Monday, December 10, 2007

Mike Stewart, Downtown Vancouver Real Estate Specialist: An attack from the Left on EcoDensity

EcoDensity won't cut house prices

Straight Issues By Pieta Woolley

Mayor Sam Sullivan and his NPA colleagues want to bring densification to more neighbourhoods. Pieta Woolley photo.
Mayor Sam Sullivan and his NPA colleagues want to bring densification to more neighbourhoods. Pieta Woolley photo.

Real-estate agent Richard Morrison, who specialized in investment properties, thinks the city's EcoDensity initiative is a great way to keep property values from skyrocketing in Vancouver. He just sold a single-family home, worth nearly a million dollars, to an investor, who then tore it down and built eight 1,000-square-foot units that will sell for between $400,000 and $500,000.

"Way more density is the only way I see a softening of the market," Morrison told the Georgia Straight on November 27. "$450,000 is very affordable. Much more than buying an average home in that neighbourhood for $800,000."

The problem is that $450,000 is still double what the average Vancouver family can afford if the home doesn't have a secondary suite. With a median household income of about $56,200, according to Statistics Canada, most families max out at a $300,000 mortgage if they pay 30 percent of their incomes over a 25-year term.

According to www.mls.ca/ , $300,000 will still buy a two-bedroom condo in some parts of East Vancouver. It will also buy a three-bedroom townhouse or a small, single-family home in Maple Ridge–a long commute and the opposite of EcoDensity's goal.

At City Hall on November 27, Vancouver's director of planning, Brent Toderian, told councillors that EcoDensity won't provide housing that meets average incomes. He said that the initiative is really about keeping the market softer than it would be with less density.

"I don't think we could affect [housing] supply to the point that prices would go down," said Toderian. "Especially at the mid level."

Toderian was presenting his department's draft charter and draft initial actions on EcoDensity. It's the mayor-driven "acknowledgement that high quality and strategically located density can make Vancouver more sustainable, livable and affordable", according to www.vancouver-ecodensity.ca/ .

EcoDensity has been billed as supplying more housing through densification–laneway homes, condos on top of stores, rezoning sprawling house-oriented neighbourhoods to accommodate low-rise apartments–and prices would drop into the affordable zone.

Vision Vancouver councillors Heather Deal and Tim Stevenson slammed Toderian's draft for leaving out true affordability. Deal said EcoDensity, in this report, is no different from green bonuses for developers. Stevenson wanted to know if his "ordinary kids with ordinary jobs" will be able to afford to live in the city.

"What is ordinary may change in the future," Toderian responded.

Vancouver's developers have, in fact, been densifying Vancouver swifter than the population has grown for 15 years. And, instead of prices dropping, they've soared since 1991.

Morrison told the Straight that the rush to buy condos in Coal Harbour and Yaletown is fuelled by investors, rather than folks seeking out a primary residence. He would like to know who owns the condos downtown, and who is living in them. No one seems to know.

Vancouver senior planner Rob Whitlock told the Straight his department plans to study that as part of a rental survey in 2008-09.

"Empty housing stock is very difficult to estimate," he said. "BC Stats has previously undertaken some analysis based on hydro usage, which indicated that four percent of all downtown apartments were identified as unoccupied in 2003, with eight to nine percent of condo apartments included in that number." In addition, he said, the 2001 census found that 2,600 downtown apartments were unoccupied.

Whitlock defended the idea that building more homes leads to a softer market, if not affordability. "If the number of units had not occurred, housing prices in the city generally would have escalated at an even faster rate," he said, echoing the EcoDensity draft report. "The more difficult objective for EcoDensity will be addressing housing costs for those with lower incomes, working poor, families, and others who are unable to compete in the current market."

As Deal pointed out, there's nothing in the report that requires affordability. EcoDensity has gone on to another round of public consultation, and will be back before council February 24, 2008

Tuesday, December 04, 2007

Canadian dollar tumbles after rate cut - The Cut Works!

TAVIA GRANT

Globe and Mail Update

The Canadian dollar hit its lowest level since September after the Bank of Canada cut its key lending rate Tuesday, citing a worsening U.S. housing market and turmoil in credit markets.

The currency shed more than a cent, trading at 98.80 cents (U.S.) from Monday's close of 99.98 cents, to its lowest level in two-and-a-half months. It closed Tuesday's session at 98.78 cents, down 1.20. Lower interest rates tend to diminish the allure of a country's currency.

The loonie has tumbled 11 per cent from last month's peak as a growing number of Canadian economic reports have highlighted a slowdown in exports and consumer spending.

“Overall sentiment certainly seems to have changed over the last few weeks, moving against the Canadian dollar,” said Camilla Sutton, currency strategist at Bank of Nova Scotia. She sees the loonie staying below parity for the rest of this month before appreciating again in the first quarter.

“The bank judges that there has been a shift to the downside in the balance of risks around its October projection for inflation through 2009,” the bank said. “In light of this shift, the bank has decided to lower the target for the overnight rate.”

Traders betting in futures markets are pricing in an 80-per-cent chance of a 25 basis-point rate cut in the first quarter, and are fully pricing in a second such cut in the second quarter of next year, according to Ideaglobal.

“We expect this to continue weighing on the Canadian currency moving forward,” said David Powell, Ideaglobal's currency analyst in New York, in a note.

Most strategists still believe the Federal Reserve will be more aggressive in cutting rates than the Bank of Canada though -- and that may be limiting the loonie's decline. Almost half of traders now believe the Fed will cut 50 basis points at its meeting next week.

The Canadian dollar had soared as high as $1.10 in early November before settling around the parity mark – one of the most turbulent months for the currency in at least a decade – something the bank noted in today's statement.

“In the context of exceptional volatility in global financial markets, the Canadian dollar spiked well above parity with the U.S. dollar in November,” though it has recently moved to where the central bank had expected it would be, the bank noted.

Tuesday's statement gave little indication of whether interest rates will fall further. The central bank next meets on Jan. 22 in what will be Governor David Dodge's last decision before Mark Carney assumes the mantle.

“The door is open to further rate cuts although it is not a fait accompli at this particular point in time,” said Stewart Hall, market strategist at HSBC Securities (Canada).

Interest Rates Fall! More good news for Vancouver's Property Market! Central bank cuts interest rates as high loonie, credit turmoil raise fears

Pressure on the Central Canadian manufacturing sector from the high loonie has prompted the Bank of Canada to reduce rates.

This great for Vancouver's real estate market.

We don't have Central Canada's problems with the high loonie stemming from being integrated with US manufacturing. BC's & Vancouver's economy are some of the strongest in Canadeqa. Lower interest rates make real estate more affordable by giving buyers more spending power.

Keep you fingers crossed for more good news from the Bank of Canada!

Globe and Mail Update

OTTAWA — The high Canadian dollar and turmoil in credit markets have prompted the Bank of Canada to cut its key interest rate by a quarter point.

Just months after the central bank indicated that it was on a course of hiking interest rates, it announced Tuesday it has changed direction, lowering its target rate to 4.25 per cent.

The move indicates that the central bank fears the Canadian economy is about to be sideswiped by a rapidly slowing U.S. economy and tighter credit conditions caused by financial market turmoil.

While Canada's economy is growing steadily right now, inflation is much softer than the central bank had projected earlier this fall. Total inflation was 2.4 per cent in October, and core inflation (which excludes the most volatile items) was 1.8 per cent, on a year-over-year basis.

Plus, the Canadian dollar unexpectedly spiked well above parity in early November, hurting exports and pushing down domestic prices, further taking the steam out of inflation, the bank said.

At the same time, financial markets around the world are struggling to come to terms with the U.S. sub-prime crisis, and have not been able to re-evaluate structured financial products, the central bank said in a statement.

Following the rate cut, the Canadian dollar fell more than a full cent, trading at 98.74 cents (U.S.) from Monday's close of 99.98 cents. Lower interest rates tend to diminish the allure of a country's currency,

The headwinds facing the Canadian economy have worsened since October and will likely drag on, pushing up bank funding costs, tightening credit conditions, and punishing the U.S. economy, the Bank of Canada noted.

“All of these factors considered, the bank judges that there has been a shift to the downside in the balance of risks around its October projection for inflation through 2009,” the bank's statement concludes. “In light of this shift, the bank has decided to lower the target for the overnight rate.”

A rate cut acts as an insurance policy, said Jacqui Douglas, economic strategist at TD Securities.

“While the Canadian economy is not yet showing any significant signs of strain, it's unlikely that it can keep growing at an above-potential rate for much longer, given the headwinds that it's encountering,” she wrote in a commentary.

It was no doubt a tough call for the central bank. Markets and economists have been divided on whether the central bank should stand pat or cut its key rate. The so-called shadow monetary policy council, run by the C.D. Howe Institute, recommended no cut, although the call was by no means unanimous.

“We think the Bank of Canada is at a difficult crossroads, and a mistake at this juncture could prove costly in the medium term,” foreign exchange analysts at the Bank of Nova Scotia said Tuesday.

Economists believe generally that if central banks wait too long to respond to a slowdown, they will be forced to make radical rate cuts to put the economy back on track.

Political pressure on the central bank to cut rates has been rising. The premiers of Ontario and Quebec have complained loudly that the high Canadian dollar is putting too much strain on their export-oriented economies.

Monday, organized labour and company executives in the manufacturing sector took the rare step of issuing a joint press release to urge the central bank to cut rates.

But at the same time, the Canadian economy is still in overdrive, the central bank says, and the job market is booming – posing risks for inflationary pressure.

In its statement, the Bank of Canada did not give many hints about whether it would continue to cut rates next year. Rather, it said it would take stock of the economy and financial market conditions again in January to make a new assessment.

Tuesday's announcement is the first time since April 2004 that the central bank has cut its key interest rate. After that time, the Bank of Canada gradually raised rates from a low point of 2 per cent, reaching all the way up to 4.50 per cent by July 2007. Rates have been on hold since July, until now.

With a file from Tavia Grant.