February 2008 Vancouver CMA CMHC Data

February was a busy month for developers in the Vancouver area. They started construction on 2,446 new homes and completed only 1,484. This pushed the number of new homes under construction in the Vancouver Census Metro Area to a new record high of 26,560.



The number of completed and unabsorbed homes continues to rise in the Fraser Valley markets of Langley, Surrey, Abbotsford, Maple Ridge and Pitt Meadows. The total number of unabsorbed new homes rose to 1,384 which is 24% higher than last year.

With the number of new homes that will complete soon and the number of unabsorbed units rising, one wonders why developers are starting construction on so many projects.

Cost of business rises in Vancouver

It's the most expensive city in Canada, according to KPMG study

Bruce Constantineau, Vancouver Sun, Friday, March 28, 2008

High real estate values have bolstered Vancouver's position as the most expensive Canadian city in which to conduct business, according to a KPMG study.

The study -- which examines 27 cost components and assigns a value of 100 to average costs in the U.S. -- said Vancouver's cost index has risen from 96.9 to 104.2 in the past two years.
Calgary is the second-most expensive Canadian business city, with an index that has risen from 94.7 to 102, while Chilliwack is third, with an index that has gone from 94 to 101.6.

MMK Consulting representative Glenn Mair, an author of the study, said high house prices and other real estate values continue to drive up business costs in Vancouver.

"Industrial property costs, construction costs and office leasing costs are all quite high in Vancouver as a result," he said.

Mair said Chilliwack's proximity to Vancouver has clearly driven up business costs in that Fraser Valley community, which also faces high real estate values and labour shortages that have driven up wages.

The study noted the strong Canadian dollar has taken away much of the business cost advantage Vancouver used to enjoy over Seattle. Vancouver's cost index is just 1.3 points lower than Seattle's but in 2006, it was 7.5 points lower.

"The strong increase in the Canadian dollar has really closed the gap in business costs between Canada and the U.S.," Mair said. "But even with the dollar at par, Canada can still be competitive with the U.S. because of some significant cost-competitive changes that have occurred in the past decade."

He noted federal and provincial cuts to corporate income taxes across Canada have been a major boost to businesses throughout the country.

The study said Canada (99.4), the U.S. (100) and Australia (100.2) are the business cost leaders among nine developed countries surveyed. Mexico, an emerging industrial country, had a business cost index of just 79.5 -- the lowest of 10 countries examined in the study.

Mexican labour costs were the lowest by a wide margin but Canada ranked much higher than Mexico on quality-of-life issues like health care, crime rates and education.

Germany (116.8), Japan (114.3) and Italy (107.9) had the three highest national business cost ratings in the study. The three countries face the added challenge of having the oldest populations -- having the largest proportion of citizens older than 44 and the smallest proportion under 25.

Drop in B.C. business optimism cited as omen for economy

Fiona Anderson, Vancouver Sun, Thursday, March 27, 2008

Business optimism in British Columbia is dropping and it could be a sign of a turn in the economy, according to the Canadian Federation of Independent Business.

B.C.'s business barometer, an indicator developed by the CFIB to measure optimism among small and medium sized businesses, works from a base of 100 set in 1988. It is now at 107.7, above the national average of 104.0, but the lowest B.C. has seen since 2003. It's also the second quarterly drop in a row.

And that's a concern, CFIB's vice-president for Western Canada, Laura Jones, said in an interview.

CFIB's barometer readings are often a leading economic indicator, predicting future trends, Jones said. That's because the survey goes to the source, asking business owners on the ground how they see the future.

"When the B.C. economy turned around in 2003, our quarterly business barometer was one of the first indicators out there," Jones said. "And sure enough, that ended up being the beginning of B.C.'s boom."

"If it's like 2003, this is the prediction of the turn," she said.

So this is not the time for the B.C. government to get complacent about the economy, Jones said.
"In B.C. we're so used to the economic good times it's hard to remember back to when there were bigger challenges," she said. "And there are bigger challenges."

Across the country, business owners in Prince Edward Island had the least positive outlook at 96.9. Even Alberta --which along with B.C. has led the country in business optimism over the past five years -- was below the national average at 102.8. Topping the barometer were Newfoundland and Labrador with a reading of 119.6, followed closely by Saskatchewan at 116.1.

Optimism also varied across industries, with a gloomy outlook in manufacturing, agriculture and transportation, while businesses in the finance, health care and education sectors saw a rosier future.

In B.C, more than half of businesses that responded to the survey said they expected their businesses to improve over the next 12 months, a drop from the 58 per cent that felt that way in December.

At the same time, one-third of provincial businesses surveyed expected to increase their number of full-time employees, down from 41 per cent.

Sixty-nine per cent of provincial respondents expected energy costs to continue to rise, up from 55 per cent in December.

That may be a reflection on B.C.'s new carbon tax, coming out in July, Jones said. "Energy prices are a huge concern for business owners and introducing a carbon tax into that mix certainly isn't instilling a whole lot of confidence," she said.

But across Canada, 71 per cent of businesses expected energy costs to worsen, even in the absence of a carbon tax. But Jones said B.C. businesses shouldn't be too pessimistic. "We are still higher than the national average," she said. "But the main message for government would be that this is really not the time to get complacent about the economy."

Case-Shiller Index

NEW YORK (Reuters) - Prices of existing U.S. single-family homes slumped in January, with 16 of 20 regions measured posting record annual declines, according to the Standard & Poor's/Case-Shiller home price index reported on Tuesday.

The composite month-over-month index of 20 metropolitan areas fell 2.4 percent to 180.65 from December, bringing the measure down 10.7 percent from a year earlier and 12.5 percent from its July 2006 peak.

"It shows that the housing correction is still under way," said Michelle Meyer, an economist at Lehman Brothers in New York. "The weakness is not contained to the bubble areas."
Home prices in Las Vegas and Miami fell the most of any region, at 19.3 percent year-over-year, while Phoenix, San Diego and Los Angeles also suffered double-digit drops.

S&P said its composite month-over-month index of 10 metropolitan areas fell 2.3 percent to 196.06 for an 11.4 percent year-over-year drop.

Keep this in mind - until home prices stop declining there will be no end to the financial crisis.

Navigating the Labyrinth

Here are a few photographs from my wanderings in California and points between. Glad to be back - sort of. It was a relaxing time and I would be lying if I said I didn't want to stay where the sun shines more than 2 months per year.

Maze of the Madness


Enveloped by Fog

Surrounded by Jellyfish

Last week was an interesting one on the markets and I haven't had time to fully digest what has happened. It also appears that, locally, real estate inventory is truly exploding upwards and the psychology is definitely taking on a more negative / realistic tone.

During my navigations, I observed that Vancouverites, among many other people around the world, are insular and feel that they are different from others, perhaps even granted immunity to worldwide problems. In reality, only a few miles away from our fair city, the realities of a recession and a collapsing housing market are on the minds and lips of the average person.