Canadian mayors warn of looming home affordability crisis

Theglobeandmail.com
Oct. 8, 2015
By Michael Babad

Mayors warn Ottawa

The mayors of Canada’s major cities are warning Ottawa about a looming housing affordability crisis, and they want the issue front and centre as the federal election campaign nears its end.

Their point is threefold: Canada’s population is aging fast, federal money for social housing is disappearing, and many families are scrambling to find affordable homes.

The latter is an issue all too familiar to Vancouver Mayor Gregor Robertson, who chairs the Big City Mayors Caucus of the Federation of Canadian Municipalities (FCM), which rang the alarm bells this week after a meeting in Montreal.

Home prices in Vancouver and Toronto have surged to levels unattainable for many potential buyers.

“The federal government needs to remain a committed partner for our cities instead of walking away from the table,” Mr. Robertson said in a statement.

“Working together we can offer relief to our growing population of seniors and to hard-working Canadian families who struggle to find affordable housing.”

The group noted that the number of seniors across Canada will double to more than 10 million in the next two decades, and that federal money for social housing will decline to “nearly zero” from $1.6-billion now.

A recent report from the FCM also warned that the cost of buying a home has climbed markedly, shutting out young families and people just entering the work force, among others.

“For more than two-thirds of Canadians, a rising rate of ownership, along with gains in the value of their homes, has created a sound financial asset, enabling many to build their net wealth,” the group said.

“Not all have shared in these gains, of course. There is evidence to suggest that access to ownership is now being constrained, and that Canadian homes are, in general, overvalued.”

Investors anxious

Chinese stocks came roaring back today after a holiday period, but many other markets are mixed this morning.

The Shanghai composite surged 3 per cent, while Tokyo’s Nikkei lost 1 per cent and Hong Kong’s Hang Seng shed 0.7 per cent.

In Europe, London’s FTSE 100 and Germany’s DAX were up by between 0.1 per cent and 0.2 per cent by about 7 a.m. ET, and the Paris CAC 40 down by 0.1 per cent.

“Markets can’t possibly maintain the recent manic pace, and this morning in Asia the call went out to take a deep breath,” said Kit Juckes, the chief of foreign exchange at Societe Generale.

“The Chinese equity market reopened and bounced, but not as much as some hoped, and that was enough for a reversal of the recent risk rally.”

Encana in deal

Encana Corp. has struck a deal to sell a Colorado property to a group led by the investment arm of the Canada Pension Plan for $900-million (U.S.).

The Canada Pension Plan Investment Board will hold 95 per cent of a new concern, and The Broe Group the remaining 5 per cent.

The deal is for the Denver Julesburg Basin assets, tens of thousands of acres that in the first half of this year churned out an average 52 million cubic feet of natural gas a day and 14,800 barrels of crude and natural gas liquids.

Whither Europe's powerhouse?

There are fears in Europe today that its growth engine is running out of steam.

Concerns about Germany grew amid fresh numbers showing a drop of more than 5 per cent in exports in August from a month earlier, and a new report from forecasters who cut their growth outlook for the year to 1.8 per cent from an earlier 2.1 per cent.

“The slowdown in China, which stands for 10 per cent of German exports, is dangerously creeping in,” said Ipek Ozkardeskaya of London Capital Capital Group.

“[The] rising euro is also pulling away some support from German products in terms of price competitiveness. At a time when German companies are also suffering from reputational risk following the Volkswagen scandal.”

Beer, anyone?

The fight between Anheuser-Busch InBev and SABMiller PLC is anything but a friendly chat over a pint of beer.

AB InBev hiked its hostile bid for SABMiller yesterday, drawing a quick rebuff.

So today, the owner of the Budweiser brand fired back with a plea to SABMiller shareholders.

“If shareholders agree that we should be in proper discussions, they should voice their views and should not allow the board of SABMiller to frustrate this process and let this opportunity slip away.”

What to watch for today

Markets will be watching closely for this afternoon’s release of the minutes of the last Federal Reserve meeting, in mid-September, particularly now that some observers believe the U.S. central bank won’t hike rates until next year.

“The minutes ... should provide more insight into just how worried they were by the apparent slowdown in China’s economy, which triggered a bout of turbulence in U.S. financial markets in the run-up to that meeting,” said Paul Ashworth of Capital Economics.

“The conventional wisdom was that the Fed would wait until December, but after the evident weakness in the labour market in August and September, there is now a good chance that the Fed will delay the first rate hike until early 2016.”