Canadian banks continue to report healthy and better-than-expected earnings, near-record profits, and capital levels at all-time highs. Yet valuation expansion for the sector has been muted so far in 2013 due to negative sentiment about the domestic housing market.
While analysts at Scotiabank acknowledge that the long-anticipated slowdown in Canadian housing appears to be underway, Kevin Choquette believes the concerns are being overly discounted in bank valuations.
Back on April 27th, Chicago-based real estate investment trust Equity Residential (EQR) lowered its guidance during its Q1 earnings call, namely due to the luxury apartment slowdown in Manhattan. "New York City just turned very quickly and more deeply than we expected; There's some crazy stuff going on in New York" said COO David Santee during the call.
Sales of Manhattan development sites slowed significantly in the first months of 2016, adding to broader concerns over the health of the New York real estate market.
A mere $90 million worth of development deals were recorded in the borough in January and none in February, according to data from Real Capital Analytics. Brokers blame a drop in demand on tighter financing markets, weakening luxury condo sales and the expiration of the 421a tax abatement program.
As Bloomberg notes, apartment prices in Manhattan are at record levels. Q1 Mean and median prices are up 15% and 22% y/y respectively. Drilling into the detail a little further, the median price for 3+ bedroom apartments skyrocketed to $4.0mm, a whopping 30% y/y.
Andrew Burton/Getty ImagesNew York City’s tax revenues declined about 1 percent in the past few months, reversing a trend of continuous growth since 2012. And a choppy real estate market is a major culprit.
Canada’s latest step to head off the threat of a housing bubble is making bonds sold by the nation’s housing agency increasingly precious.
Canada Mortgage & Housing Corp. said June 6 it will no longer insure financing for condominiums after other steps to cool the housing market. Lower issuance and an end to a six-month rally in government bonds means relative yields for CMHC debt may narrow by five basis points by the end of the year, said Andrew Kelvin, senior fixed-income strategist at Toronto- Dominon Bank’s TD Securities unit.
Over the weekend, we asked the question, Did the Canary of New York's Luxury Housing Market Just Die, following reports of the bankruptcy of a New York luxury real estate developet. Now, just two days later, we learn that another high-end real estate developer is having trouble closing out an ultra-luxury project in Manhattan.