Teranet’s Rating Cut to BBB by DBRS on Ontario Housing Slowdown

Teranet Holdings LP, which operates Ontario’s land registry and profits each time a house is sold, has had its credit rating downgraded by DBRS Ltd. on dimming prospects for the province’s housing market.

The ratings company cut Teranet to BBB, two levels above junk status, with a stable outlook. DBRS cited Teranet’s 2013 results, which showed a third consecutive year of declining transaction volume and revenue.

“Ontario’s real estate market is expected to remain subject to volatility and uncertainty over 2014,” Travis Shaw, an analyst at DBRS, wrote in a report today. “High household debt remains a key risk for the sector and is expected by DBRS to greatly limit upside on the market for the foreseeable future.”

The Canada Mortgage and Housing Corporation and the Bank of Canada have said the market is stabilizing and have forecast a soft landing, while central bank Governor Stephen Poloz has identified record consumer debts and signs of overbuilding in some markets as risks to the economy.

A housing boom in recent years has helped push Canadian consumers’ debt to disposable income ratio to a record 164 percent as of the third quarter of last year, the most recent period with data available.

DBRS cited CMHC forecasts for modest growth in resale activity in Ontario this year and a contraction in housing starts in its decision to downgrade Teranet.

Teranet has C$2.1 billion ($1.89 billion) of debt outstanding.

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