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Oilpatch woes impacting Canadian economy, central banks says

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The Bank of Canada acknowledged Wednesday the struggles of the oilpatch are weighing on the broader economy, adding that investment in the sector is “projected to weaken further.”

The central bank, which announced it will keep its key interest rate unchanged at 1.75 per cent, said global benchmark oil prices have been about 25 per cent lower than expected since October.

“Here in Canada, lower oil prices have reached the point where they will have material consequences for our macroeconomic outlook,” Bank of Canada governor Stephen Poloz said. 

Worries about oversupply and slowing global demand for oil are also reflected in the bond and equity markets, the bank said. It also directed attention to a costly gap between Canadian and U.S. benchmark oil prices. 

“While price differentials have narrowed in recent weeks following announced mandatory production cuts in Alberta, investment in Canada’s oil sector is projected to weaken further,” the bank said in a statement.

However, overall, the bank expects the impact of the oil price decline to be about one-quarter the size of that during the oil price plunge that hit in 2014 and continued through 2016.

The Bank of Canada expects the slide in oil prices since last summer will reduce the level of Canadian gross domestic product by about 0.5 per cent by the end of 2020. (Chris Wattie/Reuters)

Concern over oil prices came to a head last fall in Alberta as the price gap between Canadian crude and U.S. benchmarks hit new records, topping $50 US a barrel in October, due to rising oil production, export bottlenecks and American refinery maintenance.

A number of oil executives and politicians warned of a broader impact on the economy.

This month, Alberta began enforcing mandatory production cuts on its largest oil producers in a bid to clear the oil glut.

Todd Hirsch, chief economist at ATB Financial, called it “encouraging” that the Bank of Canada is taking note of the issues in the oilpatch and their broader impact.

“I know it’s really fashionable right now in Alberta to feel that nobody outside the province cares about us,” Hirsch said.

“Well, the Bank of Canada certainly does understand the energy economy and they understand that this is a national problem, not just an Alberta problem.”

Hirsch said Poloz’s remarks sounded “more dovish,” leading to speculation “they may not raise rates at all in 2019.”

And that should help Albertans as many expected rates to go up, he said.

“It makes it more comfortable for all those people who are either carrying debt or wanting to take on some mortgage debt,” Hirsch said.

“There’s not a lot of welcomed news these days … but, in Alberta, we’ll take whatever breaks we can get. And holding steady on interest rates is one break I think we need right now.”

Robert Mark, portfolio manager at Raymond James in Toronto, said Poloz’s remarks on the struggles of the oilpatch were appropriate. He thinks the issue, which he called a “crisis” for the economy, has deserved to get more attention than it has.

 

Alberta Premier Rachel Notley speaks last month during an announcement of a mandatory cut in oil production to deal with a price crisis. (Jason Franson/The Canadian Press)

Mark said the energy industry is a big part of the Canadian economy and so, in light of the current challenges, there’s some reason to be less aggressive in monetary policy.

“You can’t have that kind of bloodshed — in terms of prices and differentials and job losses and all the things that come with it — without having negative ramifications,” Mark said.

The Canadian economy has been performing well overall, the bank said Wednesday.

“Growth has been running close to potential, employment growth has been strong and unemployment is at a 40-year low,” said the Bank of Canada release. 

It said exports and non-energy investment are projected to grow solidly.

However, the bank said, household spending will be dampened further by slow growth in oil-producing provinces. 

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Real Estate

Montreal real-estate prices climbing much faster than Toronto or Vancouver: study

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MONTREAL — The cost of housing per square foot has skyrocketed in Montreal while other cities saw little change over the last year, according to a new national survey.

The study found that condominium prices in downtown Montreal are up 13.5 per cent from last year to, on average, $805 per square foot.

That’s not as high as other cities, but it’s catching up — and Montreal’s rate of growth is outpacing other major Canadian cities.

Toronto’s condo prices grew to $1083 per square foot, an increase of just under 10 per cent, according to the study. In Vancouver, where you can find some of Canada’s most expensive condo prices, rates are down 4 per cent to $1192 per square foot.

To make the comparisons, Canadian real estate giant Century 21 collected data from real estate boards across the country to calculate the home costs per square foot.

“It’s important to compare apple to apples,” said Todd Shyiak, the company’s vice president of operations.

Montreal’s rise was even more explosive for detached homes and townhouses.

Detached houses in Montreal’s downtown and southwest rose to $958 per square foot, 40 per cent up from last year.

“It’s wild,” said Century 21 broker Angela Langtry. She says the pandemic raised demand.

“People had a lot of time to figure out they don’t like the home they’re in,” she said. “They all want pools.”

There was a big spike in sales, she noted, following a pause in brokerage during the spring, at the peak of the pandemic.

Experts say the pandemic will push people into the suburbs as they search for affordable housing and home office space.

“A huge portion of our society’s housing needs changed overnight,” said Shyiak. People “no longer need to be 10 minutes from the office.”

He says that could mean less demand for condos in the future. “People want their own front door,” he said.

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Carttera buys prime downtown Montreal development site

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Carttera has acquired a prime downtown Montreal site at 1455 De La Montagne St. which will mark its third development on the thoroughfare.

“We think it’s probably one of the best, if not the best, locations in the whole city,” Carttera founding partner Jim Tadeson told RENX. “We’ve had great success on De La Montagne.”

The two earlier projects are: L’Avenue, a building with 393 residential units, 84,000 square feet of office space and 34,000 square feet of retail that was developed with Broccolini and occupied in 2017; and Arbora Residences, a two-phase development with 434 rental and condominium units in three buildings being built in partnership with Oxford Properties.

Thursday’s latest acquisition, for $48.5 million from 630745 Ontario, is a 31,750-square-foot surface parking lot with flexible mixed-use zoning on the corner of De La Montagne and De Maisonneuve Boulevard West.

The site is near the Vogue Hotel Montreal Downtown, the new Four Seasons Hotel Montreal and high-end retail.

“It’s zoned for up to 203,000 square feet of density, which we’re going to take advantage of,” said Tadeson. “Our vision for the site is a condominium project with some retail.”

Since there is no demolition required and no heritage issues to contend with, Toronto-based Carttera plans to move ahead quickly with the luxury project.

It’s in the concept design phase and Tadeson said it could take six months or more before it’s prepared to make a submission to the city.

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Montreal Has the Hottest Real Estate Market in Canada Right Now

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If you thought Toronto’s real estate market was on fire, it’s time for a second take, because the market in Montreal is the hottest in all of Canada right now.

A newly-released annual report from CENTURY 21 Canada reveals that, following an early-spring decline due to the COVID-19 pandemic, sales numbers are bouncing back and house prices across the country are maintaining their strength. The study compared the price per square foot of properties sold between January 1 and June 30 of this year, compared to the same period last year.

In Toronto and Vancouver, unsurprisingly, prices remain high. But while regions across the country are seeing varied stories when it comes to their housing market fluctuations, Montreal stands out — there, prices have increased dramatically since 2019. While the numbers remain lower than Toronto and Vancouver, that housing market is proving to be the country’s strongest right now.

In Quebec’s largest city, prices have increased significantly since last year, particularly in the downtown detached house and townhouse markets. For example, the price of a detached house in Montreal’s downtown and southwest rose 42.14% to $958 per square foot, while townhouses went up 44% to $768, and condos, 13.55% to $805. Comparatively, in Toronto and Vancouver, prices saw more modest increases or, in some cases, even declines.

“Even though real estate in Quebec was not considered an essential service, we have seen strong demand and a jump in prices in 2020,” said Mohamad Al-Hajj, owner of CENTURY 21 Immo-Plus in Montreal.

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