Article content

By Fergal Smith and Matt Scuffham

Investors are losing enthusiasm for Canada’s banking stocks as a slowdown in the country’s housing market dents banks’ growth prospects, and they see insurance companies as a better bet to benefit from higher interest rates.

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or Investors cool on Canadian banks, turn to insurers, amid housing fears Back to video

Home sales in Toronto, Canada’s largest city, plummeted more than 40 per cent in July from a year earlier and prices were down nearly 19 per cent from April following the introduction of a range of measures designed to cool a housing market amid fears of a bubble, including a 15 per cent tax on foreign buyers.

The slowdown in home sales has investors concerned about the impact on Canadian banks, which derive a big chunk of their earnings from residential mortgages.

“Once Toronto started getting hit I think the housing fears became much more front-of-mind for a lot of people, said Ian Scott, equity analyst at Manulife Asset Management. “I think now when you get a move higher in yields and you are looking for financial exposure in Canada, the incremental dollar seems to be flowing into the lifecos rather than the Canadian banks,” he said, referring to life insurance companies.