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'Good luck' behind B.C. growth in key areas

Despite strong retail sales and consumer spending, there's no 'indication economy is on huge boom'

The Vancouver Sun
Thursday, July 5, 2007

The British Columbia economy grew by 1.3 per cent in the second quarter of 2007, nearly double the growth of a sluggish first quarter, according to the Business Council of British Columbia's (BCBC) B.C. Economic Index.

For the first time in the five years that the index has charted economic activity in the province, growth occurred in all seven of its categories. Of these seven, housing starts climbed 8.2 per cent, followed by retail sales at 2.8 per cent.

Strong growth in retail spending remains one of the key drivers of the current economic expansion, said BCBC director of economic research, Ken Peacock.

"Retail sales growth is quite strong," said Peacock. "Consumer spending is strong, and that's due to good job growth, a sustained housing market and the strongest income growth in at least a decade."

Non-residential building permits were up 1.5 per cent and manufacturing shipments increased 1.3 per cent. Although employment grew by a more modest 0.8 per cent, it was a significant factor in the index's gain because it is not as volatile as some of the other indicators.

International visitors (0.6 per cent) and the Canadian leading indicator (0.9 per cent), which reflects strength in the broader national economy, rounded out the across-the-board gains.

The growth occurred in spite of a decline in home building in the United States, which has hamstrung the province's lumber industry.

"The gain in manufacturing shipments is close to being a surprise because the lumber industry is struggling," said Peacock.

Peacock said people shouldn't read too much into the fact that all seven indicators were up.

"It's more good luck than anything," said Peacock.

"It's good news that all seven are going up, but it's not an indication that the economy is on some huge, unprecedented boom. The overall gain of 1.3 per cent is stronger than average, but it's not the strongest gain we've seen in the last couple of years."

Growth in the first quarter of 2007 was just 0.7 per cent.

This year's second-quarter growth of 1.3 per cent beats the same figure one year ago (0.4 per cent) and that of 2005 (0.8 per cent), although it falls short of 2004's second quarter of 1.5 per cent.

Peacock said there that an increase in visits to the province by Asian and European tourists have offset the fact that fewer Americans are coming here because of a strong Canadian dollar.

KEY ECONOMIC INDICATORS

British Columbia saw growth in seven key areas in the second quarter of 2007, according to the Business Council of British Columbia's B.C. Economic Index:

- Housing starts +8.2%
- Retail sales +2.8%
- Non-residential building permits +1.5%
- Manufacturing shipments +1.3%
- Employment +0.8%
- International visitors +0.6%
- The Canadian leading indicator, which reflects the national economy +0.9%

Source: Business Council of British Columbia

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Home sales increase makes for second-best June yet

Buyers feel financially secure as rates inch up, analyst says

The Vancouver Sun
Thursday, July 5, 2007
By Derrick Penner

An increase in Greater Vancouver home sales in June indicates both strong employment and buyer concerns about rising mortgage rates, according to at least two analysts.

Greater Vancouver recorded 3,951 sales on the Multiple Listing Service in June, a 7.4-per-cent increase from sales in June 2006 -- and the second-best June on record, according to statistics from the Real Estate Board of Greater Vancouver.

Forecasts have predicted sales would slow in 2007, however, Cameron Muir said buyers are feeling more financially secure and able to afford to buy a home.

Buyers have also watched mortgage rates inch up over recent weeks. Posted rates for a five-year closed mortgage stand at 7.24 per cent, according to the Bank of Canada, compared with 6.64 per cent at the beginning of June.

Muir added that the increase can act as an incentive for house hunters who had received pre-approved mortgages at lower discounted rates to buy.

"If you look at affordability, it has eroded somewhat because of those higher rates," Muir said.

"Typically what can happen with the perception of higher mortgage rates on the horizon, many potential buyers who have been sitting on the fence not quite ready to jump right in [do buy] in anticipation of higher borrowing costs."

Robyn Adamache, senior market analyst for Canada Mortgage and Housing Corp., added that the recent bump up in interest rates was not something that she had forecast, and it makes sense that some buyers would jump in to take advantage of pre-approvals.

In general, however, she expects mortgage rates to average out at a somewhat lower rate.

"We'll probably see another [mortgage-rate] increase going forward, and then more of a downturn," Adamache added.

Banks offer discounts from their posted rates to their better customers, and Adamache said that as long as buyers can get discounted rates below six per cent, she does not believe that mortgage rates will put a significant dent in the market.

The surprise in sales statistics, Adamache added, is the strong price growth. In Greater Vancouver, prices have increased about 10 per cent over the first half of 2007, which is more than she expected.

However, she added that provincial job growth and economic performance is stronger than anticipated in her forecast, which increases demand.

Greater Vancouver, saw a continuation in the shift toward multi-family housing in its June statistics with all of its growth appearing in townhouse and apartment condominium sales.

Some 1,846 condominiums changed hands in Greater Vancouver in June, a 16-per-cent increase from June a year ago. Townhouse sales were up 3.2 per cent to 775 units.

Combined, the sales outweighed a 10-per-cent decline in June sales of single-family homes across Greater Vancouver. June saw 1,632 single-family homes sold compared with 1,805 in June a year ago.

The so-called benchmark price for a typical single-family home hit $715,715 in June, up 10.3 per cent from a year ago. The benchmark townhouse price also rose 10 per cent to reach $443,060. Benchmark condominium prices were up almost 11 per cent to $360,469.

Greater Vancouver's inventory of unsold homes also rose to 11,811 units, a 17 per cent increase over June of 2006.

In the Fraser Valley, realtors reported 2,126 MLS-recorded sales in June, a decrease of three per cent compared with the same month a year ago.

However, Adamache added that the single-family category experienced the biggest decline with 1,037 sales representing an almost 10-per-cent decrease from the same month a year ago. Condominium sales, in the meantime, were only down 7.4 per cent, and townhouse sales increased almost 10 per cent to 427 units.

The average price of a Fraser Valley single-family home hit $529,678 in June, up 11.5 per cent over June 2006. Apartment sales averaged $219,935, up 16.2 per cent and townhouse sales averaged $321,613, up 11 per cent.

The Fraser Valley's inventory of unsold homes stood at 8,182 in June, up 39 per cent over 2006. However, Jim McCaughan, the Fraser Valley Real Estate Board's president, said the inventory level decreased two per cent from May and overall sales are "on par with some of the strongest real estate cycles in [the] Fraser Valley's history."

SQUAMISH LEADS IN HOUSE PRICE GAINS

The benchmark price* of a detached home in Squamish rose 24.6% from June 2006 to June of this year, the biggest percentage gain of any area in the Real Estate Board of Greater Vancouver's region and well above the board average of 10.3%.

Benchmark price*, detached homes (% change)

June 2006- June 2007

Burnaby
$698,093 (+6.7)

Coquitlam
$621,540 (+9.4)

South Delta
$631,781 (+8.3)

Maple Ridge
$435,021 (+7.7)

New Westminster
$564,621 (+9.4)

North Vancouver
$853,247 (+12.5)

Pitt Meadows
$492,508 (+16.4)

Port Coquitlam
$521,937 (+12.2)

Port Moody
$722,100 (+8.4)

Richmond
$709,500 (+11.6)

Squamish
$522,590 (+24.6)

Sunshine Coast
$412,509 (+6.3)

Vancouver East
$645,729 (+7.5)

Vancouver West
$1,329,884 (+18.0)

West Vancouver
$1,415,852 (+6.8)

Greater Vancouver
$715,715 (+10.3)

* Price of a house typical for the area

Source: Real Estate Board of Greater Vancouver