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“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.” -Oscar Wilde
IN THIS WEEK’S FACTS BY EMAIL:
PETRONAS HOLDS LNG PROJECT
WHICH REAL ESATE AFFECTED BY LOWER OIL AND GAS PRICES
FRASER VALLEY – DETAILED NUMBERS
GREAT MORTGAGE APP
HOT PROPERTY: UBC CONDO 3 BEDROOM 3 BATHS – 319,900
HOT LINE: A DETAILED DISCUSSION ON LOWER OIL PRICES AND AFFECTED REAL ESTATE
C A N A D A: Questions, Questions
Q: Ozzie you were right – the Swiss turned down the gold vote. I also heard that you did a gold versus real estate debate? Do you have a cd from that?
Yes the vote wasn’t even close … 78% to 22%.
Actually it was my German banker friend which made the call. The debate was in January of 2013 and can be listened to on the Michael Campbell World
Outlook conference site.
Q: What areas would be affected by lower oil prices?
Our motto is: Values grow where people go, people go where jobs grow. If prices stay low, the large multi-billion corporation will not be affected as
they plan for lower prices for prolonged periods. The smaller producers however may not be able to stay in business – particularly in the US. Their
debt load is often enormous and they need $65 as a bare minimum to survive. If we go below that even for 4 months, they shut down and lay off people. What areas? Smaller producers in Texas, Saskatchewan, New Foundland, Labrador, and Alberta (see more below).
The Numbers, The Numbers – Vancouver
Sales in Metro Vancouver were up by 8% to 2,516 in November 2014 compared to the 2,321 sales achieved in November 2013, and an 18 per cent decline compared
to the 3,057 sales in October 2014.
Last month’s sales were 6.9 per cent above the 10-year sales average for November.
in Metro Vancouver stand at 12,553, a 10 per cent decline compared to November 2013 and a 9.4 per cent decrease compared to October 2014.
Sales of detached properties
in November 2014 reached 1,012, an increase of 9 per cent from the 926 detached sales recorded in November 2013.
Sales of apartment properties
reached 1,052 in November 2014, an increase of 9 per cent compared to the 969 sales in November 2013.
The average price – while up 2% over last year – is down by 4% from the average of $838,300 reached in September this year. The average condo price is up
6% over last year but down from $468,000 in October. This is normal, prices usually head lower into December from highs reached (generally) in May. We also
have performed well when measured against the anemic November 2012 and the solid November of 2011. Anecdotally we also see condo prices in Metrotown (used)
rising more than the averages.
The Numbers, The Numbers – Fraser Valley
1,136 sales in November represented an increase of 15 per cent compared to the 986 sales during the same month last year,
22 per cent lower than the 1,448 sales processed in October.
The number of active listings stand at 8,302, a decrease of 4 per cent compared to the 8,641 active listings in November of 2013.
Pricing continues along the same trends as seen for most of 2014, with single family detached prices continuing to rise; townhouse prices remaining steady,
and apartment prices decreasing.
The MLS Home Price Index (MLS HPI) benchmark price of a detached home
in November was
$575,400 an increase of 4.6 per cent compared to November 2013, when it was $550,300.
The benchmark price of townhouses
increased 2.2 per cent from $292,400 in November 2013 to $298,900 last month.
The benchmark price of apartments
decreased year-over-year by 3.5 per cent, going from $196,200 in November of last year to $189,400 in November 2014.
Sales higher than last year but even with 2011. Single family homes a tad higher over last year but solidly higher over 2011. Condo prices also trending
However, the Fraser Valley
is a huge multi-faceted area and the averages really do not tell the total story.
Let’s take a closer look at the sub markets:
DETACHED MARGINALLY HIGHER
It is clear that when we buy in the “Valley” we need to dig down into the much varied numbers, to get a true picture of each local market.
The Landcor Report
This fine third quarterly report (by economist Will Dunning for Landcor) is a ‘must read’. Excerpt: “I have to say that I am shocked – SHOCKED – by what I have found. Now that I have looked closely at the numbers, a decade’s worth of prejudices have
been blown away. What I see is a stable market, which has good prospects of
remaining stable and healthy for some time. I also see that, as a result of prolonged shortages, housing in BC is fully-priced and a sharp rise in
interest rates could be quite disruptive.”
He discusses that BC averted a bubble and why the market now is much more healthy and in balance.
“All things considered, trends in the BC housing market can be explained by economic conditions and the policy environment. The era of an artificially
over-heated market appears to be well in the past.”
A good read … here.
The North Is Getting Affected By The Downturn In Oil And Gas Prices?
Even as BC granted Petronas much of what it wanted (low taxes and new carbon rules) it announced this week that it has delayed making a
final investment decision on plans to export liquefied natural gas from British Columbia, citing high construction costs.
The Petronas-led Pacific NorthWest LNG terminal proposed for Lelu Island (Prince Rupert) was to cost $11.4-billion.
This week’s statement said that pipeline and terminal engineering costs estimated so far may make the Canadian LNG project uneconomic. This delay
raises the possibility that another major resource project in Canada could be sidelined, following a string of planned oil pipelines that have run into
political and environmental opposition. Here are other oil price related ‘project shelvings’:
Norway’s Statoil ASA
in September put its multibillion-dollar Corner oil sands project on hold for at least three years, cutting 70 jobs. This forcedPembina Pipeline Corp. to cancel a proposed pipeline. Postponed France’s Total SA, along with its partners Suncor Energy Inc., Occidental Petroleum Corp., and Japan’s Inpex Corp., canned plans to build an $11-billion oil
sands mine known as Joslyn because of rising costs.
Royal Dutch Shell PLC is also holding back, shelving plans to develop an application to build an oil sands mine dubbed Pierre River.
So is it only the lower oil and gas prices? No, but they are the catalyst. A lot of the costs are too high in relation to income. But it is runaway
costs (construction and approval delays) and the fact that the US plants are getting ready to ship LNG sooner … while we are quagmired in
environmental and other holdups.
Another reason? Pacific NorthWest LNG risks missing out in the global race, especially with U.S. LNG export projects looming, Petronas chief executive
officer Shamsul Azhar Abbas said and Pacific NorthWest LNG president Michael Culbert put in more pressure: “We have LNG cargoes that are committed for early 2019 … .and … Canada has to be competitive with U.S. supplies.”
(State-owned Petronas holds a 62-per-cent interest in Pacific NorthWest LNG. The four partners are China’s state-owned Sinopec, whose formal name is
China Petroleum & Chemical Corp. (15 per cent), India’s state-run Indian Oil Corp. Ltd. (10 per cent), Japan Petroleum Exploration (10 per cent)
and Petroleum Brunei (3 per cent).
Major Point 1:
The key to any project is always, always timing. Rio Tinto announced it would spend $1.2 billion in Kitimat in 2006. In 2008 the world financial crisis hit and it postponed the smelter expansion. In 2011 it started a much larger $3
million expansion. The result? Real Estate stalled from 2008 to 2011 in Kitimat and boomed from 2011 to now. Prince Rupert in 2007
announced a $280 million port expansion, but by the end of 2008 it was cancelled and today it is still not fully re-implemented. The recovery was slower.
The falling price of oil will put a lot of projected projects on hold. Most will come back when (if?) prices rise again. The problem for BC is that a lot
of producers in the US can start shipping gas (and oil) a lot sooner as our project remain quagmired in environmental and regulatory mud.
Tax collection will be way off in Texas, Oklahoma, Saskatchewan, Alberta, New Foundland and Labrador. Their economies will take a bigger hit than the
If more LNG construction gets put on hold … there could be large layoffs in the North. But then there is Site “C” Dam putting up the slack
could lose more than $1 billion in oil royalties. Oil sands are also often high cost producers. So the Calgary real estate market in
particular is fuelled by the price of energy, which means slumping oil prices could affect confidence of all buyers. Sellers may need to sharpen pencils. I
would advise all developer subscribers to get in “all out” sales mode – providing the very best pre-sale deals now!
Saskatchewan at risk?
Saskatchewan might be hit less hard as costs to extract from the Bakken field are lower
Newfoundland and Labrador
have to re-evaluate its tax structures – there could be serious shortfalls.
IN THE US
Things have changed in Houston and they changed fast. Huge building boom will stop! Already some overbuilding: 24,000 apartment
units under construction but there may be a need for only 19,000 units next year.
and other oil-producing states have serious budgetary problems.
Major Point 2:
All oil producing states and provinces will not only fight the lower revenues, they will also have to fight a ‘lower confidence’ environment … which
will result in buyers holding off. We urge all developer clients … to get into overdrive NOW and sell, sell, sell.
1. UBC OKANAGAN
New 3 bedroom, 3 bathroom, 887 sq. ft., $319,900 +GST, rents for $2,300/month, ready August 2015
Duplex, 5 bedrooms/2 bathrooms, 2,438 finished sq. ft. Rental income $2,050. First listed in February 2014 at $509,900. Now slashed to $459,900;
3. Anmore Building lot, Countryside Village – a 20 minute walk to Buntzen Lake. Price: $349,000.
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