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CHHMA NEWS

CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 41, October 26, 2016

Inside This Issue:

• Join Us at the Industry Cocktail (November 24th) at Casino de Montreal
• The CHHMA Can Help You Improve Your Negotiating & Business Proposal Development Skills
• Reducing Your Freight Costs Will Improve Your Bottom-Line
• Choosing Not to Pursue Growth Can Be a Business’s Death Sentence
• How Amazon is Spending its Way Toward ‘Total Global Domination’
• Defiantly Independent: Home Hardware CEO Terry Davis Stares Down the Competition
• Walmart Visa Ban Extends to all Stores in Manitoba
• Record High Housing Prices Could Spur Further B.C. Sales Slide
• Realtor Says Vancouver Foreign-Buyer Tax had ‘Significant’ Impact on Luxury Homes Sales in Toronto
• Weak Retail Sales Keep Rate-Cut Talk Alive
• Canada’s Inflation Rate Up 1.3% in September
• U.S. House Prices Rise 5.1% in August; Consumer Confidence Slips


Association News

Join Us at the Industry Cocktail (November 24th) at Casino de Montreal  

This year’s Industry Cocktail is taking place on Thursday, November 24th from 5:30 p.m. to 8:30 p.m., at the Bar Dame de Coeur at the Casino de Montreal.

The location offers a fun and relaxing atmosphere where you can enjoy some wonderful food, drinks and conversation with friends from the industry while enjoying the festive season together.

Click here for further information and to register online.  

Click here for a PDF registration form.



The CHHMA Can Help You Improve Your Negotiating & Business Proposal Development Skills    

The CHHMA has organized an information-packed one-day learning program that will provide attendees with proven strategies and tips to help improve your negotiating and business proposal development skills.

Don’t delay – register NOW, attend, and get the expert advice and insights you need to improve business results, profitability, and outcomes!

One-Day Learning Program Divided Into Two Sessions:

Morning Session: Secrets of Power Negotiating® – Key Insights for Improving Negotiating Effectiveness

Afternoon Session: Developing Persuasive Proposals

Note: Members/guests cannot register for only one of the two sessions.This is a one-day program.

Date: November 23, 2016

Venue Location:
Centre for Health & Safety Innovation (CHSI)
5110 Creekbank Road
Mississauga, Ontario
(905) 219-0044
http://www.tchsi.ca

Tuition Fee: $399.00 plus $29.95 for course materials (HST not included)

Program Time Frame: This one-day program will run from 8:30 a.m. until 4:30 p.m. There will be one 15-minute refreshment break
in the morning and afternoon, as well as one 50-minute lunch break.

Why You Need to Attend This Impactful One-Day Program:

Effective negotiating and proposal development skills are essential for everyone.The hardware and housewares industry and retail selling/marketing environment have become increasingly complex and competitive. People who work in this industry need to effectively develop and deliver business and line item reviews, propose new products, and/or make recommendations regarding the category, and then they need to be able to negotiate properly with customers/accounts across a wide range of channels.  Also, people are negotiating all the time with their colleagues, co-workers, and senior management.

Whether you are an experienced senior manager or a sales/marketing professional looking for a few new ideas and strategies – or a novice looking for the fundamentals – this one-day program will provide you with proven strategies you can implement immediately.

Who Should Attend:

This one-day program is designed for senior management, sales management, all levels of sales and account management, and marketing and customer service personnel.Anyone involved in communicating and negotiating with customers/accounts can benefit from attending.

What You Will Learn:

This highly beneficial one-day program will be divided into two separate sessions. The following are some of the key learnings that will be covered during the program:

• Learn a proven and powerful negotiating process and methodology.
• Be able to effectively prepare and plan for all negotiations.
• Understand the three critical stages of every negotiation.
• Learn the three key factors that influence every negotiation.
• Learn how to properly and effectively make concessions.
• Learn valuable techniques on how to deal with difficult objections in negotiations.
• Learn one key negotiating gambit and corresponding countergambit.
• Learn several powerful negotiating tips, questioning techniques, and phrases that will help to improve negotiating effectiveness and help to optimize outcomes.
• Reduce unnecessary compromise and excessive price discounting.
• Learn a proven formula for how to construct your proposals and business reviews.
• Learn how to improve your company’s value proposition in proposals.
• Learn how to shorten the selling cycle and influence faster decision making by customers.
• Learn how to move away from feature-based communication in your proposals and articulate the real benefits for customers.

Meet Negotiating Coach® Michael E. Sloopka:

Michael is a recognized negotiating and sales process transformation expert and a highly rated professional speaker, teacher, and coach who assists organizations and individuals by joining their team for specific negotiating projects or by training their staff to negotiate and manage customers and vendors more effectively on a daily basis.  He is adept at helping his clients build, develop, and maintain high-performing sales and marketing teams. He is also a leading expert in diagnosing selling and buying behaviour and the decision-making dynamics that directly affect the outcome of a negotiation.Michael has written articles or contributed to articles for the Globe and Mail newspaper, Investors.com, Forbes.com, AMEX Open Forum for Small Business, and Selling Power and Profit magazines.

Offering more than 30 years of successful negotiating experience in sales, marketing, purchasing, distribution, and consulting – from small business to multinational corporations, from personal transactions to multimillion-dollar extended supply agreements and contracts – Michael has added hundreds of millions of dollars to his clients' collective bottom line through effective education, consulting, coaching, and negotiation facilitation. He has personally taught tens of thousands of individuals a proven process and methodology, as well as strategies and tactics, to optimize their outcomes. Michael has previously delivered high-impact presentations at various CHHMA conferences and educational sessions.

What Each Attendee Will Receive:

With fully paid tuition, each attendee will receive a bound workbook and the MP3 downloadable version of the Power Negotiator Toolkit Audio Learning Program that includes the following:

Secrets of Power Negotiating® Audio Learning Program: Almost 6 hours of proven content and advanced material containing all the methodology, strategies, and tactics you will need to become a power negotiator.
Secrets of Power Negotiating® Key Verbal Phrases and Questioning Techniques: Over 106 minutes of Michael Sloopka’s “best practice” phrases, scripts, questioning techniques, insights, and tips – including numerous personal and business application examples.
Secrets of Power Negotiating® Personality Type and Corresponding Negotiating Style Self-Assessment: A PDF format
printable version of a self-assessment questionnaire and the interpretation information that you need in order to learn more about yourself and how to interact more effectively with different personalities involved in negotiations.

Spots are limited so register now while you still can for this Impactful Professional Development Learning Opportunity



Reducing Your Freight Costs Will Improve Your Bottom-Line    

Today’s business environment has become the most competitive that we have ever seen. The pressure on achieving bottom-line results has intensified across all industry groups. Your customers are finding new and innovative ways to put additional pressure on you and your company. Margins are being squeezed and you are being asked to answer for this decrease in profitability.

At the CHHMA we recognize that this pressure is intense and have and continue to offer our members an opportunity to improve margins by unlocking savings within their supply chain. Its an area that is often taken for granted and yet it can account for on average about 4-10% of your overall top-line revenue. From the cost of landing your raw materials or products here in Canada, taking them into inventory and processing and shipping the orders to the retailers is a process that consumes significant dollars.

For over 22 years we have been introducing Logistics Solutions & Services Inc. to our members on a consultative basis. They have provided numerous members with advice and knowledge on how they can reduce their distribution and supply chain costs. LSS have proven over time that by creating buying power within our membership, as well as being able to identify the true market cost of transportation they have contributed to many of our members’ bottom line performance.

If you have not used their services, we would like to introduce them to you. Take them up on a “no cost-no obligation” session to explore how they can assist your company. Mr. Paul Publow, President of Logistics Solutions will assist you in maintaining and improving your bottom-line. There is no cost attached to exploring this initiative and we highly endorse his services.

Logistics Solutions & Services Inc.
Paul F. Publow, President
Email: pfpublow@LSSaves.com
Cell: 647-290-0547



Best Business Practices

Choosing Not to Pursue Growth Can Be a Business’s Death Sentence

Choosing not to pursue growth was once an acceptable strategy for entrepreneurs. Markets were more stable, and being “good enough” was enough for many customers and business owners.

Today, it’s a death sentence. Customers are restless and the competition is increasing. Entrepreneurs have to upsize their ambition, enhance their processes and adopt continuous innovation if they want their companies to survive, let alone prosper.

The recent PROFIT 500 CEO Summit, an invite-only event for the founders of Canada’s fastest-growing companies, as ranked by Canadian Business magazine, attracted 250 delegates from across Canada, eager to learn how to expand their businesses and grow as leaders.

Pierre Cleroux, chief economist at Business Development Bank of Canada, set the stage by pointing out the top opportunities in the global economy. Despite growing concern about the slowdown in China, for instance, Cleroux noted the Chinese economy is still growing by 6% a year. “China is not on the verge of recession,” he said. “They’re in transition.” With salaries growing 15% a year, he said, manufacturing is no longer a growth industry in China. But as its economy becomes increasingly reliant on consumer spending, he sees more and more opportunities for Canadian exporters.

In addition, U.S. unemployment is at its lowest rate since 2007, and India expects to post 7% annual growth in the next five years. “There’s a lot of growth in the world economy,” Cleroux said. “There are more opportunities outside Canada than there are here.”

Even in Canada, he insists growth is a choice: “Our research is showing that growth in the economy is not the most important factor in business growth. It’s the strategy that businesses are using that is most important.”

How do you build an organization that can innovate and grow? Plan, measure, communicate, repeat, said Adam Bryant, who writes the New York Times’ weekly leadership column, “Corner Office.” The Montreal-born Bryant distilled the lessons he’s learned from hundreds of CEO interviews into a few key principles:

Have a simple plan. Complex, multi-faceted strategies get lost in the daily grind; keep things simple. Measure progress with one or two key indicators, he adds: “If you don’t have metrics, your people will make their own up.”

Communicate it relentlessly. “There is no such thing as overcommunicating,” Bryant said. Silence breeds disquiet. He likes to quote Geoff Vuleta, CEO of Fahrenheit 212, a New York-based strategy firm: “Never give people a void. Because instinctively they’ll think something is awry.”

Make your own rules. Every company has to establish its own values, Bryant said. But again, keep your list short. He has often watched company presidents struggle to list their core values: “If companies have six or more values, no one can remember them all. Not even the CEO.” Bryant cites a story from Robert LoCascio, CEO of LivePerson, a New York-based customer-engagement firm. A few years ago, LivePerson had amassed 40 official core values — including “innovation” and “customer first.” During two days at an offsite retreat, the team wrestled those values down to two: Be an Owner, and Help Others.

Show a little respect. “You have to treat people with respect when they come into work,” Bryant said. The No. 1 form of respect? Listening.

Make the most of your team. Teams don’t automatically work smoothly; they have to be bred for collaboration and recognized for their results. Mark Toro of North American Properties in Atlanta, Ga., gave Bryant his simple formula for getting the most out of teams: he ends every meeting by asking, “WWDWBW?” (Who will do what by when?”)

Build Trust. Bryant’s lone Canadian example came from Shopify CEO Tobi Lutke, who developed the concept of a “trust battery.” The metaphor reminds us that trust levels between individuals may rise or fall, but always need to be recharged. When people first enter an organization, Bryant said, “Everyone’s trust battery starts at 50%. Every time you work with someone, the trust battery between the two of you is either charging or discharging.”

Globalive Communications chair Tony Lacavera, whose company topped the list of Canada’s Fastest-Growing Companies in 2004 even before founding (and successfully selling) renegade cellphone provider Wind Mobile, told the next generation of growth companies they all share one remarkable opportunity: to market themselves as Canadian companies in a world that respects Canada as a high-quality brand.

“Canadian technology, Canadian banks, can change the world,” Lacavera said. But it’s all in your attitude. If telecom giants Bell and Rogers had spent as much time seizing foreign markets as they did trying to squelch new competitors such as Wind, they would be multinational successes today, he said. Similarly, “We have the best banks in the world,” but he wonders why they didn’t use the financial crisis of 2008-9 as an opportunity to acquire undervalued banks around the globe.

“We have to start getting our act together and really start propelling our companies on the world stage,” Lacavera concluded. “If we don’t, we’re at risk of falling further behind our peers in the global marketplace.”

Source: Article by Rick Spence, The Financial Post 



Industry News

How Amazon is Spending its Way Toward ‘Total Global Domination’


Amazon.comIn the third quarter of 2014, online retail giant Amazon Inc. posted one of its worst ever quarterly losses, prompting a sell-off in the company’s shares and heightening scrutiny of chief executive Jeff Bezos’ free-spending ways.

That quarter, the online retail giant lost US$437 million while spending a seemingly outsized US$2.42 billion on research and development, leading at least one analyst to question whether the company had too many “balls in the air.”

When Amazon reports 2016 third-quarter results this Thursday after the bell, that R&D figure will likely have ballooned to nearly US$4 billion — but don’t expect investors to complain.

Since that ugly quarter, the company’s shares have rallied nearly three-fold, to $834.34 Tuesday afternoon from US$284.40 the day after those results were released. And it is Bezos’ massive bets in R&D that are helping to drive the company forward, analysts say.

“It’s kind of shocking how well it’s working,” said Gene Munster, an analyst at Piper Jaffray, of Bezos’ investment-heavy strategy. “And there was a period there that people didn’t feel like it was working.”

Amazon ranked as the seventh largest R&D spender last year, just behind Google and ahead of Toyota, according to a recent PriceWaterhouseCoopers report. It wasn’t even in PWC’s top 20 in 2013.

Investors now for the most part see the big spending on R&D as “a positive,” because Amazon is “investing in the future” and grabbing market share, Munster said. For example, units sold on Amazon sites grew 28% last quarter, ahead of the 15% growth in e-commerce as a whole, he said.

“They are essentially going to take over traditional retail,” Munster said. “It’s a bold comment. But when you are thinking in those terms, it takes many years and a lot of investment to do that. And that’s their goal.”

Amazon’s investments in areas beyond pure e-commerce have paid off too.

Amazon Web Services, its cloud computing unit whose customers include Netflix, generated US$2.88 billion in net sales last quarter. That’s up 58% from US$1.82 billion a year earlier.

“They’re generating a whole lot of revenue…. Who cares if they’re spending a billion or two or three billion on R&D, if they’re building revenues at that kind of clip?” said Michael Pachter, an analyst at Wedbush Securities Inc.

Meanwhile, the e-commerce giant continues to expand its reach and speed up its response to its customers. Amazon planned to open 21 new warehouses during the first nine months of this year, up from 10 in the same period, Bloomberg reported.

Last month, Amazon began offering same-day delivery in Toronto and Vancouver to members of its Amazon Prime program, on purchases over $25.

The e-commerce giant is also adding 120,000 seasonal positions, up from 100,000 last year, “to support growing customer demand,” Mike Roth, Amazon’s vice president of customer fulfillment, said in a statement earlier this month.

These workers will be placed in fulfillment centers, sorting centers and customer service sites in the U.S.

Analysts are expecting revenues for the fiscal third-quarter to have grown by 28.8% to US$32.6 billion and earnings per share of US$0.80, according to Bloomberg.

“They’re going to take over the world,” said Pachter. “They’re going to be the architecture for anyone who wants to do anything in the cloud. And they’re going to dominate retail. And that tech spend line is showing you that they’re making progress towards total global domination.”

Amazon does not directly report a “research and development” line in its financial statement. Rather, it appears under the heading “technology and content.”

The “technology” component includes a range of items, from R&D activities such as developing new product platforms to the cost of technology infrastructure, according to Amazon’s 2015 annual report. “Content costs” consist mainly of “payroll and related expenses for employees involved in category expansion, editorial content, buying, and merchandising selection,” the report said.

The jump in these “technology and content” costs between 2013 and 2015 stemmed largely from increased spending on technology infrastructure for AWS, and an increase in payroll and related costs needed to expand Amazon’s products and services, the report said.

“We expect spending in technology and content to increase over time as we continue to add employees and technology infrastructure,” Amazon said.

Bezos has said the retailer aims to be an “invention machine.”

“Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there,” he wrote in his 2015 letter to shareholders.

“Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right… We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs.”

It’s “important to be bold” as “big winners pay for so many experiments,” Bezos wrote.

Heavy investing in R&D hasn’t been a silver bullet for all its technology peers.

For example, social media platform Twitter has been spending proportionally far more than Amazon, with R&D costs of US$178.5 million last quarter at nearly 30% of the period’s revenue.

Yet, Twitter’s user growth has stalled this year, and a series of potential suitors have backed away, prompting the company to reportedly consider job cuts.

Some analysts are uneasy about Amazon’s growing capital expenditures.

“We remain believers in the long-term story,” Robert Peck, an analyst at SunTrust, told Reuters this week. But the amount of money needed for Amazon’s expansion plans and support its projected revenue growth has not been factored into its share price, he said. Others, however, insist the R&D investments are money well spent, and have helped improve margins.

Amazon can afford to keep spending money on R&D because the markets it’s targeting — particularly cloud computing and e-commerce — have plenty of runway to grow, Munster said.

“If these were markets that were relatively mature, then you would have to think that some of their R&D spend would have to taper off,” Munster said. “But when you just think about broader commerce, the percentage of things that are bought online, the percentage of computing that’s done on cloud, this is something that is sustainable for the next five plus years.”

Source: Article by Armina Ligaya, The Financial Post 



Defiantly Independent: Home Hardware CEO Terry Davis Stares Down the Competition

If you want to get a chuckle out of Home Hardware chief executive Terry Davis, ask him why the company has kept its headquarters in St. Jacobs, Ontario.

“Why not,” he said of the company, which can trace its roots to a hardware store in the town in 1900.

Each year, thousands of visitors flock to the village along the Conestoga River, a short drive from Kitchener-Waterloo, which is about 110 kilometres west of Toronto, to attend the country’s largest year-round farmer’s market.

A towering new Home Hardware store opened last year in the town, across from the original location. And a short distance away, in the heart of Mennonite country, is a 1.5 million square foot distribution centre, along with a mock showroom and Davis’s own office.

It’s a testament to Home Hardware Stores Ltd.’s rural roots. Its stores are fixtures along main streets in small communities such as St. Jacobs.

Davis becomes serious when the discussion turns to the competition.

He isn’t intimidated by the machinations of Home Depot or Lowe’s, which recently closed a deal to buy RONA. The U.S. giants, with substantially more money, have been building anchor stores in suburban plazas, as they seek to dislodge Home Hardware from the minds of amateur and professional handymen.

But Davis doesn’t believe his militia of dealers need to open super-centres to keep up.  Prime urban real estate doesn’t support a low margin industry like home improvement, he said.

Home Hardware has an 80,000-square-foot building centre in Gananoque, Ont., about 290 kilometres east of Toronto, but many stores are less than 10,000 sq. ft.

Nor is Davis about to change Home Hardware’s unique corporate structure to match its competitors. “The only investors we have in this company are the dealers that we serve,” said Davis, who has been with the company since 1970 and, in the top job since May 2014.

Even though Home Hardware markets itself as a co-operative and it behaves like one, it is legally a “privately-owned wholesale company,” with each dealer acting as a shareholder with an equally weighted vote. Each store retains its profits, and at the headquarters Davis and his team diligently try to cut costs to keep them happy.

“When you have that total control of a company, it is going to do what you want it to do,” said Davis, who is the third CEO in the company’s history.

Davis believes the Lowe’s purchase of RONA worked in Home Hardware’s favour, due to Lowe’s strategy of putting stores on the territory of existing RONA dealers. On average, two stores open under the Home Hardware banner every month, the majority of which are absorbed from competitor defectors.

“If they don’t like who they’re with, it makes sense for them to move to another company,” Davis said, adding most independent owners go into business because they like to be in control.

“You are going to have a culture clash when the majority of the company you belong to is owned by somebody with a corporation mindset, where the control comes from far away, not your office at the back of the store.”

Now might be an advantageous time to prey on RONA, according to Morningstar retail analyst Jaime Katz. She said Lowe’s has its hands full integrating RONA, and the brand is going through a turnaround as it tries to recover its profit margins.

As it stands, all the major home improvement players in Canada are in a tight race for the lead in market share. And in terms of revenue, Home Hardware’s store network keeps within reach of the competition, recording nearly $6 billion in sales last year.

Canadian Tire’s 498 stores under the namesake banner reported $6.4 billion in revenue last year (it now has 501 stores), and that figure includes products beyond the industry category. Lowe’s Canada has 541 corporate and dealer-owned stores with combined revenue of around $6 billion. Home Depot Canada has 182 stores in the country, but it does not disclose its geographical revenue breakdown.

Source: Article by Anwar Ali, The Financial Post 



Walmart Visa Ban Extends to all Stores in Manitoba

The dispute between Walmart Canada and Visa over merchant fees heated up again on Monday as the retail giant stopped accepting the credit card at its 16 stores in Manitoba.

Walmart first refused Visa credit cards at its three stores in Thunder Bay, Ont., in mid-July, arguing that the financial services firm charges high fees to merchants.

Alex Roberton, a spokesman for Walmart, says the company pays more than $100 million a year in credit card fees and is focused on reducing Visa transaction costs.

Roberton says the impact of its policy on customers in Thunder Bay has been minimal, adding that the stores have seen an increase in cash and debit payments.

Walmart announced in June that it would expand its phase-out of Visa at all of its Canadian stores — more than 400 — though Roberton says it hasn’t determined which stores will be next in line.

Visa spokeswoman Carla Hindman says Walmart’s action to further limit Visa acceptance in Canada is “disappointing.”

Visa has said it offered Walmart one of the lowest rates for any merchant in the country, but Walmart wanted fees that would have been lower than those charged to local grocery markets, pharmacies, convenience stores, charities and schools.

Despite the dispute, both companies say they are committed to working out a solution.

Source: The Canadian Press 



Economic News

Record High Housing Prices Could Spur Further B.C. Sales Slide


Real estate prices in the Vancouver region have gone up too much too quickly, creating conditions ripe for sharp declines, the author of a report on the country’s most expensive real estate market says.

“Prices have accelerated sharply, especially at the beginning of 2016, and many more people were priced out of the market,” Marc Pinsonneault, senior economist at National Bank of Canada, said. “Prices were overshooting.”

The Teranet-National Bank House Price Index, which tracks overall change in price for various housing types, last month reached a record 249.53 (which means prices have climbed almost 150% since June, 2005) in the region, but could fall 10% over a 12-month period, Mr. Pinsonneault said. For all housing types, that would bring the broad index back to where it was in April.

Within that index, the value of detached houses could tumble 20% over a 12-month period, likely to begin in late 2016, Mr. Pinsonneault estimates. For detached houses, it roughly translates into values that could retreat to levels last seen in October, 2015.

Sales of detached houses, condos and townhouses have been falling in the region since peaking at a record high in March of this year.

Several measures have combined to dampen sales activity, including the B.C. government’s new luxury tax on properties in the province that sell for more than $2-million. That tax took effect in February.

The provincial government also implemented a 15% tax on foreign home buyers in the Vancouver region, effective Aug. 2, although it is unclear how much of the sales decrease since is due to the tax. Another factor to consider is the impact of the federal government’s decision to tighten mortgage lending rules effective Oct. 17.

The Teranet-National Bank House Price Index for the Vancouver region has gained 24% over the past year, despite the recent sales slowdown.

The index shows pricing trends based on a large sample of the sales of properties registered at the land titles office.

“The index prices are different than average prices,” Mr. Pinsonneault said.

The real estate industry’s benchmark prices, which represent the sale of typical properties, remain strong. The benchmark price for detached homes sold last month in Greater Vancouver hit a record $1.58-million – 33.7% higher than in September, 2015.

But with fewer high-end properties selling, that has dragged down the average price for detached houses sold in Greater Vancouver, compared with the spring. Last month, the price for detached houses sold in the region averaged $1.53-million, down 15.7% from April, according to the Real Estate Board of Greater Vancouver.

By contrast, the Teranet-National Bank House Price Index has continued to roar ahead in the region this year. “The reason the sharp drop in sales has yet to translate into [an index] price decline is that the resale market remained tight despite the drop in sales,” Mr. Pinsonneault wrote.

He said it is unclear whether a significant number of foreign buyers are shifting their attention to the Greater Toronto Area.

“China’s anti-corruption campaign is suspected of crimping the flow of capital from that country,” he said in his report, which notes that both the Vancouver and Toronto metropolitan markets are at risk of experiencing price declines in 2017.

The GTA faces a 3% overall drop its home price index next year, especially with condos expected to be plentiful in supply, Mr. Pinsonneault said. He believes the anticipated price decrease for detached houses in the GTA will likely be in line with his overall forecast.

Source: The Globe and Mail



Realtor Says Vancouver Foreign-Buyer Tax had ‘Significant’ Impact on Luxury Homes Sales in Toronto

A Toronto realtor says he sees a clear link between Vancouver’s tax on foreign buyers and the surge in sales in Toronto’s luxury real estate market.

Barry Cohen, a luxury realtor with Re/Max says the sale of homes worth more than $2 million soared in the third quarter of this year.

“Foreign investors were transitioning into the Greater Toronto Area within weeks of the tax introduction in Vancouver,” says Cohen, referring to the 15% additional property tax transfer imposed by the British Columbia on overseas buyers purchasing in the west coast city’s urban limits. “The impact on the market has been significant.”

The Real Estate Board of Greater Vancouver has reported year-over-year sales declines in the 30% range since the tax was implemented Aug. 2 (it was announced July 25). The Ontario government has said it is looking at the issue and some economists have called for a special tax in Toronto as well.

Cohen says there were 759 homes priced over $2 million that changed hands between July 1 and Sept. 30 in Toronto, an unexplained increase from the 394 sales during the same period a year earlier. He did not supply any data to indicate those additional buyers were actually from abroad.

Year-to-date 2,400 sales in Toronto have take place for more than $2 million, an increase from 1,312 a year earlier. Those sales only represent 2.6% of the Toronto marketplace.

TD Bank economist Diana Petramala wrote recently that the impact on Toronto is no where near what was happening in Vancouver.

“The million dollar question now is whether foreign investment has shifted east and Toronto has become the new Vancouver.  With record immigration in 2016 and the strong growth in prime first-time homebuyer population, the fundamental factors supporting housing activity appear stronger in Toronto than Vancouver – helping drive existing home sales and prices up,” said Petramala. “Having said that, the sales-to-population ratio in Toronto has risen sharply recently, suggesting that foreign investment and speculation are playing a part, albeit likely smaller than in Vancouver.”

The federal government brought in new rules on Oct. 17 making it tougher to qualify for a mortgage and Ottawa has also tightened regulations regarding claiming a tax exemption on principal residences, something many believe was aimed at foreign buyers.

“It’s likely the first of many pre-emptive measures that will be put in place to reduce overall risk in the marketplace,” warns Cohen, who believes that Toronto is unlikely to follow Vancouver’s lead and says any new tax on foreign buyers would have “far-reaching implications” for the housing market.

Source: From Articles by Garry Marr, The Financial Post 



Weak Retail Sales Keep Rate-Cut Talk Alive

A drop in Canadian retail sales in August and cooler-than-anticipated annual inflation in September reinforced speculation the Bank of Canada may lower interest rates again, after the bank acknowledged last week it had considered cutting.

Statistics Canada said last Friday that retail sales fell 0.1% to $44.0 billion in August, missing expectations for a 0.3% gain. Volumes fell 0.3%. Compared to August 2015, retail sales are up 1.6%.

The weak retail performance in the first two months of the third quarter could mean there is somewhat less buoyancy to the expected economic rebound. Analysts expect growth picked up in the third quarter after wildfires in Alberta caused a contraction in the second quarter.

Economists had anticipated retail sales would be supported by the new child benefit checks that families began receiving in July, but the figures suggested consumers may be choosing to save or pay off debt for now.

“This is exactly when the much-ballyhooed child benefit effect should be kicking in a big way,” said Doug Porter, chief economist at BMO Capital Markets. “If it is not showing up here, it’s not going show up anywhere.”

The annual inflation rate rose to 1.3% in September [see next article], shy of forecasts for an increase to 1.5%, as food prices saw their smallest gain since 2000.

Economists said the disappointing figures were likely to keep talk of a rate cut alive. The central bank left interest rates at 0.5% last week, but downgraded its economic outlook and said it had considered cutting for the second time in three years.

Avery Shenfeld, chief economist at CIBC Capital Markets, said the door for a rate cut that the central bank had opened got a tad wider with the day’s data, though he noted it would take more data for the bank to move off the sidelines.

The Canadian dollar weakened to a one-week low against the greenback following the data.

Retail sales declined in 7 of 11 sectors in August, accounting for 57% of retail trade, led by lower sales of new and used cars and a decline in purchases at general merchandise stores.

Sales at motor vehicle and parts dealers were down 0.5% in August, in large part because of weaker sales at new car dealers (-1.1%) and, to a much lesser extent, used car dealers (-0.6%). Following declines in July, sales rose at other motor vehicle dealers (+5.4%) and automotive parts, accessories and tire stores (+1.1%). The gains at automotive parts, accessories and tire stores were concentrated in Ontario and Quebec.

General merchandise stores (-0.9%) recorded their third decline in four months but sales remain up 3.0% year-over-year.

After increasing 1.5% in July, sales at building material and garden equipment and supplies dealers were down 0.5% in August, however, are still 6.3% higher than a year ago.

Clothing and clothing accessories stores posted a 0.5% sales decline. Sales at clothing stores (-0.7%) and jewellery, luggage and leather goods stores (-0.4%) were both down, following increases in July. Shoe store sales (+0.6%) rose for the third time in four months.

Sales at furniture and home furnishings stores increased 1.7% in August. Higher sales were reported at both furniture stores (+2.0%) and home furnishings stores (+1.3%). Over the past 12 months, sales are down 0.3%.

Gains were also recorded at health and personal care stores (+0.7%) and gasoline stations (+0.5%), where sales increased for the fourth time in five months.

Following relatively flat sales in July, sales at food and beverage stores edged up 0.2% in August. The main contributors to the gain were beer, wine and liquor stores (+2.6%) and, to a lesser extent, convenience stores (+1.9%). After increasing 0.5% in July, receipts at supermarkets and other grocery stores fell 0.5% in August, returning to their level in June. For the first time in three months, specialty food stores (-0.2%) recorded lower sales.

Retail sales declined in six provinces in August.

Ontario (-0.7%) recorded the largest decrease in dollar terms. The main contributors were lower sales at building material and garden equipment and supplies dealers, and general merchandise stores.

In Saskatchewan, sales were down 0.4%, as results were mixed among store types.

Retail sales in Quebec were relatively unchanged in August, as lower sales at motor vehicle and parts dealers, and general merchandise stores more than offset higher sales at most other store types.

Retail sales edged down 0.1% in Alberta, the fourth consecutive monthly decrease. Retail sales in Alberta have trended downward since late 2015.

In Manitoba, sales were up 1.7%, mainly as a result of widespread gains at most store types.

In the Atlantic provinces, sales were up for the second time in three months in Nova Scotia (+1.3%), Newfoundland and Labrador (+1.7%), and New Brunswick (+1.0%). In Prince Edward Island (-1.4%), retail sales were down for the third consecutive month.

Source: Statistics Canada, Reuters



Canada’s Inflation Rate Up 1.3% in September

Statistics Canada reported last Friday that its consumer price index was up 1.3% in September compared with a year ago.

That indicates slightly higher inflation compared with August when the index was up 1.1%.

“Headline inflation will continue to trend up in Canada alongside the price of oil, but underlying price pressures remain soft and indeed appear to be cooling as the past depreciation in the loonie falls out of the index,” TD Bank senior economist James Marple wrote in a report.

“The Canadian dollar was slightly higher in September relative to its value a year ago. Even as a more dovish sounding Bank of Canada may put some downward pressure on the loonie going forward, this will be offset in part by rising energy prices, leaving most of the adjustment in the exchange in the rear-view mirror.”

Statistics Canada said prices were up in all eight major components that it tracks, with the shelter and transportation sectors contributing the most to rise.

The transportation index gained 2.3% compared with a year ago, while the shelter category was up 1.7%.

Food prices were up 0.1%, the sector’s smallest year-over-year increase since February 2000.

Food from stores posted their first year-over-year decline since March 2008 as they fell 0.9%. Food from restaurants was up 2.5%.

The Bank of Canada’s core index, which excludes some of the most volatile components, increased 1.8% compared with a year ago, matching the gain in August.

The core inflation was in line with analyst estimates but overall inflation was below the estimated 1.5%, according to Thomson Reuters.

Prices were up more on a year-over-year basis in September than in August in every province except Alberta and British Columbia, where they posted smaller increases.

Source: Statistics Canada, The Canadian Press 
     


U.S. House Prices Rise 5.1% in August; Consumer Confidence Slips  
       

U.S. home prices rose 5.1% in the year to August as home buyers competed for fewer properties, helped by low  mortgage interest rates, some wage growth and low unemployment.

The S&P CoreLogic Case-Shiller report published on Tuesday said its 20-city index was up 5.1%, after a rise of 5.0% in the year to July. The national index has now almost recovered to the record high set in July 2006 before the financial crisis of 2008.    

“All 20 cities saw prices higher than a year earlier with 10 enjoying larger annual gains than last month,” David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said.

The acceleration in home price inflation comes after other signs the housing recovery is gaining strength.

Sales of existing U.S. homes increased 3.2% in September from August, but the number of homes for sale has fallen nearly 7.0% from a year ago, the National Association of Realtors said last week. Just 2.04 million existing homes were for sale in September.

Building of new single-family houses rose 8.1% in September, in data published earlier by the Commerce Department, although the annual rate of 783,000 starts remains well below the historical average of more than one million annual rate of new home building.

“Demand is high and enthusiasm for homeownership remains strong, especially among all-important young, minority and would-be first-time buyers,” Svenja Gudell, chief economist at real estate data provider Billow, said.

Case-Shiller’s national index, after seasonal adjustment, rose 0.6% month-over-month in August, while the 10-city and 20-city indexes rose 0.2%.

Portland, Seattle and Denver reported the strongest year-over-year increases for the seventh month in a row, with gains of 11.7%, 11.4% and 8.8%, respectively, as buyers were forced out of the expensive Silicon Valley area in California.

After the financial crisis of 2008, home prices plunged 35% from their peak in July 2006 until they bottomed out in March 2012. They have since risen to just 7.2% below the peak.

Consumer Confidence Slips

U.S. consumers’ perceptions of both current conditions and the six-month outlook dimmed in October, with the U.S. Conference Board’s confidence index slipping to 98.6 in October, down from 103.5 in September.

Economists expected the index to hit 101.5 in October, according to a Thomson Reuters consensus estimate.

The survey, a closely followed barometer of consumer attitudes, measures confidence toward business conditions, short-term outlook, personal finances and jobs.

“Consumer confidence retreated in October, after back-to-back monthly gains,” said Lynn Franc, director of economic indicators at The Conference Board.

“Consumers’ assessment of current business and employment conditions softened, while optimism regarding the short-term outlook retreated somewhat. However, consumers’ expectations regarding their income prospects in the coming months were relatively unchanged.”

Monthly U.S. job growth slowed to an average 161,000 in August and September after gains in the previous two months and is averaging 178,000 this year, down from 229,000 in 2015.

However, unemployment remained low at 5.0% in September.

The Conference Board report also said the present situation index, which measures overall consumer sentiments toward the present economic situation, decreased to 120.6 from 127.9 in the prior month.  The Expectations Index, which measures sentiments for the next 6-months, declined to 83.9 from 87.2 in September. . 

Source: Reuters                      
 
  

 Upcoming CHHMA Events 

Secrets of Power Negotiating & Developing Persuasive Proposals One-Day Seminar
Featuring Negotiating Expert Michael E. Sloopka

Wednesday, November 23, 2016
Corporate Event Centre at CHSI, Mississauga, Ontario

Industry Cocktail
Thursday, November 24, 2016
Casino de Montreal, Montreal, Quebec

Canada Night
Held in Conjunction with the International Home + Housewares Show
Sunday, March 19, 2017
InterContinental Hotel, Chicago, Illinois

CHHMA Spring Conference & AGM
Tuesday, April 11, 2017
International Centre (Conference Facility), Mississauga, Ontario

CHHMA Maple Leaf Night
Held in Conjunction with the National Hardware Show
Tuesday, May 9, 2017
Location TBA, Las Vegas, Nevada

CHHMA Quebec Golf Classic
Thursday, May 25, 2017
Club de golf Le Fontainebleau, Blainville, Quebec

CHHMA/COPA Ontario Golf Tournament
Tuesday, May 30, 2017
Angus Glen Golf Club, Markham, Ontario

CHHMA Industry Calendar

To register for all events visit our website at www.chhma.ca or call Pam Winter at (416) 282-0022 ext.21.


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"Eye On Our Industry" is published by the CHHMA as an information resource for our members. Member input regarding content and format is welcomed. Please contact Michael Jorgenson by email: mjorgenson@chhma.ca, or call at (416) 282-0022, ext. 34. CHHMA is located at 1335 Morningside Ave., Suite 101, Scarborough, ON, M1B 5M4 www.chhma.ca

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Canadian Hardware & Housewares Manufacturers Association | 1335 Morningside Ave., Suite 101, Scarborough, ON M1B 5M4
Telephone: (416) 282-0022   Email: pwinter@chhma.ca