Altus Group Ltd. (AIF), a Canadian real estate advisory firm, is in talks with at least two of the country’s big banks to help them assess their real estate risk amid concern from regulators about frothy markets.
Many of the banks have issued requests for proposals asking for an independent analysis of their real estate assets, Altus Chief Executive Officer Bob Courteau said.
“We are now starting to consult with the banks,” Courteau, 58, said July 8 in an interview at Bloomberg’s Toronto office. “We even want to build products for the banks that allow them to do a risk profile on a portfolio.”
Sayla Nordin, a spokeswoman for Altus, declined to name the banks, citing confidentiality. Spokesmen for Toronto-Dominion Bank, Royal Bank of Canada (RY), Bank of Nova Scotia, Bank of Montreal (BMO), Canadian Imperial Bank of Commerce didn’t immediately respond to requests for comment or declined to comment.
Altus, whose shares doubled in both 2012 and 2013 as the Toronto-based company’s Argus software business improved, is seeking to make inroads as Canada’s booming housing market draws scrutiny from regulators.
Banks are ultimately responsible for loans they grant in an environment that’s riskier than in the past because consumer debt levels remain near record highs and there’s little scope for lower interest rates, Mark Zelmer, deputy superintendent of the Office of the Superintendent of Financial Institutions, said last month.
Stretched values and overbuilding exposes the financial system to a sharp correction in home prices, Bank of Canada Governor Stephen Poloz also said last month, though he continues to see a soft landing in the housing market.
“If CMHC’s worried, the Bank of Canada’s worried, then the banks are worried,” said Courteau, who spent eight years leading the Americas group for German business software supplier SAP AG before becoming Altus CEO in September 2012.
The banks “are looking for tools and solutions” to better determine their risk, he said.
Altus has supplied data and collaborated with Canada Mortgage and Housing Corp., the country’s real estate boards, and the developers of most of the condominium projects in the country, he said.
Canada’s ratio of household debt to disposable income income fell to 163.2 in the first three months of 2014, the second straight quarterly decline, though it remains near the record 164.1.
Canadian housing starts unexpectedly rose for a third month in June, CMHC said July 9. The average home price in Toronto, the country’s largest city, rose 7.4 percent to about C$569,000 ($532,000) in June compared with the same time last year as the number of sales climbed 15 percent. In the decade to 2013, the average price of a house jumped 78 percent in the city.
Altus was little changed at C$22.04 at 9:43 a.m. in Toronto and has gained about 31 percent this year, compared with an 11 percent increase in the broad Standard & Poor’s/TSX Composite Index.
To contact the editors responsible for this story: Brad Skillman at email@example.com Jacqueline Thorpe, David Scanlan