IN THIS WEEK’S FACTS BY EMAIL:
- US MARKETS STALLING-THRIVING?
- PETRONAS CANCELS LARGEST LNG PROJECT EVER (PLANNED)
- SURREY GROWS CONSTANTLY INTO ITS FUTURE BEST – NOW A NEW 33 STOREY HILTON
- TANKERS ARE SAFER THAN TRUCKS TO TRANSPORT OIL
- WHISTLER UPDATE
- BITCOIN, THISCOIN, THATCOIN, NOW A REAL ESTATE COIN?
- RESERVE YOUR EARLY BIRD SPONSORSHIP FOR OUTLOOK 2018 ON SEPTEMBER 30
• International •
The US Markets are Flourishing … or Stalling?
Developers continue to proceed with plans for nearly 34,000 new condos east of Interstate 95 in the South Florida county of Miami-Dade (CraneSpotters.com). It is the most active coastal condo development market in the tri-county region of Miami-Dade, Broward and Palm Beach.
Yet, just last month some 6,942 units that had been planned have been taken off the market. Why? There is now a 14-month supply of units available for purchase. A balanced market is generally considered to have about six months of supply. CraneSpotters highlights that a 6-months supply is a buyer’s advantage and less months typically indicates a seller’s advantage in the market.
Major Point: Indeed. That is the story elsewhere.
Danish Prices Keep Rising
As we reported in May/June … negative interest rates continue to distort European markets. In Denmark they actually pay you to borrow money (remember the lawsuit we reported last year?!). No matter the IMF and others complain of market distortions. During the year to May 2017, the price index of owner-occupied flats in Denmark rose by 6.8% according to Statistics Denmark. During the latest quarter, house prices rose by 3.19% (2.38% inflation-adjusted).
- The average price of owner-occupied flats stood at DKK24,550 (EUR3,300) per square metre (sq. m).
- Detached/terraced houses were priced at an average of DKK12,482 (EUR1,678) per sq. m.
- Holiday homes were priced at an average of DKK13,848 (EUR1,861) per sq. m.
Major Point: Imagine this world: The short-term mortgage rate averaged (MINUS!) -0.29% in 2016, down from -0.16% in 2015, 0.19% in 2014, 0.23% in 2013, and 0.47% in 2012, according to the Association of Danish Mortgage Banks (ADMB). Luxemburg and Hong Kong are also hot, while Italy and Singapore prices remain down.
Australia Doubles Property Taxes For Foreigners
New South Wales, followed Victoria – to quieten mad locals, who blame foreign nationals for skyrocketing property prices. The tax was a 4% surcharge. The surcharge has now been increased to 8%.
The Australian government has also announced fines on foreign buyers who keep their homes unoccupied for more than six months in a year. The government has expressed concern about properties bought by foreigners lying vacant, adding to housing shortage.
Major Point: Who are the foreigners? Mostly, Chinese investors, accounting for two-thirds of a total A$47.3 billion (US$47.3 billion) invested in the property market in the 2016 financial year.
• Canada •
Pipelines Suffer Fewer Accidents Than Other Modes Of Transportation
In a very detailed study the Fraser Institute reported that the transport of oil and gas is quite safe by all modes that it examined: pipeline, rail, and tanker. There are 3 three recently approved oil pipelines (Trans Mountain, Line 3, and Keystone XL). The report found that pipelines suffer few occurrences (accidents and incidents) given the amount of oil and gas that is shipped through them. Overall, between 2004 and 2015, pipelines experienced approximately 0.05 occurrences per million barrels of oil equivalent (Mboe) transported.
Actually, added the report: “…when petroleum and natural gas goods are evaluated separately, we find that the transportation of oil results in fewer occurrences than the transport of natural gas. Indeed, transporting petroleum products by pipelines resulted in approximately 0.04 occurrences per Mboe compared to 0.07 for natural gas products. This means that the rate of occurrences for transporting natural gas products was 1.67 times greater than the rate of occurrences for petroleum products.”
It also concluded that: “…in addition to having low occurrence rates, almost 70 percent of pipeline occurrences result in spills of less than 1 cubic metre (17 percent result in no spill). Only 17 percent of pipeline occurrences take place in the actual line pipe, meaning that the vast majority of spills occur in facilities that often have secondary containment mechanisms and procedures. The results were similar for rail, where the transportation of oil was found to result in fewer accidents per Mboe transported than natural gas. Also similar to the data on pipelines, most rail accidents occurred in facilities rather than in transit.”
While both pipeline and rail transportation of oil and gas are quite safe, when comparing the two modes of transportation, pipelines continue to result in fewer accidents and fewer releases of product, when taking into consideration the amount of product moved. Specifically, based on petroleum product transport data from 2004 to 2015, pipelines were 2.5 times less likely than rail to result in a release of product when transporting a million barrels of oil.
Major Point: It’s interesting when one studies the facts that anti-pipeline crowd does not wish to hear them.
Petronas Quits Its LNG Plant Plans
The massive $11.4-billion Pacific Northwest LNG project approved last year by the federal government is not going ahead. The natural gas terminal was to be built in Port Edward on B.C.’s northern coast near Prince Rupert. The terminals would have shipped liquefied natural gas to Asia, allowing B.C. gas to trade on the world market.
This is disheartening news and a major disappointment as the size of the project would have clearly given the “north” a shot in the arm – in terms of employment and economic activity.
The reason? “We are disappointed by the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision,” said Anuar Taib, chairman of the PNW LNG board.
While that is true, it is also likely that the fact of the new BC Government being in opposition to the project may have been the real decision maker.
Major North developer, Western Canadian Properties Group says in a press release that “the sky is not falling in Northeast BC”. In fact it shares the view that: “When we look back in a few years, it’s our opinion that the recent announcements by Petronas and by the New Democrat Party about a Site C Dam review will be viewed as minor setbacks for this region.”
It cities these reasons:
- Northeast BC has always been about natural gas drilling because the area has huge reserves. In short Northeast BC is about the natural gas (NG) much more than being about liquid natural gas (LNG). Even though Petronas is not proceeding with the LNG facility in Prince Rupert, they will continue to invest in drilling in Northeastern B.C. and is likely to export natural gas via pipelines to the US rather than export LNG via Price Rupert.
- Taking a look at the $40-billion Shell LNG project in Kitimat, on June 30, 2017 Premier Horgan: “It has all of its permits in place, has social license from First Nations in the region, has the support of the community, and is waiting for economic conditions to turn around, and that project will proceed.” On July 27, 2017 Shell CEO thinks the Shell LNG project could be a go. “We need to get the timing properly right — we think we can,” he said. “If we look at an investment decision in the next 18 months or so, this is going to be a project that could start producing right at the moment when the spot market, the short-term market is getting very tight again.”
- The $1.6-billion Woodfibre LNG project in Squamish, which has already made a positive final investment decision, will move forward.
- The Montney gas reserve in Northeast BC has been compared to the booming Permian Basin play in Texas due to its stacked resource potential, prolific wells, relatively low costs and ongoing improvement potential through technology development. Truth be known, the Montney is the only formation that had its production grow since 2014 according to the National Energy Board report released June 14, 2017.
- Encana, currently the largest Montney producer, expects to double its liquids production by 2019.
- Seven Generations Energy, with year-over-year quarterly production up 73 per cent and funds from operations up 146 per cent, expects to spend between $1.5 billion and $1.6 billion this year.
- ARC Resources $750 million capital program for 2017 includes Montney infrastructure investments.
- Painted Pony increased its Montney land position by 52 percent, Tourmaline to ramp up operations heading in to third quarter. In fact, Tourmaline is currently operating 10 drilling rigs, and plans to ramp up to having all 18 rig in its fleet operating in July.
Also, says the WCPG release: “…the New Democrats have committed to supporting the oil & gas and pipeline industry in British Columbia. In fact, The BC NDP reaffirms commitment to LNG despite Petronas’ project cancellation.”
In regards to the massive site “C” dam project review WCPG point out that the New Democrats have promised a six-week review of the Site C project, however the BC Utilities Commission review has not been ordered yet. In the meantime, the NDP have said that construction won’t be stopped, so it is business as usual.
WCPG makes these excellent further points:
- Site preparation on the dam began in 2015.
- The work is now 20 per cent complete
- $1.75 billion has been spent.
- Contracts worth a total of $4 billion have been awarded for work that is either just starting or not yet begun. Although BC Hydro would avoid spending $4 billion to $5 billion by not building the dam, there would be expenses associated with halting it.
- Cancelling the project would mean that the $2 to $4 billion spent to date and to be spent on cancellation penalties would need to be recovered from the BC Hydro customers (you and me) through increased hydro rates – similar to what happened in Ontario when their government cancelled ‘in process power plans’.
- The recently appointed BC Hydro chair is Kenneth Peterson, whose 40-year career in the electricity industry has seen a decade’s work as CEO of Powerex, the marketing and trading subsidiary of BC Hydro.
- Most in the North don’t feel that the review will result in the shut down of Site C and this is as much about politics as it is about good business so no one can say for sure.
- Fortunately, our rentals aren’t significantly impacted by Site C. We estimate that about 15/220 (7%) of our rentals in Fort St. John are rentals related to BC Hydro.
Major Point: The point that WCPG makes about cancellation of projects in Ontario (revisit last week’s Facts by Email ) combined with misguided windmill and river power project replacements) resulted in hydro costs almost doubling. It is also idle speculation to try and guess what the new Government coalition can and WILL implement from their platforms. We would agree with WCPG that BC’s north needs a stable economy which means jobs and growth. We’d also hope that the new government will support the DAM.
So often I am amazed at all the electric car proponents that also dislike new power generation. Where do they think the electricity will come from?
For the full report read here: http://myemail.constantcontact.com/Northeast-BC-Update-from-WCPG.html?soid=1116705671895&aid=2ejbbtkdSS8
Next Week A Look At A Possible World Where All Cars Are Electric
Here is an excerpt from a conclusion by US Energy Information Administration: “Which means electric vehicles are a pretty crummy way to reduce CO2 emissions, given the current US power mix. You can do three times as much good per dollar by fitting coal plants with carbon capture systems. Not to mention even better alternatives like replacing coal plants altogether with nuclear, wind, or combined-cycle gas plants. Mass rollout of electric vehicles is only worthwhile in tandem with massive increases in renewables generation. Perhaps in the future we’ll get there. But today’s generation market trends do not support that assumption for the next several decades.” From: U.S. Energy Information Administration (EIA)
Surrey Keeps Growing Into Its Future Best Shiny Self
As most of you know I have had the privilege of being a judge for the Fraser Valley Real Estate Board Commercial Building Awards for the last 6 years. This has allowed me to visit and review the dozens and dozens of nominated projects. Every year, I am more impressed by the composition and the vision for brand new living environments as well as mostly LEED green building design constructions. With over 20% of BC sales now in the Fraser Valley and Surrey as its largest city (overtaking Vancouver in a few years), we’re seeing new projects galore. Two weeks ago Surrey (finally) approved the redevelopment of the old Flamingo site (undertaken by Tien Sher Developments) and this week a new hotel!
Approved was a 33-storey, 353-ft-tall mixed-use tower proposed by land owner Yann Holdings and designed by Canadian architectural firm Architecture49. This will be the tallest building in Surrey.
Major Point: If you add to this the $25-million upgrade for SkyTrain’s Surrey Central Station, a massive 50-storey education campus for international students planned for Surrey City Centre and a $150-million Great Wolf Lodge indoor water park resort proposed for Surrey …Surrey is on the move!
Bitcoin, Thiscoin, Thatcoin Now A Real Estate Coin?
From its website: “Recuing provides both investors and the average person a safer, more secure and superior alternative to storing their wealth in the form of digital currency. recount is a new cryptocurrency alternative designed to accommodate a wide range of financial transactions and investment goals. Its security is ensured through the use of one of the soundest and most reliable currency backings there is real estate.
Many of those who are looking to invest their earnings face the dilemma of putting their savings into low-interest rate bank accounts or lacking other investment alternatives due to a lack of liquidity.
No real commodities back the world’s widely used currencies. Real estate backs recuing in countries with a developed and stable economies such as the United States, Canada, the U.K., Japan and Switzerland.”
Major Point: WE MAKE ABSOLUTELY NO RECOMMENDATION ON THIS. It is a curiosity!! You can read up on its website https://101recoin.com/
(Sent by dispatch last Thursday): 1. Kelowna – single family brand new home $499,000; 2. Osooyos – 1 bedroom waterfront $205,000.
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