CANADA: International securities transactions data showed foreign investors increased their holdings of Canadian securities by C$6.2 billion in January. Net buying of bonds (+C$10 billion) easily compensated for net selling of equities/investment funds (-C$1.0 billion) and money market instruments (-C$2.7 billion). The bond net inflows were largely due to corporates (+C$12.7 billion, of which C$9.7 billion were private) and ex-federal government bonds (+C$2.9 billion). Alternatively, foreign investors reduced their holdings of federal government bonds by C$5.6 billion, the largest such divestment since June 2016. After recordhigh foreign purchases of Canadian securities in 2016, net foreign investment moderated in the first month of 2017. Equities lost some of their shine as high valuations continued to be a concern. Similarly, money market instruments lost favour owing to the widening rate differential with the United States. Foreign demand for bonds remained strong, however, particularly for private corporate bonds. This suggests that foreigners remain confident about the outlook in Canada.
The Teranet–National Bank National Composite House Price IndexTM rose 1.0% in February, the largest gain for that month in the index’s 18-year history. This unusually large increase for the season was attributable primarily to three of the 11 metropolitan markets surveyed: Toronto (+1.9%), Hamilton (+1.4%) and Vancouver (+1.4%). While prices were also up in Ottawa-Gatineau (+0.9%), they declined elsewhere: Victoria (-0.1%), Montreal (-0.2%), Edmonton (- 0.5%), Winnipeg (-0.5%), Quebec City (-0.9%), Calgary (- 1.3%) and Halifax (-1.9%). Year over year, the national index sprang 13.4%, its sharpest 12-month upswing since November 2006. This surge was driven mostly by prices in three cities: Toronto (+23.0%, a record), Hamilton (+19.7%, also a record) and Victoria (+15.9%). The Toronto market has become especially worrisome. Historically low supply there contributed to a 20% hike in the price of dwellings other than condos in the past 12 months. In a city where apartments account for only 26% of sales, this has created an acute affordability problem. However, in spite of soaring prices, sales for dwellings other than condos remain near their historical peak in Ontario’s capital.
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