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January 2010

Ally

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B.C. Building Costs down, thanks to Recession

VANCOUVER — Last year`s recession dried up enough plans to build new buildings and erased enough construction jobs to take a substantial bite out of the cost to build new buildings that will last until at least 2010, according to a new survey.

For almost five years, double-digit annual inflation in construction costs was the norm, but those days are gone.

From a peak in 2008, construction costs fell in 2009 from around five to six per cent at the low point to more than 20 per cent, depending on building type, the survey — which was conducted by quantity surveyors BTY Group in conjunction with the Independent Contractors and Business Association of B.C. — found.

With a smaller pool of available work, more companies are competing for each job, Philip Hochstein, president of the independent contractors association, said in an interview.

Also, with less work, contractors have laid off their least experienced and less productive workers, and don`t need to pay experienced tradespeople the huge incentives and overtime that were required in the boom period.

"It`s the productivity improvement that has reduced the labour costs more than reduction in wages," Hochstein said.

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B.C. Economic Growth predicted to remain steady in 2010

VICTORIA — British Columbia`s economy will grow at 2.9 per cent this year, the province`s economic forecast council estimated in its most recent report.

Coming last week, the council`s estimate confirms the 2010 growth target it put forward in December.

"As we prepare the Province`s 2010 budget and look ahead to the profile the 2010 Winter Games will bring, I am reassured that the Economic Forecast Council outlook for 2010 remains steady," said Finance Minister Colin Hansen.

The 2010 growth number is significant as it is one of the key indicators the provincial government uses to help formulate the coming budget, due March 2.

An unchanged number for 2010 adds stability, and means any related assumptions made in December can remain unchanged.

The council did slightly reduced its forecast for 2011, however, dropping to 3.1 per cent from the 3.2 per cent projected in December.

It also dropped the forecast for the 2012-14 period to 3.0 per cent from the 3.1 per cent projected in December

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B.C.`s Economy will be one of the strongest in 2010: Report

The 2010 Olympics, the domestic housing market and an improved global appetite for resources will make British Columbia one of Canada`s strongest provincial economies next year, according to a new report from RBC Economics.

RBC anticipates 3.2 per cent growth for the B.C. economy for 2010, compared to a 2.6 per cent decline in 2009.

A commodity outlook by Scotiabank recently forecast modest recovery in the resource prices that are fundamental to B.C.`s economic health and the Business Council of B.C. is also cautiously optimistic.

"As Vancouver gets ready to host the world`s biggest winter sporting event in February and March, British Columbia`s economy is set to enjoy a burst of economic activity that will help it move onto a recovery path in 2010," says a provincial outlook report released Monday by RBC.

"This economic tonic could not come soon enough for a province that has been hit hard by the recession," RBC said, projecting B.C. to end 2009 with a 2.6 per cent economic contraction that will be its worst performance since 1982.

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Pine Beetle ruination threatens treaty deal

The pine beetle has already taken its toll on B.C. forests.

Now it`s threatening even more.

Years of work to conclude a treaty with the Yekooche First Nation, a small remote community in northern B.C., is back to square one because the original agreement centred around a forestry industry now decimated by the beetle.

The approximately 230 members of the Yekooche First Nation signed a treaty agreement in principle in 2005 that included 6,400 hectares of land in the package.

The community would have likely been self-sufficient with a concluded treaty had the infestation to 80 per cent of their forest not happened.

"It`s been pretty devastating for us," said Yekooche First Nation Chief Partner Schielke, of the community that is accessible by travelling a logging road for 1½ hours outside of Fort St. James.

"We`re right in the middle of an infested area that has killed off a lot of pine trees. They`re going grey. It doesn`t look bad because of the snow, but in the summer you`ll really see the difference."

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Column: Economic forecasting at best an educated guess

The problem with statistical regression analysis is that if you get one variable wrong — the impact of the subprime mortgage crisis in the U.S., for example — then your forecasting model might miss something big — like the worst recession since 1982.

In fact, most economists were off the mark by a wide margin on the 2009 recession. In February 2008, Central 1 Credit Union assured us that British Columbia would experience the strongest five-year rolling growth rate — during 2008-12 — since the mid-1980s. "We don`t see the B.C. economy getting hammered by the subprime mortgage crisis, the high Canadian dollar and weak U.S. export as much as the B.C. government does in the next five years," the credit union said. And we thought the government was seeing the economy through rose-coloured glasses.

Plotting data points based on eight years of boom, economists could be forgiven for projecting good times forever. Only the brave warned the bubble would burst, and they were treated with the derision usually reserved for "end of the world is nigh" doomsayers. Of course, past results do not guarantee future performance, as the mutual fund industry warns us while trumpeting their one-year, five-year and 10-year returns. So we should have anticipated that, sooner or later, the boom would go bust.

Nevertheless, it`s the job of forecasters to forecast, and, chastened by last year`s economic train wreck, they have delivered a short-term outlook that is decidedly downbeat on the pace of recovery.

On Tuesday, the B.C. Economic Forecast Council, which advises the minister of finance on the budget and fiscal plan, predicted real gross domestic product growth of 2.9 per cent this year, with average annual growth of 3.0 per cent over the 2011-14 period, down from its December forecast of 3.1 per cent. The individual forecasts by the 14 members of the council ranged from a low of 2.6 per cent to a high of 3.8 per cent. Central 1 sees growth of 2.5 per cent in 2010, following last year`s decline of 3.1 per cent, and gains of 2.6 per cent in 2011, 3.5 per cent in 2012, 4.2 per cent in 2013 and 3.8 per cent in 2014. These figures appear to be in line with other forecasts, although the Royal Bank of Canada is more bullish in the early years — 3.2 per cent in 2010 and 3.4 per cent in 2011.

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Intrawest up the hill without any skis?

With less than a month to go before the opening ceremonies of the Vancouver Olympics, the company that owns the main venue for the games is in a fight with its creditors that could result in a change in ownership.

Bloomberg News is reporting that creditors to Intrawest ULC have lost patience with the owner of the Whistler Blackcomb ski resort after it missed the final payment on a US$1.4-billion loan that was originally due in October.

Fortress Investment Group LLC, which owns Intrawest, at first tried to persuade the creditors, including Davidson Kempner Capital Management LLC and Oak Hill Advisors LP, to exchange the debt for a new loan, but the offer was refused, with some creditors reportedly demanding equity instead.

Calls to Intrawest were not returned by press time.

The troubles at the ski resort operator come as British Columbia is struggling with a slumping economy and when the province won the right to host the Olympics it was hoped that the games would provide a boost for the tourism industry and help finance much needed transportation infrastructure, but since the start of the recession, some of the optimism has disappeared.

Last spring officials with the organizing committee conceded that the games are unlikely to yield a profit.

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Short-term incentive for rental program is hosing taxpayers

How much would you, oh grateful taxpayer, like to give up of your city taxes to get a developer to agree to build private rental housing? Anything? How about $10,000 per unit, the amount contributed by the city to renovate provincially owned rooms in the Downtown Eastside? Or $19,000 per unit, such as in a recent case in which city rents were forgiven on a low-income co-op building which was in difficulty?

Well, these numbers are ridiculously low considering that Mayor Gregor Robertson and his Vision council have just given up $96,000 per suite to get 49 units of market rental housing in the West End -- a staggering total of $4.7 million. Yes, that is money given up. Your tax dollars are being sacrificed to help a private developer build a private project that will be rented at full market rates. The units will not be inexpensive housing for people in need.

Let me hasten to add that none of this should be taken as any criticism of the developer, who is only doing as the mayor has requested.

The project, at Bidwell and Davie, is a 21-storey, 147-unit (49 rental, 98 condo) building recently approved by Vancouver city council under the STIR (short-term incentives for rental) program.

If the building were allowed to go ahead as condominiums without the subsidized rental units, two things would happen. First, the owners would put about 59 of the condos into the rental market (40 per cent of all condos in the city are rented out). Second, the city would have $4.7 million to invest in public projects that would benefit everyone.

Here are some West End projects that could use $4.7 million: The Aquatic Centre is old, serves a very large population and needs significant funds for renewal. It has been on the "wait list" for years. A long-desired gay and lesbian centre has been promised support by the mayor. Why not use this money to get that project started? The West End library and community centre both need capital improvements that sooner or later will be taxpayer funded.

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Late wave of sales carries B.C. House markets higher

A strong wave of property sales through British Columbia`s southern and coastal property markets in December helped lift the province to a strong finish in 2009, the B.C. Real Estate Association reported Tuesday.

And the sales boost should give markets enough momentum to push sales growth into the first part of 2010, or until rising prices again start pushing more buyers out of the market, according to association chief economist Cameron Muir.

The province saw 5,703 homes sold through the Multiple Listing Service in December, a 132-per-cent increase from the same month in 2008, the second highest number ever.

For the year, B.C. recorded 85,028 sales through MLS, a 23-per-cent increase from all of 2008 and the annualized average price of a home hit $465,725 in 2009, a two-per-cent increase from 2008.

"It`s impossible to determine how much pent-up demand is left in the market," Muir said in an interview, "but certainly the trend of the last quarter of 2009 would be indicative of a fairly strong first quarter of 2010.

"Beyond that, sales will likely come down from their lofty heights."

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Home inspection remains a buyer-beware environment

Darcy Zallen liked the spacious half-acre Maple Ridge property she purchased a lot more than the little bungalow on it, but thought as long as the home was structurally sound, she could live with it.

She needed the outdoor space for her dogs and the work she does for an animal rescue society.

However, despite a property inspector`s report that indicated some minor problems and noted a roof needed to be replaced within five years, Zallen faces spending up to an estimated $40,000 to make major repairs before she can move in.

She purchased the home for $405,000.

"I think I did what I could, I hired an inspector," Zallen, a civilian employee of the RCMP, said in an interview.

The trouble is, she didn`t know what standards the inspector would be working under, what things he would look at and what things he wouldn`t.

In April, the provincial government implemented a requirement for home and property inspectors to be licensed with Consumer Protection B.C. to bring a measure of order to a previously unregulated industry.

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Supply, Demand, and Real Estate rebound

A little over a year ago Greater Vancouver`s real estate market threatened to grind to a halt, gripped by panic and confusion. After a seven-year boom, many believed the global economic and credit crises were enough to kill our market and that recovery from them was years away. Even after interest rates dropped dramatically, many chose to sidestep the market and wait to ``see what happens.``

Many did not contemplate the rate at which our population grows, and the resulting pressure on real estate. They may not have realized it, but people who wait out the market typically find themselves competing against almost 1,000 more people every week in need of a home in Greater Vancouver.

In early 2009 I advised prospective buyers to beware the peril of waiting for news of the market bottom before buying a home because such statistical feedback tends to materialize too late to be useful.

Fastforwardthrough2009.TheReal Estate Board of Greater Vancouver reports that the almost 3,100 transactions in November were an increase of 253 per cent, from the November, 2008 number. Selling prices have been climbing and many buyers have found themselves chasing the market upward. Remarkably, during the eight months from April through November, Greater Vancouver detached, attached and apartment benchmark prices increased by 16.6 per cent, 11.7 per cent and 13.3 per cent respectively. Most values are back in the ballpark of their previous peaks ofabout twoyears ago.

How did the market rebound so quickly, and what lies ahead?

To answer, let`s focus on some often misunderstood dynamics that drive our real estate market. For starters, homes listed for resale are often referenced as inventory, which can be a misleadingoversimplificationbecause it doesn`t recognize that prospective ``sellers`` in a stable or growing population are typically also prospective ``buyers.`` When thousands of homes change hands, keeping spirits high and realtors busy, neither the stock of usable homes nor the number of people needing those homes necessarily changes. Some sellers may choose to become tenants, but each such decision creates a market for one more landlord-owned home, and inventory remains fundamentally unchanged.

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Economy still needs help walking before it runs

Premier Gordon Campbell arrived for the first government caucus meeting of the year in a cast, the result of surgery to alleviate a painful nerve condition in his right foot.

"Lame duck premier," quipped one of those ever-present press gallery wags Tuesday, riffing off the rumour that the B.C. Liberal leader will retire before facing another provincial election.

Campbell shot back with his own joking take on what he insisted was "not" a news story: "Premier limps into Victoria after a long, hard 2009."

But maybe things will be looking up for him in 2010.

Other than the impromptu medical news, most of the questions focused on the pending economic recovery.

"We`ve got a long way to go before we`re out of this," Campbell told reporters. "We`ve got to make some pretty challenging decisions. It won`t be business as usual."

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Homebuilding poised for revival

METRO VANCOUVER - The Onni Group kicked off 2010 by launching three new suburban highrise condominium projects, Polygon Homes laid out a plan to increase its construction by 20 per cent, and across the industry builders are ramping up activity.

It`s not so much a new building boom, though, as a crawl up from the dismal bottom of 2009, which saw builders start work on just 8,339 new homes in Metro Vancouver as counted by Canada Mortgage and Housing Corp.

That was the lowest number since 2000 and the second lowest since 1962.

By comparison, in 2008, Metro Vancouver`s builders racked up 19,591 starts, one of the region`s best years since the 1993 peak of 21,307 units.

Canada Mortgage and Housing`s forecast is for 13,000 starts this year, but the final numbers will depend on how an expected mid-year increase in mortgage rates affects consumers` ability to buy, how willing banks will be to extend developers credit and the general state of the economy.

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Metro Vancouver Real Estate hot, not yet overheating: Conference Board

VANCOUVER - Metro Vancouver`s real estate market warmed up considerably at the end of 2009, but likely won`t overheat as 2010 progresses, new data released Friday by the Conference Board of Canada suggests.

While Metro Vancouver home sales in December tracked a pace that was nearly three times higher than sales last January, board senior economist Robin Wiebe said new listings also rose keeping the overall market in balance.

"Though [the market] is closing on the top of the balanced range, buyers are provided with a reasonable choice as the go out searching for homes," Wiebe said in an interview.

However, Wiebe added that "it wouldn`t take much to tip [the market] over into seller`s territory."

That is one factor that has the Conference Board putting Metro Vancouver on the list of cities it expects will see property prices rise between five and just under seven per cent along with Victoria, the Fraser Valley, Calgary, Regina, Ottawa and Halifax.

Edmonton, Saskatoon and Montreal are among the cities that the Conference Board expects will see price increases over seven per cent, with Winnipeg Toronto and Hamilton among cities that should see price increases between three and five per cent.

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Transition to HST hits sour note

Grant Clark thinks he`s the kind of business owner Ontario wasn`t thinking of when it developed plans for the new, harmonized sales tax.

Mr. Clark is president of Solutions for HR Inc., a small consulting shop he`s operated for the past 15 years. In this economy, potential customers are trying to minimize spending on outside expertise. He`s getting a lot of requests to cut his hourly rate or do some kind of deal.

So he`s not sure what`s going to happen in July when, as a service provider, he`ll need to begin charging clients a full 13 per cent HST, or harmonized sales tax. Previously, his services were exempt from Ontario`s provincial sales tax, and he had to add only the 5 per cent federal Goods and Services Tax, or GST, to his bills.

"My cost to clients is going up 8 per cent, as is anyone`s who sells professional services," he said. "I can see the logic behind it – I understand the goal is to encourage investment by businesses in Ontario. It`s going to be beneficial overall, but there`s going to be an impact on any professional services firm, and I don`t think that was a major consideration by the provincial government."

That concern from the businesses on the front lines, who deal directly with the consumers who will pay higher taxes on certain services, is injecting a sour note into a tax-reform program that accomplishes major, long-standing goals of the business communities in Ontario and British Columbia, which will also fold its provincial sales tax into the federal one this summer.

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New West Minster retail complex transforming troubled area, says mayor

Developers have reached the construction phase of a major retail complex that will merge with New Westminster SkyTrain Station, some four years after the project was first unveiled, but New Westminster Mayor Wayne Wright says the development has already transformed the location.

Known as Azure Plaza 88, it will be a 1.2-million-square-foot, mixed-use development that Wright wants to be "the catalyst for the opening of our city," and which TransLink considers the template for integrating development into its transportation network.

An early benefit: The addition of residential development virtually on top of New Westminster Station has helped drive the drug dealing and other crime away from the formerly notorious trouble spot, and it is being heralded as the epitome of transit-oriented urban development.

"When I say crime has fallen off, it has disappeared," Wright said in an interview Wednesday following the unveiling of new details of the $250-million Plaza 88.

With three condominium towers gracing the site, Wright said enough people now live nearby that the "hangers-out" who brought the drug trade to the station no longer feel comfortable there.

"I don`t know where they`ve gone, but they`re not here any more," Wright said.

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Prince Rupert Port weathers lows in Pacific Trade

The Port of Prince Rupert showed growth in cargo traffic in 2009, but much of it is still coming at the expense of other West Coast facilities as overall trans-Pacific trade remains in a downturn.

Prince Rupert longshoremen handled some 12.2 million tonnes of cargo by the end of 2009, up 15 per cent from the previous year, the port`s best year since 1997, according to figures released by the Prince Rupert Port Authority this week.

Much of the increase came from a dramatic rise in shipping containers moving through the port`s still infant container terminal

The port handled 265,258 twenty-foot-equivalent units (TEUs) in 2009, its second full year of operation, up 46 per cent from 2008.

Total trans-pacific trade, however, shrank in the range of 15 per cent, Shaun Stevenson, the Port of Prince Rupert`s vice-president of marketing and business development said in an interview.

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Vancouver`s Home prices rated `most unaffordable`

VANCOUVER — Vancouver is the least affordable housing market in nearly 300 metropolitan markets worldwide, according to a study released Monday.

"Vancouver is the most unaffordable of the 28 housing markets measured in Canada and the most unaffordable of the 272 metropolitan markets ranked in Ireland, the U.K., New Zealand, Australia, the U.S. and Canada," the Frontier Centre for Public Policy concluded in its sixth annual Demographia International Housing Affordability Survey.

"[In] Vancouver the median sale value was $540,900 and the median household income was $58,200, giving a Median Multiple of 9.3 — defined as `severely unaffordable.`"

Frontier senior policy analyst and Canadian representative David Seymour said in an interview that the Vancouver results weren`t unexpected.

"It wasn`t a great surprise. [Vancouver] was at the top of the list last year as well, or on the bottom of the list, depending on your perspective."

Report authors Wendell Cox and Hugh Pavletich, who based their findings on 2009 third-quarter data, said that to be affordable, housing prices have to be equivalent to approximately three years` income.

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