Tuesday 19 November 2019

Canada's economy is no longer invulnerable after all

HERBERT Crockett at different times called Cairo, Geneva and New Delhi home in his four decades as a human-resources executive with the World Health Organisation. The Canadian invested closer to his roots in 2005.

With Toronto on the verge of what turned into a colossal building spree, the 75-year-old retiree bought a C$904,000 (€673,000) one-bedroom suite in the Trump International Hotel and Tower. Eight years later, the 65-story skyscraper is complete, exuding Manhattan-style glamour.

However, for Mr Crockett, fellow investors and Canadians alike, the glow is fading as home sales tumble. They are worried that Canada's debt-fuelled expansion will stall before a global recovery can revive exports – a slowdown that would blemish Bank of Canada Governor Mark Carney's record just as he begins his new job as head of the Bank of England on July 1.

"If the city is any indication of what's going on in the country, it's over-reliant on its housing sector," Mr Crockett said, pointing out the window of a downtown coffee shop at dozens of cranes swinging across the skyline.

Condo crash fear

He added: "I'm afraid of a condo crash – and then what will happen to all the investments?"

Toronto is awash with property. There were 144 skyscrapers under construction in late February, more than in any other city in the world. Proposals for new apartments reached 253,768 units at the end of the fourth quarter, up 10pc from a year earlier.

Four luxury hotels have opened in the past two years.

The projects keep coming. Frank Gehry, architect of the landmark Guggenheim Museum Bilbao in Spain, plans three towers. The highest, at 85 floors, would be North America's tallest residential building.

Mr Crockett, who lives in Crozet, France, says he's losing C$7,000 a month amid the glut and that his Trump suite, which guests rent through the hotel-reservation system, is only occupied about a quarter of the time.

He is suing Donald Trump and the developers for C$2.9m for misrepresenting investment returns. About two dozen other buyers have brought similar cases.

Mr Crockett says in his lawsuit that a presentation by developer Talon International Development put returns as high as 27pc a year and that the company wasn't transparent about room fees and mortgage financing.

He adds that after he had bought the suite, Talon declined to answer questions about his investment.

As recently as September, the World Economic Forum ranked Canada's banking system the world's soundest for the fifth straight year. Canada's bank stocks never fell as far as their US counterparts during the financial crisis.

Carney job

This helped Mark Carney (47) land his new job in the Bank of England. Britain's Chancellor of the Exchequer George Osborne called him "quite simply the best, most experienced and most qualified person in the world to do the job."

There are already signs of how difficult Mr Carney's job may be. Because Britain's economy shrank in the fourth quarter, he could find himself struggling with fallout from an unprecedented triple-dip recession.

Yet if Canada's home sales keep sliding and household debt keeps rising, the banker who helped orchestrate his nation's vaunted growth and stability may consider his transatlantic move a timely escape.

Irish Independent

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