How overvalued is the Canadian housing market?

March 10: The IMF chimes in on debt and Canadian house prices. Plus, a growing crisis in Brazil and China's female factory strikers


Yesterday was the day of the Apple Watch, and what a day it was: a daylong discussion of flashing screens, fitness trackers, battery lives and a $13,000 question: Is that too much to pay for a gold-plated smartwatch?

But in the meantime, the Canadian economy was not feeling much hype, with the announcement of the lowest housing-start numbers in six years (although the cold weather probably didn’t help), and a downgrade for Canada’s own smartphone maker by Goldman Sachs. The investment bank rated BlackBerry as “sell,” a notch down from its neutral rating. In the meantime, energy stocks fell as oil dipped once again, and the TSX/S&P Index posted a nearly 100-point loss, after a 150-point loss on Friday.

Today the economic calendar is fairly light: In the U.S., there are numbers for wholesale inventories and job openings, as well as the short-term energy outlook. Chinese inflation numbers are also out this morning: For February, inflation hit 1.4 per cent, a boost from January not enough to shake worries the country is headed for deflation, as the recent Chinese New Year tends to have a distorting effect on economic data.

What do we now know about the Apple Watch?
Too much, frankly. The announcement of the highly slated watch in San Francisco yesterday was the product launch of the year and the fanfare was inescapable. Highlights include the price (ranging from about a smooth $450 Canadian for the basic version, to $22,000 for gold-plated versions), an 18-hour battery life (as long as you’re not using it too much), and the ability to talk into your watch when you need to take a phone call, like a secret agent. Notable missing features include GPS, so, yes, you will still need to carry your iPhone, just in case you get lost.  

The IMF warns Canadians about the housing market. The same day Canadian housing starts hit their lowest pace since 2009, the IMF warned homeowners that their houses are priced too high, by as much as seven to 15 per cent. The report also criticized fractured responsibility for the housing industry, which is spread across several government bodies, and said more information should be available about how often Canadians are borrowing just to pay their down payments. Housing starts were at an annualized 156,300—down by 16.4 per cent—with a particularly marked drop in condos and apartments. But the slowdown is not merely economic: Cold weather in central and eastern Canada, where the drop was largest, also put a chill on construction. 

Brazil is in trouble. The real has fallen to an 11-year low, amid large protests and political fallout over scandals, austerity cuts and skyrocketing inflation, just months after Dilma Rousseff held onto power in Latin America’s largest economy. The currency has fallen almost 15 per cent against the dollar since the year began, and inflation has surged at an annualized 7.36 per cent. Meanwhile, Brazil’s biggest company, the state-owned oil company Petrobras, has been embroiled in a massive corruption scandal. Last week, the country’s central bank hiked the rate to 12.75 per cent, and the country now faces a budget deficit and is expected to face a recession this year.

Female factory workers in China are getting fed up. Women make up more than half the workers in some Chinese regions, according to this report from Quartz, and make only three-quarters of what their male colleagues make. Increasingly, women are behind protests for better pay, hours and severance rights in Chinese factories. The country’s sprawling manufacturing sector is also the industry with the largest labour strife, accounting for 40 per cent of strikes and protests across China.

Need to know
TSX: 14,854.49 (-98.01), Monday
Loonie: 79.39 cents (+0.09), Monday
Oil (WTI): $49.66, Tuesday (7:00 a.m.)


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