weak, and a recent study from Zoocasa highlighted how extreme the problem has become: It estimates only the top 2.5 per cent of Vancouver’s earners, and the top 10 per cent of Toronto’s earners, could afford a detached home today. Only the top 25 per cent of earners in these cities can even afford a condo.

And, with household debt hitting yet another record high at the end of 2018, BoC deputy governor Carolyn Wilkins expects consumers to keep hitting the brakes on spending.

“When consumers are highly indebted — and yes, it’s a major vulnerability, it’s the number one financial vulnerability for the Canadian economy — at some point households may start to say, ‘I need to increase my savings’,” Wilkins told reporters at a press conference on Wednesday.

What that means for the housing market going forward is hard to guess, and even the Bank of Canada isn’t willing to go out on a limb. With new taxes and new mortgage rules working their way through the system, and high debt levels supported by a booming job market, we’ve got a brew on our hands no one has ever quite seen before.

The BoC’s report sums it up neatly, if not reassuringly: “The housing market is currently in uncharted territory.”

MONTREAL — If you need any further proof that big-city housing prices are out of control and a whole generation of Canadians risks being shut out of home ownership, look no further than a new report from real estate site Zoocasa.

Using data from Statistics Canada and the Canadian Real Estate Association, Zoocasa calculated that you would need to be in the top 10 per cent of Toronto’s earners to afford a detached home at the benchmark price of $873,100.

In Vancouver, only the top 2.5 per cent of earners can afford a benchmark single-family home, at $1.441 million.

Watch: Canada’s high house prices are actually hurting the job market. Story continues below.

But that’s okay, because there are still condos, right? Well, for some of us. Zoocasa’s data shows you would need to be in the top 25 per cent of earners in both Toronto and Vancouver to afford a typical condo in those cities ($656,900 and $522,300, respectively).

Given that, in both cities, about half of residents own their own home today, the data implies that the home ownership rate in these cities could fall by half over the coming years, if nothing changes.

“This illustrates just how elite a level of income you need to purchase a benchmark home in these cities,” said Penelope Graham, managing editor at Zoocasa.

“It really highlights that house prices have not kept pace with incomes in these cities.”

But she notes that the situation may not be as bad as the statistics suggest. Zoocasa’s study compared incomes against the benchmark price, and in most markets you can find properties below that price level, Graham said.

Still, like many other market experts, Graham believes renting will be the future for many would-be homeowners, so long as incomes lag house prices. She says buyers are stuck in a “cycle of unaffordability” as house prices rise faster than they can save for a down payment.

“That is going to put pressure on the rental market, which has been playing out in the Toronto and Vancouver markets,” Graham told HuffPost Canada.

Statistics Canada’s rental housing measure has been rising at the fastest pace in decades recently, though data from rental sites suggests things may have cooled off in the past month.

Affordable homes are available … if you travel

Notably, there are many markets where housing remains very affordable, Graham noted. In Regina, for instance, the top 75 per cent of earners can afford a detached home.

In some of the metro areas of southern Ontario, not far from Toronto, prices have risen but affordability remains relatively reasonable, Zoocasa’s data showed. You need to be in the top 25 per cent of earners to buy a detached home in Hamilton or Kitchener-Waterloo, and being in the top 50 per cent will get you a benchmark condo.

“We’re seeing spillover effects into these markets because there are affordable options there,” Graham said, particularly for those with the flexibility to work from home or commute long distances.

“There are options for those who are trying to get on the property ladder.”

OTTAWA — The United States is crediting tighter rules in the new North American free-trade deal for its decision to move Canada off a list of countries that it says are the worst violators of intellectual-property rights.

Not that Canada is completely in the clear, however: the Office of the U.S. Trade Representative is keeping Canada on a lower-level “watch list” over continuing concerns about online piracy and pharmaceuticals patents.

Canada was first added to the so-called priority watch list last year along with 11 other countries — including China, India and Russia — that the U.S. deems the worst offenders when it comes to intellectual property.

A new deal

The U.S. trade office at the time criticized Canada for failing to crack down on counterfeit and pirated goods at the border as well as expressing concerns about drugs and copyright protection, particularly online.

It promised what it called “intense bilateral engagement” to address the concerns. That coincided with negotiations on the new Canada-U.S.-Mexico trade deal, including new intellectual-property provisions.

In a report on Thursday, U.S. officials specifically described Canada’s agreement to these provisions in the trade deal as “the most significant step forward” for this country’s protection of intellectual property rights over the past year.

“Once implemented, these commitments will substantially improve the IP environment in Canada, including with respect to areas where there have been long-standing concerns,” reads the trade-office report.

Some intellectual-property experts have criticized those provisions, suggesting the deal will benefit U.S. companies to the detriment of Canadian industry.

The U.S. report also credits tougher penalties in court cases and a recent crackdown on counterfeit goods at a particular Toronto-area mall as evidence of a tougher stance on violators.

Watch: Canadians lead the ranks in pirating “Game of Thrones.” Story continues below.

Despite this, the report said U.S. officials remain concerned about weak protections at the border and online against counterfeit or pirated goods as well as proposed changes to Canadian laws around drug patents.

It concludes that U.S. officials will monitor Canada’s implementation of the intellectual-property provisions in the new trade deal “and looks forward to working closely with Canada in the coming year to address priority IP issues.”

COPENHAGEN — Major food companies in Italy and Denmark have received letters containing an unidentified powder and written threats requesting they pay money or risk having their products poisoned, authorities said Wednesday.

Danish police said the letters in Denmark contained “a hazardous substance” and were sent from Belgium. Danish Crown, which describes itself as Europe’s largest meat processing company, confirmed it received such letters but said that staff and consumers were not at risk.

Watch: Surprising foods that can cause food poisoning. Story continues below.

Similar letters have been sent to Italian coffeemakers Lavazza and Caffe Vergnano as well as Nutella producer Ferrero, said investigators in Turin, northern Italy.

Danish broadcaster DR said letters also have been sent to food processing companies in Belgium, Germany, Austria and Britain. Swedish broadcaster SVT said that frozen foods giant Findus, based in Malmo, southern Sweden, received a letter with white powder and a threat on April 7.

It was not immediately clear whether the letters were connected.

The letters in Denmark threatened to infect the companies’ products if they did not pay 30,000 euros ($33,735), Danish media said. Investigators in Italy said the same demands were made in the Italian cases.

Giada Zampano in Rome contributed to this report.

OTTAWA — The United States is crediting tighter rules in the new North American free-trade deal for its decision to move Canada off a list of countries that it says are the worst violators of intellectual-property rights.

Not that Canada is completely in the clear, however: the Office of the U.S. Trade Representative is keeping Canada on a lower-level “watch list” over continuing concerns about online piracy and pharmaceuticals patents.

Canada was first added to the so-called priority watch list last year along with 11 other countries — including China, India and Russia — that the U.S. deems the worst offenders when it comes to intellectual property.

A new deal

The U.S. trade office at the time criticized Canada for failing to crack down on counterfeit and pirated goods at the border as well as expressing concerns about drugs and copyright protection, particularly online.

It promised what it called “intense bilateral engagement” to address the concerns. That coincided with negotiations on the new Canada-U.S.-Mexico trade deal, including new intellectual-property provisions.

In a report on Thursday, U.S. officials specifically described Canada’s agreement to these provisions in the trade deal as “the most significant step forward” for this country’s protection of intellectual property rights over the past year.

“Once implemented, these commitments will substantially improve the IP environment in Canada, including with respect to areas where there have been long-standing concerns,” reads the trade-office report.

Some intellectual-property experts have criticized those provisions, suggesting the deal will benefit U.S. companies to the detriment of Canadian industry.

The U.S. report also credits tougher penalties in court cases and a recent crackdown on counterfeit goods at a particular Toronto-area mall as evidence of a tougher stance on violators.

Watch: Canadians lead the ranks in pirating “Game of Thrones.” Story continues below.

Despite this, the report said U.S. officials remain concerned about weak protections at the border and online against counterfeit or pirated goods as well as proposed changes to Canadian laws around drug patents.

It concludes that U.S. officials will monitor Canada’s implementation of the intellectual-property provisions in the new trade deal “and looks forward to working closely with Canada in the coming year to address priority IP issues.”

OTTAWA — Prime Minister Justin Trudeau lost an ally in Rachel Notley Tuesday evening, but he gained an opportunity to rebrand himself on a file on which he’s lost much credibility.

Over the past year, Trudeau has been pummelled by critics who feel his mantra of the environment and the economy going hand in hand is a slogan and nothing more.

The Liberal government’s decision to spend $4.5 billion on a pipeline and another $7.4 billion to triple the flow of bitumen to the West Coast enraged progressives and environmentalists last summer.

In the fall, a report by the United Nations Intergovernmental Panel on Climate Change suggested Canada’s objectives are far from what’s needed to stop the planet from catastrophically heating up, bringing along with it deaths, migration challenges, and species extinction. And earlier this month, Canada’s environment commissioner, Julie Gelfand, made it clear that the Trudeau government is not doing enough to even meet its unambitious Stephen Harper-era targets and greater action is needed.

On the other side of the issue, Conservative premiers are fighting Trudeau’s carbon price, and their supporters are enraged by what they perceive to be federal action aimed at limiting future oil and gas projects through measures such as Bill C-69.

In short, nobody is happy with Trudeau’s climate compromise.

Back in 2016, when the prime minister personally announced that the government was giving the Trans Mountain project the green light, Trudeau went out of his way to credit Notley for his decision.

“Let me say this definitively. We could not have approved this project without the leadership of Premier Notley and Alberta’s climate leadership plan, a plan that commits to pricing carbon and capping oil sands emissions at 100 megatonnes per year.”

Environment and Climate Change Minister Catherine McKenna also noted the “leadership of the Notley government” and stressed that the 100 megatonne cap was built into the federal Liberals’ climate plan and would lead to the “right approach to manage the growth of the oil sands.”

On the campaign trail, United Conservative Party Leader Jason Kenney has attacked his political rival for her close relationship with Trudeau.

“I think the biggest mistake that Premier Notley made was her alliance with Justin Trudeau. We are paying the price for that, for this job crisis and the failure of getting the pipeline built,” the UCP leader said.

The feud between Notley and British Columbia Premier John Horgan over the Trans Mountain expansion project is what led the federal Liberals to buy the pipeline.

Last April, when the two NDP premiers were threatening each other with ultimatums and the federal government was exploring its options, Trudeau held a press conference to declare the pipeline to be in the national interest. Having, in his words, put in place “the most rigorous set of environmental standards, ocean protection and coastline protection in the world,” Trudeau pledged of the pipeline: “It will be built.”

“… My commitment was to demonstrate to Canadians that we can grow the economy and protect the environment together. That’s exactly what we’re doing, and we’re simply demonstrating the resolve to actually deliver on that promise to Canadians,” he said.

Since then, Trudeau bought a pipeline. He saw his (and Notley’s) plan take a setback with what sources say was an unexpected decision by the Federal Court of Appeal to quash the project’s approval. But the National Energy Board’s reconsidered report, released in February, once again gave the project the OK. It also gave the Trudeau cabinet 90 days to make a decision.

Watch: Trudeau says Canadians should look at the big picture on Trans Mountain

Notley has been adamant she believes her partners in Ottawa will give the project the green light in May and that shovels will be in the ground this fall.

“I’m willing to bet my political future on it,” the NDP leader has said.

While the NDP premier’s rhetoric hasn’t shown it in recent months, Notley’s and Trudeau’s offices worked well with each other, and their interests were aligned on multiple fronts. On climate change mitigation and pipeline expansion, they sang from the same song book. Her willingness to act — albeit, perhaps, far from what some environmentalists desired — gave Trudeau political cover to say ‘yes’ to the Trans Mountain project.

With Kenney, Trudeau doesn’t have that luxury. The UCP leader has said he will scrap Notley’s 100-megatonne cap on oil sands emissions, let coal power plants operate past 2030, and rollback much of Notley’s carbon emission pricing plan.

Trudeau now has the opportunity to walk his talk. He can say no to Kenney.

No strict environmental plan, no pipeline. That was the bargain Trudeau sold to Canadians.

During a visit to Kitchener, Ont., on Tuesday, Trudeau was asked whether he worries about the future of his climate plan with a likely UCP victory. The prime minister left the door open to two possible courses of action.

When Albertans face difficult times, he said, “all of Canada will be there for them. That is going to continue.” But almost in the same breath, he also said he thinks it is “impossible in the 21st century, to have a plan for the economy, without having a plan for the environment. It just can’t happen.”

As the federal Liberals head towards the federal election campaign, there are two serious knocks against the prime minister in constituencies he plans to court again for support.

Many New Democrats, Greens, progressive voters, B.C. voters, Quebec voters, younger voters, chose to cast a ballot in 2015 for a leader they thought would act on climate change and someone they believed would keep his word.

Many now believe, however, that Trudeau has turned out to be the same type of opportunistic politician they were used to. Yes, he put a price on carbon but he approved, bought, and plans to build a pipeline. He lied about electoral reform, although he had enough honesty to admit later that he made the promise planning to support only one recommendation (a preferential ballot). The prime minister may also have lied about his office’s handling of the SNC-Lavalin file (time will tell, perhaps).

So, as Trudeau tries to rebuild the coalition that gave him a majority government, he needs to convince voters that he’s not a liar, that he means what he says, and that he’s not a fake environmentalist.

Here’s his opportunity to plant his flag.

OTTAWA — The federal government says it is delaying its decision on the Trans Mountain pipeline expansion project until June 18 in order to wrap up consultations with Indigenous groups.

The deadline is being pushed back by almost a month on the recommendation of both Indigenous communities and former Supreme Court justice Frank Iacobucci, who is advising the government on the consultation process, Natural Resources Minister Amarjeet Sohi said Thursday.

“The government has consistently said that a decision would only be made on the project once we are satisfied that the duty to consult has been met,” Sohi said in a statement.

The proposal to twin the existing Trans Mountain pipeline between Edmonton and Burnaby, B.C., was first approved by cabinet in 2016. The Federal Court of Appeal rescinded that decision last August, however, declaring that neither the environmental review nor the Indigenous consultations had been properly completed.

After taking into consideration the impact of more oil tankers on marine life off the coast of B.C., the National Energy Board (NEB) said on Feb. 22 that it still believed the project was in the public interest and should go ahead, subject to 156 conditions and 16 new non-binding recommendations for Ottawa.

That decision gave cabinet 90 days to make its call, setting May 22 as the expected deadline. But even as that report was being finalized, officials in Sohi’s office were signalling that more time would likely be required.

It was not lost on some critics that Thursday’s decision came two days after an Alberta election in which the lack of new pipelines played a significant role.

Conservative natural resources critic Shannon Stubbs also pointed out on Twitter the Liberals were announcing the deadline extension one month before the deadline and on the last day before the four-day Easter long weekend.

“Clearly never was a plan to decide in time for summer construction,” she said.

Sohi said consultation teams are continuing to meet with Indigenous communities potentially impacted by the project.

“This process includes engaging in meaningful, two-way dialogue — to discuss and understand priorities of the groups our teams meet and to offer responsive accommodations, where appropriate,” he said.

He said the government remains committed to doing “things differently” on the project.

The Liberals are under intense pressure to make progress on Trans Mountain, the only pipeline project the government has approved. Ottawa spent $4.5 billion to buy the existing pipeline last year in a bid to overcome political hurdles holding up construction.

Kinder Morgan investors got skittish in the wake of a B.C. court challenge, which aims to determine whether the province can prevent more diluted bitumen from flowing through B.C. given the limited understanding of how the product behaves when spilled in water.

The company halted work last spring, and warned it would cancel the project altogether unless Ottawa could convince it that the delays would not continue. Ottawa bought the pipeline instead, planning to expand it and sell it back to the private sector or Indigenous-owned companies once complete.

Alberta premier-designate Jason Kenney, whose United Conservative Party defeated the Rachel Notley’s NDP government Tuesday, has threatened to turn off the oil taps to B.C. unless opposition to the pipeline is removed. He also says he plans to hold a referendum in Alberta on equalization if there are no new pipelines built by 2021.

The NEB told Sohi a few weeks ago that existing pipeline capacity is both full and running at near-maximum efficiency, meaning the only way for Alberta oil producers to get more product to market is to build new pipelines. Additional rail capacity is possible but not the most efficient way to move oil, the NEB said.

Also On HuffPost:

CORRECTION: An earlier version of this story stated the previous deadline for a decision was May 23. In fact, the original deadline was set for May 22.

TORONTO — The federal government will end up with the power to regulate almost every facet of life — such as when you can drive or where you can live — if its law aimed at curbing harmful greenhouse gas emissions is allowed to stand, Ontario’s top court heard Monday.

Ottawa’s climate-change law is so broad, a lawyer for the province told the start of a four-day Appeal Court hearing, that it would give the federal government powers that would be destabilizing to Canada in the name of curbing the cumulative effects of global-warming emissions.

“They could regulate where you live. How often you drive your car,” Josh Hunter told the five-justice panel. “It would unbalance the federation.”

Watch: Doug Ford hammers federal carbon tax

In his submissions, Hunter was categorical that Ontario’s constitutional challenge to the federal Greenhouse Gas Pollution Pricing Act was not intended to be a debate on the realities or dangers of global warming. What’s at stake, he said, is which level of government has the power to deal with the problem.

“Which measure is the best measure — the most efficient measure — is best left for legislatures to decide,” Hunter said. “Which legislature? That’s what we’re here to decide.”

The federal government law that kicked in on April 1 imposed a charge on gasoline and other fossil fuels as well as on industrial polluters. The law applies only in those provinces that have no carbon-pricing regime of their own that meets national standards — Ontario, Manitoba, Saskatchewan and New Brunswick.

The Liberal government, which is due to make its submissions on Tuesday, insists its law is an appropriate response to the nationally important issue of climate change. It maintains the legislation was designed to “fill in the gaps” where provincial measures aren’t up to snuff. The aim, the government says, is to cajole people into changing their behaviour.

The federal law, Hunter also said, puts a “tax” on ordinary people every time they drive to work or heat their homes, which he said was too much of a burden.

As the justices pointed out, Ottawa is promising to return the money it collects to people in the affected provinces to offset the charge.

Hunter, however, said the rebates — via the federal climate action incentive — flow to everyone in the impacted province regardless of whether they drive at all, for example.

“It’s not just that you get back what you give,” he said.

Progressive Conservative Premier Doug Ford insists Ontario can curb greenhouse gas emissions on its own and has already taken significant steps to do so.

Those steps, Hunter told the court, include shutting down coal-fired power plants — a measure in fact taken by the previous Liberal government — which has sharply reduced the province’s harmful emissions.

“Ontario is further ahead than all the other provinces,” Hunter said. “(But) none of those (steps) count towards determining whether Ontario has a stringent plan.”

In addition, he said, the province is developing a “made in Ontario environmental plan” that is still under consideration.

Fourteen interveners, including provinces such as Saskatchewan and British Columbia, Alberta Conservatives, Indigenous organizations who point out they are acutely vulnerable to global warming, as well as business and environmental groups, will get their say over the course of the hearing.

MONTREAL — Grocery chain Metro Inc. will allow customers to use reusable containers and zipper bags to purchase fresh products in stores across Quebec.

The grocery and drug store company says in a statement today it wants to reduce the amount of single-use packaging it sells.

Metro Inc. senior vice-president Marc Giroux says the plan is a simple one and allows for customers to bring clean resealable containers and bags from home without compromising product safety or quality.

Practice being tested in three cities

Beginning April 22, customers across the province will be able to use their own packaging at the deli, meat, fish, seafood, pastry and ready-to-eat meal counters.

The practice is already being tested in stores in three Quebec cities: Drummondville, L’Ancienne-Lorette and Saint-Eustache.

The company says it has set objectives to reduce its environmental impact and is finalizing a packaging and printed materials policy to be introduced this year.

Also On HuffPost:

Vancouver’s epic housing meltdown has made news around the world, and with sales down by 31.6 per cent over the past year, people listing their homes are turning motivated. After years of what can only be described as a ludicrously strong seller’s market, buyers are in the driver’s seat today.

And to chronicle this turnaround, a number of Twitter accounts have popped up, gleefully displaying homes sold for way below asking, or listed for well below their last sold or assessed price. Chief among them are Mortimer_1 and Vancouver Real Estate Flip Flops, where new examples of house resale flops appear constantly, to the chagrin of realtors.

To be sure, these sorts of massive discounts are limited mostly to the top end of the market, the million-plus homes — which today includes just about any detached home in Greater Vancouver, although that is changing as house prices come down.

Watch: Average home prices across Canada. Story continues below.

In the rest of the market, prices have been somewhat more stable. According to data released Monday by the Canadian Real Estate Association, the benchmark price for a property in Greater Vancouver is down 7.65 per cent over the past year, to $1.011 million.

Those of us who aren’t in Vancouver may have noticed that a million dollars is still pretty pricey for a bungalow. So still not exactly a cheap market, as these Twitter feeds prove.

The British Columbia Real Estate Association reported numbers showing the slowdown in Vancouver’s market is now spreading to other parts of the province.

Sales are down steeply, when compared to a year ago, at real estate boards in Chilliwack, the Fraser Valley and the Kooteny and Okanagan regions, as well as on Vancouver Island, including Victoria. Province-wide, the benchmark house price is down 5.4 per cent over the past year, to $687,720.

‘Near recession-level’ housing demand

“B.C. home sales continue to be adversely impacted by federal mortgage policy,” BCREA chief economist Cameron Muir said in a statement. “The erosion of affordability caused by the B-20 stress test has created near recession-level housing demand despite the province boasting the lowest unemployment rates in a decade.”

“The sharp erosion of affordability caused by the B-20 stress test is now creating pent-up demand, as many would-be home buyers are forced to wait on the sidelines. Unfortunately, new home construction is slowing as well, which will likely lead to another housing supply crunch down the road.”