Market Commentary

Residential Market Commentary - Week of February 1st, 2016

Canada’s priciest real estate market has found its way onto another top-10 list.

Vancouver ranks as the third least-affordable city in the world according to Demographia. (www.demographia.com) Hong Kong and Sydney came in at one and two.  Toronto did not make it into the top-10, although it ranks as the third least-affordable market in Canada.  (The study uses a comparison of median prices and median wages to determine affordability.)

The study suggests land use restrictions are a big contributor to the lack of affordability arguing that the lack of land being made available for low-rise housing drives up demand and prices for, much preferred, single family homes.

In Toronto, though, there are hints this may be changing, albeit in the surrounding 905 area code.  Figures compiled by Colliers International show that in the first three quarters of 2015 sales of residential land for townhouses and single-family homes rose from 29 to 35 compared to the same period a year earlier.  At the same time, sales of land for high-rises dropped from 80 to 71.



Le marché immobilier le plus coûteux du Canada se retrouve sur un autre palmarès.

Selon Demographia, Vancouver arrive en troisième place des villes les moins abordables dans le monde. (www.demographia.com) Hong Kong et Sydney sont en première et en deuxième places.  Toronto ne figure pas parmi les dix villes les plus coûteuses, même s’il s’agit du troisième marché le moins abordable du Canada.  (Pour évaluer le caractère abordable de l’immobilier, on a comparé les prix et les salaires médians.)

L’étude laisse entendre que les restrictions en matière d’utilisation des sols constituent un facteur important du caractère inabordable de l’immobiliser, soutenant que le peu de terrains disponibles pour les habitations basses fait augmenter la demande et les prix des maisons unifamiliales qui ont la cote.

Par contre, à Toronto, on remarque des signes que cela pourrait changer, même s’il s’agit de la zone 905.  Selon Colliers International, au cours des trois premiers trimestres de 2015, la vente de terrains à usage résidentiel réservés à des maisons en rangée et maisons unifamiliales est passée de 29 à 35 par rapport à la même période l’année dernière.  Pendant cette même période, la vente de terrains réservés aux tours d’habitation est passée de 80 à 71.

by First National Financial LP 3. February 2016 15:56

Market Commentary - January 29, 2016

Jason Ellis, Managing Director, Capital Markets

Good Morning.

I’m writing to you on Thursday evening, so my comments won’t capture the GDP data being released here and in the US at 8:30am on Friday…so keep an eye on that if you’re at all interested in economics.

The big news or at least the largely anticipated news this week was the decision by the Fed to leave its benchmark interest rate unchanged. The related comments were ‘dovish’ in nature, pushing expectations for a hike further out the curve.  The next meeting is scheduled for March 16th and the implied probability of a 25bp hike (as given by Fed Fund Futures) is just 14%.

With February just around the corner, we are anticipating a re-opening of the current December 2025 CMB bond with a deal likely to be launched the week of February 16th.  Indicative spreads are about 6.5bps wider than November when the December 2025 bond was first issued. In fact, CMB spreads remain near the wide end of their two year trading range, but despite this, they have outperformed other credits (like provincial bonds) throughout the most recent global volatility.

In other news, Scotiabank was downgraded by Moody’s earlier in the week.  Moody’s cited Scotia’s growth in credit card lending and auto finance. So, basically, they were downgraded for doing stuff that banks do.  

Sorry. That’s all I’ve got today. Must be a lack of Vitamin D or something, but I’m off to Mexico this weekend, so that should sort me out.

Adios Amigos,

Jason Ellis
Managing Director, Capital Markets

by First National Financial LP 29. January 2016 09:22

Residential Market Commentary - Week of January 25th, 2016

While market watchers focused on the housing frenzies in Toronto and Vancouver, or waited for the collapse in Alberta, Montreal real estate quietly had its best year since 2010.

Montreal saw housing sales climb 5% in 2015 with prices rising an average of 3%, according to the Quebec Federation of Real Estate Boards.  The average price of a home now stands at $295,000 in Canada’s second-largest city.

The Federation expects increases to continue, at least through the busy spring buying season.  Single-family units are forecast to increase in price by 2%.  Given increases of 9.8% and 18.9% in Toronto and Vancouver, respectively, Montreal remains incredibly affordable and could be attractive for foreign buyers.

The QFREB also expects to see oversupply in the Montreal condominium market decline this year, noting a 25% reduction in condo starts for 2015.


Tandis que les observateurs du marché avaient les yeux fixés sur les hérésies du marché du logement à Toronto et à Vancouver, ou attendaient son effondrement en Alberta, le marché immobilier montréalais enregistrait en toute discrétion sa meilleure année depuis 2010.

Les ventes de logements à Montréal ont progressé de 5 % en 2015 et les prix ont augmenté en moyenne de 3 % selon la Fédération des chambres immobilières du Québec.  Le prix moyen d’une maison se situe désormais à 295 000 $ dans la deuxième plus grande ville du Canada.

La Fédération s’attend à ce que cette hausse se poursuive, à tout le moins au cours du printemps, une saison où les achats sont nombreux.  On prévoit que le prix des résidences unifamiliales augmentera en moyenne de 2 %.  Quand on sait que les hausses enregistrées à Toronto et à Vancouver sont de 9,8 % et 18,9 % respectivement, Montréal demeure particulièrement abordable et pourrait attirer des acheteurs étrangers.

La Fédération s’attend également à ce que l’offre excédentaire de condominiums sur le marché à Montréal commence à diminuer cette année, ayant constaté une baisse de 25 % des mises en chantier en 2015.

by First National Financial LP 27. January 2016 12:09

Market Commentary - January 22, 2016

Jason Ellis, Managing Director, Capital Markets


The big news this week was the decision by the Bank of Canada to hold its benchmark rate unchanged at 0.50% on Wednesday.  The odds of a rate cut leading into the meeting were just over 50%.  One popular view is that the Bank sees the risks of further currency weakness and increased household borrowing as outweighing the benefits from a more accommodative policy.  The next meeting is March 9th and the implied probability of a cut is around 16%.

The Bank also released its quarterly Monetary Policy Report on Wednesday.  The 2016 GDP growth forecast was reduced from 2.0% to 1.4%, largely due to the precipitous decline in commodity prices (oil actually dipped below $27 this week).  That kind of adjustment to growth might normally have led to a cut in interest rates but the Bank noted the pending impact of fiscal stimulus (subject to federal budget details…all hail Trudeau) and the accelerated depreciation of the Canadian dollar in recent weeks.  In summary, the stimulus is in the pipeline.

In the minutes leading up the Bank’s announcement, the 5yr GoC benchmark (0.75% March 2021) yield was down 5bps on the day and setting a new low at 0.52%.  After the announcement, bonds sold off and yields jumped 10bps to 0.62% (remember…prices down/yields up).  Selling continued on Thursday and Friday morning.  5yr yields are now at 0.77% or 25bps higher since Wednesday morning. 

Despite the BoC meeting, the most remarkable thing that happened on Wednesday (at least for the Treasury Guy) was the NHA MBS issued by Bank of America Merrill Lynch (“BAML”) into one of the most hostile trading days seen in a long time.  As global markets melted down and credit spreads, including Provincials, were gapping wider, BAML had the audacity to launch at $475 million 5yr deal.  Remarkably, the issue was well received and even oversubscribed.  Inconceivable! 

Before we wrap up, let’s look back to where the market was one year ago, just after the BoC made its surprise 25bp cut on January 21 2015 and check the highs and lows along the way:



High Yield

Low Yield


5yr GoC





10yr GoC










5yr Bank Deposit Note Spreads





Finally, an important reminder that Monday is Robbie Burns day.  The day will be celebrated all over the world with Burns Suppers featuring the famous Haggis with Taters and Neeps.  Yum.  Remember, if it isn’t’ Scottish, it’s CRAP!

Lang may yer lum reek,

Jason Ellis
Managing Director, Capital Markets

by First National Financial LP 22. January 2016 09:37

Residential Market Commentary - Week of January 18th, 2016

To cut, or not to cut? That is the big question for the Bank of Canada this week.

More and more market watchers are expecting another drop when the central bank sets its policy rate this week. Right now a little more than half believe we will see the overnight rate trimmed by a quarter point to 0.25%.

It sounds like good news for those with variable-rate or hybrid mortgages, but many observers, including those who expect to see a cut, are calling it a bad idea.

Key concerns include:

  • Adding more heat to the housing market, especially in Vancouver and Toronto.
  • Adding more imbalance to the, already out of whack, household debt-to-income ratio.
  • Further undermining the value of the loonie. That would immediately reduce consumer purchasing power while offering minimal benefits to the export sector which is battling slow growth in the global economy.



Réduire, ou ne pas réduire? Voilà la grande question qui occupe la Banque du Canada cette semaine.

De plus en plus d'observateurs du marché s'attendent à ce que le taux directeur fixé par la banque centrale descende encore cette semaine. En ce moment, un peu plus de la moitié d'entre eux prédisent une diminution d'un quart de point de pourcentage, ce qui porterait le taux de financement à un jour à 0,25 %.

Une bonne nouvelle en apparence pour les détenteurs de prêts hypothécaires à taux variable ou hybrides, mais de nombreux observateurs, y compris ceux faisant cette prédiction, y voient une erreur.

Leurs réserves tiennent au fait que cette mesure :

  • ferait augmenter la pression sur le marché de l'habitation, particulièrement à Vancouver et à Toronto;
  • déséquilibrerait encore plus le ratio de la dette par rapport au revenu des ménages, lequel est déjà hors de contrôle;
  • alimenterait la dévaluation du huard, ce qui aurait pour effet immédiat de réduire le pouvoir d'achat des consommateurs, sans pour autant apporter de soulagement significatif au secteur des exportations, qui est victime de la faible croissance de l'économie mondiale. 

by First National Financial LP 18. January 2016 16:14

Interim & term financing - helps meet aggressive timeline for portfolio purchase

Client Objective: speedy close to save deposit
A long-standing First National client with national presence was looking to purchase six buildings. The vendor closing date was firm and aggressive. With a significant deposit on the line, the client wanted to close quickly to secure the building and then ensure a favourable rate for longer-term financing.

The First National Solution: two stages of financing
The First National team proposed interim financing to meet the aggressive closing deadline, closing on that phase within two weeks. While working on the interim, the team was also putting together the long-term financing solution with the goal of protecting against rate variances. It closed on that portion within 60 days, well ahead of industry standards.

The First National Approach: solution focus and no bureaucracy
By focusing on solutions, team has the ability to build a brand, strengthen the relationship and set new precedents. For this deal, it took hard work and ingenuity to close on the interim financing in two weeks. The lack of bureaucracy at First National was also critical – things got done according to the demands of the deal not some rigid process. And with so many moving parts and a lot of money on the line, the team communicated with the client every step of the way and remained accountable for ensuring that everything that was promised was delivered.

by First National Financial LP 13. January 2016 09:30

Residential Market Commentary - Week of January 11th, 2016

Anyone wondering about what 2016 will bring for the Canadian real estate market probably does not need to look any further than the recent headlines out of Toronto: Former Hells Angels clubhouse sells for well over asking.

The asking price was $649,900.  Purchase price was $885,000.  The building, in a gritty corner of the east end, has been abandoned since 2007.

More practically though, with the low loonie, the fast decline in oil prices and the slow growth of export industries, Canadian consumers – and in particular home buyers – are going to be key factors in the Canadian economy.  The question is whether they’ll be able keep things moving.

There is concern that debt laden consumers simply do not have the spending power left to the support the economy the way they have been for the past several years.

Another factor that could create concerns in Canada is China.  Slowing growth there and the ongoing devaluation of the yuan will likely see investment moving to safe havens.  Canadian real estate (particularly Vancouver) has traditionally been seen as very safe.


Quiconque se demande ce que 2016 réserve au marché immobilier canadien n'a qu'à jeter un coup d'œil aux plus récentes manchettes de la presse torontoise : Former Hells Angels clubhouse sells for well over asking (L'ancien repère des Hells Angels vendu à un prix bien au-delà de celui demandé).

La propriété en question, pour laquelle on demandait 649 900 $, a été vendue 885 000 $. Il s'agit d'un immeuble abandonné depuis 2007, situé dans un quartier défavorisé de l'est de Toronto.

Sur une note plus concrète, en raison de la baisse du huard, de la chute rapide des prix du pétrole et de la croissance modeste des secteurs de l'exportation, les consommateurs canadiens, plus particulièrement les acheteurs de maisons, joueront un rôle déterminant dans l'économie nationale. Mais pourront-ils à eux seuls faire avancer les choses?

Certains se demandent si des consommateurs considérablement endettés possèdent le pouvoir d'achat nécessaire pour soutenir l'économie comme ce fut le cas ces dernières années.

La Chine vient également brouiller les cartes et suscite de nombreuses inquiétudes. Le ralentissement de la croissance dans ce pays ainsi que la dévaluation continue de sa monnaie entraîneront probablement le déplacement des investissements vers des cieux plus cléments. Le marché immobilier canadien (surtout à Vancouver) a toujours été considéré comme un refuge très sûr.

by First National Financial LP 12. January 2016 16:07

Market Commentary - January 8, 2016

Jason Ellis, Managing Director, Capital Markets

Good morning and happy New Year. Only 352 more sleeps 'till Christmas. Blurg. For now, it's time to shake off any residual holiday cheer and get back to your regularly scheduled program.

When I last wrote, CMHC, the Department of Finance and OSFI had just ambushed the mortgage market with a carefully coordinated set of announcements. Refer to the last posting for details. Of all the changes, the increased cost associated with accessing the Canada Mortgage Bond (“CMB”) program will have the most immediate and measurable impact to CMHC insured multi-family lenders. More on that in coming weeks.

In the meantime, the broader market has limped into 2016. Credit spreads are under pressure and investors are keeping their money under their mattresses. The broadly watched CDX Investment Grade index has moved from +75 in November to +95 today, and for clarity, yes, higher is worse. Government bond yields continue to fall in sympathy with anemic economic data, and falling oil prices. The 5yr GoC bond opened today at 0.65%. That's down almost 40bps since November and closing in on the 0.55% low set in August. In spite of this, residential mortgage rates at the big banks have moved as much as 20 bps over the same period. It's not a cash grab, but rather an effort to restore net interest margins in the face of the ever increasing cost of funds. I wish I had something more positive to tell you. Let's hope the market just needed a week to settle back into work and we can shake, shake, shake it off soon.

Last minute update:
Employment numbers were just released in Canada and the US. In Canada, we had stronger than expected headline numbers but with at tilt toward self-employment. In the US, the change in Non-Farm payrolls shocked to the upside at almost 300,000 against 200,000 expected. Against that, no real sign of wage pressures though. Job gains without signs of inflation won’t be enough to turn the Fed more Hawkish (i.e.: accelerate rate hikes). In the 15 minutes or so since the date, yields in Canada are about 4bps higher across the curve. 0.70% and 1.35% for 5’s and 10’s respectively.

Have a great weekend,

Treasury Guy

Jason Ellis
Managing Director, Capital Markets

by First National Financial LP 8. January 2016 10:54

Residential Market Commentary - Week of January 4th, 2016

Knocking down debt leads the list of 2016 goals for maxed-out Canadians.

It is high-minded and laudable.   But this is also the 6th year in row it has topped the list of financial priorities (26%) in an annual survey by Angus Reid.

Canadian household debt to disposable income now stands just short of 164% – a new record high.  For every after-tax dollar they have to spend, they own $1.64.  Most of that is mortgage debt fuelled by low interest rates.  Although lagging wage growth remains a co-conspirator.

The high debt-to-income ratio has been labeled the “most important vulnerability in our economy”.  But the Bank of Canada and the economists say we can handle it.  And with growing predictions of another rate cut by the central bank it would seem Canadians are heading for another broken New Year’s resolution.



En 2016, les Canadiens qui ont atteint leur limite de crédit ont comme objectif premier de réduire leur dette.

Voilà un but tout à fait noble et louable.   Toutefois, cela fait aussi six ans de suite que la réduction de la dette figure au haut de la liste des priorités financières (26 %) selon un sondage annuel, mené par Angus Reid.

Le ratio d’endettement des ménages canadiens par rapport à leur revenu a atteint un niveau record, à près de 164 %.  Pour chaque dollar de revenu après impôt dépensé, ils en doivent 1,64 $. La plus grande partie de cette dette est constituée de prêts hypothécaires, favorisés par la faiblesse des taux d’intérêt.  Bien que peu importante, la croissance des salaires contribue à cette situation.

Le taux élevé d’endettement est considéré comme la plus importante faiblesse de notre économie.  Par contre, la Banque du Canada et les économistes affirment que nous pouvons nous en sortir.  Si l’on tient compte des prévisions croissantes selon lesquelles la Banque centrale diminuera les taux, on dirait bien que les Canadiens ne respecteront par leur résolution du Nouvel An encore une fois cette année.

by First National Financial LP 4. January 2016 16:43

Residential Market Commentary - Week of December 21, 2015

We have "lift-off".

Despite months and months and months of anticipation, when the U.S. Fed finally pulled the trigger on a rate increase last week nobody really seemed to care very much. The quarter-point boost puts the benchmark rate in the U.S. at 0.5%. So now what?

For us in Canada the implications are broad but not very deep. The most noticeable effect is on the value of the Loonie which has fallen to 11 year lows. For the average person that translates into higher costs when shopping or travelling in the U.S.

Canadian interest rates which have a history of moving in step with American rates are not likely to do so this time. The Canadian economy is not deemed robust enough, right now, to tolerate interest rate hikes.

Eventually fixed-rate mortgages will likely increase. Fixed rates are tied to long-term Canadian bonds which are, ultimately, tied to the U.S. dollar. Fixed-rate mortgage interest has already climbed in Canada, but that likely has more to do with fee changes at CMHC, than the increase in the U.S. Fed rate.


« Décollage » amorcé!

Malgré de longs mois d'anticipation, peu se sont émus, la semaine dernière, de la décision de la Réserve fédérale américaine de hausser son taux directeur. Cette augmentation d'un quart de point porte ce taux à 0,5 % aux États-Unis. Quelles seront les répercussions de cette hausse?

Bien que, de tout temps, les taux d'intérêt canadiens aient été en phase avec leurs pendants américains, il est peu probable que ce soit le cas cette fois-ci. À l'heure actuelle, l'économie canadienne n'est pas jugée suffisamment robuste pour subir des hausses des taux d'intérêt.

Bien entendu, les taux d'intérêt des prêts hypothécaires à taux fixe finiront bien par augmenter un jour. Les taux fixes sont liés aux obligations canadiennes à long terme qui, au bout du compte, sont liées au dollar américain. Les taux d'intérêt pour les prêts hypothécaires à taux fixe ont déjà grimpé au Canada, mais cette hausse découle probablement davantage de la modification des frais de la SCHL que de l'augmentation du taux directeur de la Fed.

by First National Financial LP 24. December 2015 10:05