Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
CMHC sounds alarm on plummeting home construction
The rising cost of building materials, shortage of construction workers and higher borrowing expenses is having an alarming effect on Canada’s housing industry. As Rachelle Younglai reports, Canada Mortgage and Housing Corp. predicts that home building could plunge by 32 per cent to 176,890 units this year. CMHC chief economist Bob Dugan said the climate is “inhospitable” for new construction, and warned that affordability would continue to worsen if the country’s housing stock doesn’t increase. Strong demand has kept home prices from falling further after the Bank of Canada hiked interest rates to slow inflation. CMHC expects the average price for the year to be about nine per cent lower than 2022, although the agency predicts that national home prices will bottom out over the next two months.
Striking federal workers get regular pay – for now
Striking federal workers will continue to receive their regular salaries until at least May 10, according to the government, though they’ll likely have their pay clawed back at a later date for the days they spent on the picket line. More than 100,000 federal public sector workers have been on strike since April 19, as the government and the Public Service Alliance of Canada – the union representing the workers – try to hash out a deal for a new collective agreement, Vanmala Subramaniam and Bill Curry report. Around 47,000 deemed essential workers are not obligated to participate in the strike and will be paid as usual. PSPC said that when a strike extends beyond five consecutive days, pay processing must involve a manual effort by compensation advisers, and some employees “will only see the salary effects of them being on strike in future pay periods.”
Union wage hikes still lag inflation
Unions have been scoring the highest wage increases they’ve seen in more than a decade, but it’s not enough to keep pace with soaring inflation. The average annual pay increase in 10 major public- and private-sector union settlements signed between December and February was 3.1 per cent, government data show. That’s still well below where inflation has been, meaning workers have experienced wage cuts in real terms. However, the Bank of Canada forecasts inflation to cool to 3 per cent by midyear, which would see it drop below the level of recently settled wage agreements. Jason Kirby examines how union wage settlements have lagged inflation in this week’s Decoder.
The Canada Pension Plan death benefit is grim
For the past 25 years, the maximum payout for the Canada Pension Plan death benefit has been a mere $2,500 paid in a single lump sum, writes Rob Carrick. Until the 1997 CPP reform, the death benefit was set using a method that paid out a maximum of $3,580. After that, the benefit was calculated as six months of the deceased contributor’s CPP retirement pension at age 65, up to a maximum of $2,500. A small improvement made in 2018 was to create a flat benefit of $2,500. Adjusted for inflation, $2,500 in 1998 would be worth $4,262 today. The CPP retirement benefit increased 6.5 per cent in 2023 to offset the rising cost of living, while the value of the death benefit was yet again reduced by inflation. Indexing the death benefit to inflation or increasing it outright would be a big help to middle- and lower-income families when a loved one dies, but it’s unlikely to happen. Small as it is, the death benefit is worth claiming, and should be done within 60 days of the death of a CPP contributor.
Four-figure rents to live with roommates increasingly common
Living with roommates used to be one of the best ways to save on housing costs, but across Canada, that’s increasingly not the case. In a growing number of cities, renters face advertised rates of around $1,000 a month for a bedroom in a shared home, Erica Alini reports. The average rent for a spare bedroom in Vancouver was $1,410 in March, based on rental listings from Rentals.ca, and in Toronto, it was $1,309. Rental demand surged in 2022, driven by higher immigration, the return of students to university and college campuses and a steep rise in mortgage rates, which forced many prospective home buyers to keep renting. That left the vacancy rate for purpose-built apartments at 1.9 per cent last year, a 22 year low, and has led to outsized rent increases across most of the country.
What to do with your tax refund
Hopefully you’ve filed your taxes, and if you’re scrambling, check out The Globe’s comprehensive tax guide ahead of the May 1 deadline. According to the Canada Revenue Agency, about 63 per cent of returns filed have resulted in refunds, and the average refund this year is $1,741. If you’re waiting on your direct deposit or mailed cheque, Tim Cestnick shares some ideas – including paying off debts and investing – for using your refund wisely.
Sign up for MoneySmart Bootcamp: If you want to improve your financial fitness, The Globe’s MoneySmart Bootcamp newsletter course is for you. This new five-part course written by personal finance reporter Erica Alini will improve your personal finance skills, including budgeting, borrowing and investing. Subscribe to the MoneySmart Bootcamp and you’ll receive an e-mail a week to work a different financial muscle. Lessons will land in your inbox Wednesday afternoons.
Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.