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Average single family detached house prices will fall by 6.7 per cent next year as the recovery stalls, economic stimulus fades and debt problems increase, Moody’s Analytics and RPS Real Property Solutions Inc. forecast.

The pandemic will punish Prairie house prices the most in Canada, but even hotspots Toronto and Vancouver will see prices drop on the back of rising rental market vacancies and lower immigration rates, according to a new report.

Average single family detached house prices will fall by 6.7 per cent next year as the recovery stalls, economic stimulus fades and debt problems increase, Moody’s Analytics and RPS Real Property Solutions Inc. forecast in a housing market outlook published Wednesday. The figure combining all housing types is a drop of more than 7 per cent.

Calgary and Edmonton will lead the losers with 10 per cent peak-to-trough slides in prices next year as oil market woes continue, with Regina next at more than a 9 per cent drop predicted. Toronto follows with a near 9 per cent fall forecast. Vancouver prices are expected to drop at just less than 7 per cent, the report said.

“The housing market will no longer be able to escape the poor condition of the labour market as vacancy and delinquency rates rise in 2021,” report author Abhilasha Singh of Moody’s Analytics said in a statement. “However, while all regions are expected to experience price declines, the size of the impact will vary meaningfully across them.”

The report follows earlier forecasts by Canadian Mortgage and Housing Corp., the country’s largest public mortgage provider, and cited its data. On Monday, CMHC chief economist Bob Dugan reaffirmed his call that house prices could decline by 18 per cent because of pandemic-induced weak housing demand.

“High unemployment and lower income will restrain buyers’ return to the market,” Singh estimated. “So will affordability issues in Vancouver and Toronto. Further, slower in-migration flows to Canada due to COVID-19 disruptions will weigh on housing demand. Not even lower interest rates will be enough to save the housing market.”

Housing starts are forecast to decline to 151,000 annualized units by the third quarter of 2021, compared with 206,000 in the first quarter of 2020, according to the report. But the market will rebound in 2021 after vaccines have become widespread and prices for single family dwellings should rise by 4.6 per cent in 2022, Singh predicts.

Ottawa appeared to be an outlier, with a forecast decline of 3 per cent, less than half the amount for the next cities in the outlook, Hamilton, Halifax and Montreal. Meantime, Toronto and Vancouver house prices are among the nation’s highest, but their condo markets will contract from oversupply, Singh said.

“Rental vacancy rates will rise in Toronto and Vancouver as an increased supply of rental units coincides with a fall in demand due to disruption of migration to Canada,” she wrote.

One bright spot was the trend of city dwellers —  freed by working from home — seeking suburban and countryside properties with more space.

“The pandemic has boosted demand for properties offering more space for working from home and fewer shared areas with neighbours,” Singh said. “Smaller markets where such properties are more affordable will particularly benefit from this trend.”

Financial Post

9/23/2020 2:58:57 PM

Statistics Canada reported that employment in the natural resources sector fell 7.3 per cent, which is “the steepest decline ever recorded.”

CALGARY – Canada recorded its largest ever drop in natural resources employment in the second quarter, as the COVID-19 pandemic caused commodity prices to plummet and close to 43,000 workers lost their jobs.

In a release Wednesday, Statistics Canada reported that employment in the natural resources sector fell 7.3 per cent, which is “the steepest decline ever recorded” as “low natural resource prices contributed to broad-based job losses.”

StatsCan also reported the resource sector’s contribution to the country’s gross domestic product declined, while exports fell 9.3 per cent due to a collapse in commodity prices.

While the implosion of oil prices, to –US$37 per barrel in the second quarter, captured attention, demand for other natural resources, such as lumber, also led to weakening commodity prices and job losses in those subsectors.

The energy industry felt the brunt of the job losses, with 23,600 workers losing their jobs, followed by 11,850 jobs lost in the mining and minerals industry. A further 6,100 jobs were lost in the forestry sector and 1,400 jobs were lost in hunting, fishing and water industries. Altogether, there were 42,950 people out of work in those natural resources businesses in the second quarter.

As the price of oil and refined products like gasoline fell between April and June, so too did the broader natural resource sector’s contribution to the Canadian economy and to exports.

“Canada has long been a net exporter of natural resources — export values are generally about double those of imports,” the agency reported.

StatsCan data shows natural resources represented about 8.4 per cent of the country’s nominal GDP in the second quarter, which is down 9.5 per cent from the first quarter. This was the sharpest quarter-over-quarter decrease since the agency first started reporting quarterly data in 2007.

“A 10.1 per cent decline in the energy subsector was mainly attributable to a substantial drop in demand for crude oil and refined petroleum products. Demand fell largely because of global travel restrictions and the growing prevalence of working and schooling at home,” the agency said, noting that minor sector contracted 14.2 per cent in the second quarter.

A recent report by Calgary-based ARC Energy Institute notes that reinvestment in the oil and gas sector will fall to $9.5 billion this year, compared to $25.3 billion in 2019 — 64 per cent drop. The institute expects the sector’s revenues to reach $69.3 billion this year, a 42.6 per cent drop from last year.

The battered state of the sector has alarmed industry executives who are seeking government support. The Canadian Association of Petroleum Producers recently asked Ottawa to offer  accelerated depreciation of capital facilities to the oil and gas sector. That includes introducing 100-per-cent immediate deductibility for oil and natural gas capital investments, including clean technology and emission.

It also wants the government to reinstate the Atlantic Investment Tax Credit (AITC) at 15 per cent in short term, moving to 10 per cent in the long term.

“CAPP estimates more than 28,000 direct and 107,000 indirect jobs were lost in the sector in 2020,” the lobby group said in a report earlier this week. “The outlook for 2021 is highly uncertain and additional jobs losses are possible if COVID-19 is not contained and energy demand does not recover. Notably, because of the industry’s widespread supply chain, job losses have impacted every region of the country.”

Financial Post

• Email: gmorgan@nationalpost.com | Twitter:

9/23/2020 2:13:21 PM

Wes Hall, founder and executive chairman of Kingsdale Advisors and founder of BlackNorth Initiative at his home in Toronto.

Wes Hall wears expensive suits, drives a fancy sports car, collects art and lives in a yellow-brick mansion in Toronto’s exclusive Rosedale neighbourhood. He is 51, fit and buff, has five kids and a great wife, and is widely respected as a Bay Street power broker, but sometimes none of it matters.

Not when he answers the door to the mansion and a contractor asks him to go fetch “Mr. Hall.” Not when a neighbour asks if he is the security guard for the property, or mistakes him for his wife’s personal trainer. And not when Hall, who is Black, has to sit his mixed-race children down for a talk about life in their wealthy enclave, and beyond, and the rules one need observe.

For example: never, ever, walk with one’s hoodie pulled up after dark; always knock on the front door of a friend’s house instead of going around to the side or the back; and if you get pulled over by police for no apparent reason while driving your father’s Mercedes-Benz SUV through one of the wealthiest parts of Toronto, be polite, respectful, betray zero annoyance at the situation — and get home safe.

“It is absurd,” Hall said. “These are the things we teach our kids, where it would never even occur to you to teach your kids these things.”

By you, Hall means his white neighbours, and white Canada at large. A generally well-meaning, but at times oblivious bunch who often don’t get it, he said, because they can’t get it. They have not lived it. They have not watched the video of the killing of George Floyd in Minneapolis and thought that could be me, or wondered is that how people see me, as some Black guy, driving through the financial district in a red Ferrari convertible that Black guys supposedly can’t afford unless, well, you know?

Hall is a marquee Canadian player in shareholder proxy fights, the founder and executive chairman of Kingsdale Advisors and a wealthy man by any measure, but even he is not immune to the unseen measures, and assumptions that get made, because of his race.

“It is 2020, man, let’s move on,” Hall said. “Bad stuff doesn’t have to last forever. The Berlin Wall didn’t last forever; nothing that oppresses people lasts forever.”

Not if Hall, and his high-powered friends, can help it.

In June, in the aftermath of the Floyd killing, with Black Lives Matter marches rippling across Canada and issues around race and racism dominating international conversation, the kid who grew up in a tin shack in Jamaica grabbed hold of the metaphorical sledgehammer and founded BlackNorth Initiative, which he believes can address systemic racism by using a “business-first mindset” to create more opportunities for Black people in corporate Canada.

The current numbers offer a damning portrait of the status quo. For example: 7.5 per cent of Toronto’s residents are Black, but just 0.3 per cent of corporate board positions are held by Black people, according to a recent study by Ryerson University.

Hall and BNI hope to have at least 3.5 per cent of executive and board roles filled by Black leaders by 2025, and draw five per cent of summer students from the Black community , thereby changing the face of business in both the near and long terms.

So far, BNI is off to a flying start, if early momentum is any indication. Co-chairs of the initiative include Victor Dodig, Canadian Imperial Bank of Commerce chief executive, Fairfax Financial Holdings Ltd. founder Prem Watsa, and Rola Dagher, global channel chief at Dell Technologies Inc.

 Wes Hall believes BlackNorth Initiative can address systemic racism to create more opportunities for Black people in corporate Canada.

More than 300 Canadian CEOs — of big banks, blue chip law firms, universities, mining companies, hospitals, airlines, charities and more — have signed BNI’s pledge to “create opportunities within our companies for Black people,” and adopt measurable targets to track their progress toward that end.

What has helped the cause, no doubt, is that the guy calling the bigwigs in the corner offices and asking them to get with the program is a big shot himself.

“There is not a CEO in this country who would not return Wes’s call inside of a day,” said Walied Soliman, a friend of Hall’s, and chair of the law firm Norton Rose Fulbright LLP. Another friend, a non-Bay Street insider, phrased it thusly: “Everybody loves Wes.”

The Schulich Foundation, the philanthropic vehicle of billionaire investor Seymour Schulich, has stepped up with a million-dollar donation to BNI (which is going through the registration process to become a charity) to support the building of a Black cultural centre.

A BNI “virtual summit” is planned for the afternoon of Sept. 30. Conversations around race relations in Canada that were not happening six months ago are happening daily now.

“I hope it is not just a head fake,” said Hall, who has stepped back from his day-to-day activities at Kingsdale Advisors to devote “100 per cent” of his energy to the initiative. “I hope people are serious about change.”

“Hope” would be a good working title for a memoir, should Hall ever get around to writing his. For now, his calendar is jammed. He keeps three day planners on the desk of the main floor office in the yellow brick mansion filled with phone numbers, meeting times, ideas that pop into his head — questions he needs answers to — stuff he intends to get done.

It is outdoors, however, on a couch next to a pool overlooking a ravine and a maple tree, where Hall has done most of his work during the pandemic.

On a chilly September afternoon, the guy who paid for the multi-million-dollar-view was dressed in blue jeans and padding around in pink flip-flops.

Dave Budhlall, a childhood pal, nailed it: Hall is unguarded, open and hard not to like. There are no talking points, no script. On camping trips, he is skittish about putting the worm on a fishing hook; on cruises, he gravitates to the karaoke microphone; away from work, he will fight like hell to win at golf, pull-up contests and driveway basketball; when he hears of a relative in Jamaica needing surgery, he will pay for it.

“Wes loves people,” Budhlall said.

About that tin shack: it was his grandmother’s place, and she was loving, kind, strong and the opposite of Hall’s mother, who was abusive. By age 13, Hall was largely on his own, surviving on his wits, doing odd jobs, hustling for nickels and dimes. He refers to Sept. 27, 1985, the day he came to Canada, as the day he “left poverty.”

Hall had never seen an airplane up close until he was on one, destination Toronto, and his father’s house on Hupfield Trail in the city’s northeast corner. Leonard Hall, a glue factory worker by day and tailor by trade, made his son’s clothes.

Hall remembers walking around Lester B. Pearson Collegiate, feigning a limp, trying to look cool, before being identified by his classmates as legitimately cool due to his Jamaican accent.

 Wes Hall and BNI hope to have at least 3.5 per cent of executive and board roles filled by Black leaders by 2025.

He kept hustling, too. Going to school, working a paper route, cleaning offices at night, leaving home at 18, getting married at 21, working at a chicken factory, having a kid, then another and then a third.

Hall worked at restaurants, crummy retail jobs, as a security guard and as a mailroom clerk at a downtown law firm, but he never stopped believing that he was destined for bigger things, even if he wasn’t quite sure what they were, or exactly how to get there.

After receiving his law clerk’s certificate from George Brown College in Toronto, he interviewed for a corporate job at Global Television, part of Canwest Global Communications Corp. (which once owned the National Post) in 1994.

He had the necessary qualifications, sure, but limited practical experience and zero chance, in his mind, of actually being hired. Then the phone rang. Glenn O’Farrell, who at the time was general legal counsel at Global, wanted to meet him for drinks.

“I don’t even drink,” Hall said, recalling the memory with a laugh. “I didn’t even know what it was to go out and have a drink with somebody, because I had never been invited to have a drink with anybody.”

O’Farrell ordered a beer. Hall did the same. He didn’t like the taste, but faked that he did. The men talked. Mostly, O’Farrell listened. He wanted to know Hall’s background. What was his story?

“So I told him, I told Glenn everything,” Hall said.

What struck O’Farrell was Wes’s humanity. “It is an amazing, soul-stirring story, and it is not one that leaves anybody indifferent,” he said.

Hall was clearly ambitious, driven and bright. On paper, he was in way over his head, but in person he was irresistible. O’Farrell gave him a shot as his right-hand man, a mentorship that turned into a lasting friendship.

Within a decade, Hall had founded Kingsdale, borrowing against his house to start the business. In 2006, he cracked the big time, stickhandling the $18-billion takeover bid of Canadian nickel miner, Falconbridge Ltd. by the Swiss firm, Xstrata PLC.

The rest, as they say, was history, until George Floyd’s murder, until Hall looked around at his own life, at his experience as a Black man, and realized enough was enough.

Bay Street made Hall rich, but it is also where he got wise to the fact that whenever he walked into the boardroom of company A, B or C, he was invariably the only Black person in the room.

“Toronto is a great multicultural society,” he said. “Then I go down to Bay Street and I don’t see it there, and why is that?”

He tells the story of being pulled over by a cop in bumper-to-bumper downtown rush hour traffic in the black BMW sedan he worked his tail off to pay for, simply because his younger brother was drinking a pop in the passenger seat.

Budhlall, who is also Black, tells another story about a clerk tailing Hall around a gift shop while their families were on holiday together in Mont-Tremblant, Que.

“Wes is very forgiving and compassionate, and recognizes that change takes time, but that now is the time to stand up,” Budhlall said.

O’Farrell and Soliman, the lawyer at Norton Rose Fulbright , have the same message for their friend: Hall doesn’t need to make any more money, now is his time. He is Wes Hall, after all, a guy who is hard not to like, a guy who CEOs actually call back, a Black guy who grew up in a tin shack.

Hall stresses that it is those early chapters in life — where so many never catch that break, run across a Glenn O’Farrell, get asked about who they are — that deserve attention.

“We appreciate the people who go from the mailroom to the boardroom,” he said. “But we don’t see them until they actually get there. There are so many people knocking on that door, just waiting for a chance to get in, but not getting in because there aren’t enough people looking at what they have had to overcome.”

Now, here we are, collectively, caught up in a global moment. Will BNI’s efforts truly translate into a wider movement or are they merely a blip, a COVID-19 interlude, rendered in black and white? Where the idea of sharing a common purpose and creating lasting systemic change in race relations gets inoculated away the moment our attention drifts elsewhere?

Signing a CEO pledge is great, but so are New Year’s resolutions, and we all know how those generally turn out.

To nudge matters along, perhaps, the federal government is partnering with the country’s biggest banks in a new $200-million program aimed at helping Black business owners and entrepreneurs access loans and crucial services.

Change, it seems, is in the air, so much so that even the world weary are beginning to see some shoots of green.

Wendy Cukier, director of the Diversity Institute at Ryerson, has been around long enough to remember Olympic champion Donovan Bailey speaking out about racism in Canada in 1996. Bailey was largely vilified. Canadians didn’t want to hear it, didn’t want to believe it.

Now, CEOs of major corporations employing tens of thousands of people are acknowledging anti-Black systemic racism isn’t just an issue, but a problem within some of their own organizations. It is a seismic shift, with BNI at the forefront.

“The optimist in me is very encouraged,” Cukier said. “The naming of the problem — in and of itself — is very significant.”

Hall sure hopes so. There is a big portrait of American civil rights icon Rosa Parks on the second-floor landing of the big yellow house. Hall put it there as inspiration, as a reminder of what is possible when people stand up for what’s right.

“Rosa Parks could have been shot for what she did,” Hall said. “We are not asking anyone to risk their lives with what we are trying to do.”

It is 2020. Not doing would seem pretty absurd.

Financial Post

• Email: joconnor@nationalpost.com | Twitter: oconnorwrites

9/23/2020 11:07:26 AM

A sign outside a restaurant in Calgary.

The pandemic may squeeze revenues of small Canadian businesses for years in a so-called L-shaped recovery unless Ottawa clears federal aid logjams and boosts consumer confidence, an entrepreneur group says.

Restaurants and hotels could take more than eight years to resume pre-pandemic income while building management companies are on pace for a five-year recovery and lawyers and accountants may need two and a half years, according to the Canadian Federation of Independent Businesses.

Only eight per cent of its members in the hospitality industry said their sales figures had returned to normal levels, according to a CFIB survey.

By mid-September less than a third of all small companies had returned to at least normal revenue levels, the federation said in a research note. Simon Gaudreault, senior director of national research at the federation, says there must be a balance between averting a second wave and making it easier for small businesses to obtain loans and rent relief. 

“We’re not calling on governments to say, ‘OK, things should go back to business as usual.’ This is a serious situation,” Gaudreault said by phone on Wednesday. “But the question is ‘how can we do better six months in, how can we achieve the outcome on the public health side and contain that pandemic but at the same time make sure the economic damage is minimized.’”

The federation, which represents about 110,000 privately held businesses across the country with an average size of 10-15 employees, is keen to push the concerns of its members as a key driver of economic recovery on the local level to avoid an extended period of depressed employment, investment, production and sales: the L-shape.  

It wants to see the Canadian Emergency Business Account $40,000 loan open to companies using personal banking accounts, not just business accounts, and the federal rent relief program should remove the landlord veto to increase access, Gaudreault said.

“Another part of the solution must come from increased consumer confidence,” he said. “Maybe there is more work that needs to be done so Canadians feel safe going back to a cafe or restaurant knowing that all the measures have been put in place.”

Even the best-performing sector, agriculture, only has 57 per cent of small businesses reporting revenue back to normal, according to the federation. Wholesalers follow at 39 per cent, then finance, insurance, real estate, leasing and retail at 35 per cent, it said. Overall, 30 per cent of Canadian small businesses reported their operations had returned to pre-pandemic levels.

Apart from hospitality, other sectors that underperformed the overall Canadian private sector, were enterprise and administration management companies with only 20 per cent reporting normal operations, only 23 per cent of arts, recreation & information businesses were back to pre-pandemic levels, and just a quarter of businesses operating in the natural resources sector had recovered all of the lost ground.

The pandemic’s first wave drained the rainy-day funds of many businesses and some aid programs were limited to loans, further hamstringing their options, Gaudreault said.

“So if a second wave hits us and we go back to certain business restrictions that had been lifted over the summer, this is then a dangerous place because the resilience won’t be there as much as the beginning of the pandemic and that’s where we might start to hit a rough patch,” the researcher said. 

The estimated average recovery period to reach pre-pandemic revenues is one year, five months, across all sectors, according to the federation. Natural resources companies might take two years, construction one year, 10 months; manufacturing one year, two months and recreation like golf courses and gyms a year and a month, the group says. 

“All Canadians can support local,” Gaudreault said. “Go on their neighbourhood’s main street a few times a week to support their local businesses. Those are things we need to do. Otherwise we’re going to continue on that L-shaped recovery and it’s going to be super tough for businesses.” 

Financial Post

9/23/2020 10:42:05 AM

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