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Archive for April, 2006
Japan to raise interest rates that can cause markets to suffer
Wednesday, April 12th, 2006End of easy money likely to have adverse impact on ‘carry trade’
Hans Greimel
Sun
A pedestrian passes by an HSBC Tokyo branch office on Tuesday. For five years, Bank of Japan’s soon-to-end zero interest rate policy helped pump up economies, stocks and foreign currencies. Photograph by : Koji Sasahara, Associated Press
TOKYO — Imagine a bank that doles out loans but charges no interest. For five years, that’s what Japan has been for the world economy — an all-purpose lender with next-to-nothing borrowing costs thanks to the central bank’s zero interest rate policy.
The trend helped pump up economies, stocks and foreign currencies from the United States to Australia. But concerns are mounting it could all unravel on a global scale with the Bank of Japan’s decision last month to finally tighten the taps on all the easy money.
At risk is a flow of funds known as the carry trade, an investment strategy that has lured people to Japan to borrow money on the cheap and invest it overseas for higher returns.
No one is sure how much money is at stake, but economists say stopping the flow could prompt global investors to sell their holdings of stocks, bonds and other assets outside Japan, particularly in the United States.
That could weaken the U.S. dollar, push up yields on U.S. Treasury bonds and boost interest rates in the U.S. and Europe.
“When it starts to reverse, it could lead to some real shock waves in the market,” warned Kenneth Courtis, the Asia vice-chairman of Goldman Sachs Ltd. in Tokyo.
The carry trade is driven by the gap between near-zero per cent interest rates in Japan and higher rates elsewhere in the world.
In an attempt to bail the world’s second-largest economy out of more than a decade of doldrums, the BOJ implemented a super-loose monetary policy five years ago to make it easy for companies to borrow funds.
Not only did the central bank hold interest rates close to zero per cent, it flooded commercial banks with about 35 trillion yen ($338 billion Cdn) in daily liquidity, nearly six times the amount banks actually needed, by many economists’ estimates.
It didn’t take long for global investors to start exploiting all this cash sloshing around at close to zero per cent.
They borrowed money from Japanese banks and invested it overseas for higher returns. In the 12-country Euro zone, the key interest rate is 2.5 per cent, while the U.S. benchmark rates are now 4.75 per cent.
Other popular destinations have been New Zealand, where the key interest rate is 7.25 per cent, and Iceland, where the central bank recently hiked rates to 11.5 per cent.
On March 9, however, the BOJ declared Japan’s economy is back on track and soon ready for higher interest rates — a trend that will squeeze the profit margin, or spread, on carry trades, making them riskier and less attractive.
It’s hard to know to what degree — and where — investors will move their money, but many experts believe that U.S. markets could suffer as a result.
© The Vancouver Sun 2006
Increasing cost of building houses puts upward pressure on inflation
Wednesday, April 12th, 2006Rising material and labour costs push new houses up 6.5%
Eric Beauchesne and Wency Leung
Sun
Continued high demand for housing, coupled with rising prices for workers and construction material, has pushed up the price of new houses, such as these going up in South Surrey, by 6.5 per cent in the past year. Photograph by : Peter Battistoni, Vancouver Sun
The surge in prices for new houses is now nearing the increases of the late ’80s housing boom, and analysts are warning that the rise could put upward pressure on inflation in the wake of further surprising evidence of a hotter-than-expected real estate market.
Prices for new housing in Vancouver rose 6.5 per cent in February compared with a year ago, driven by rising construction material and labour costs, Statistics Canada reported Tuesday.
New housing in Canada as a whole rose seven per cent, the steepest year-over-year increase in 16 years. Most cities posted increases well above inflation, now running at 2.2 per cent.
“In fact, new house price gains are moving up toward levels not seen since the real estate boom of the late 1980s,” noted J.P. Morgan economist Ted Carmichael, who warned the increases will feed into higher core inflation, which the Bank of Canada scrutinizes for evidence of underlying inflationary pressures.
The report follows on the heels of news earlier this week of a surprising surge in the pace of housing construction in March, which also flew in the face of expectations of a cooling housing market.
“Housing is the ultimate interest-rate-sensitive sector and it’s hot but not bubbly, a sign that the Bank of Canada will keep pushing rates upward, but not to levels that undermine housing or the economy,” said John Johnston, chief strategist with The Harbour Group at RBC.
According to StatsCan’s February New Housing Price Index, price increases in Vancouver did not match the rise in new housing costs in Calgary and Edmonton.
Calgary recorded the sharpest price hike in the country, up 22.8 per cent from last year, while Edmonton was up 12.4 per cent.
Don Drummond, a senior vice-president and chief economist at TD Bank Financial Group, attributed that surge to a tighter labour supply and higher wages in Alberta, compared with the rest of the country.
The survey, which measures against 1997 indices, does not provide actual home price figures.
Drummond added that the results tend to be heavily weighed by the cost of new, smaller housing units in the outskirts of the city, and thus do not follow the same spike in the resale housing market, which includes larger, more expensive homes downtown.
“You’re getting quite a big gap between existing homes and new homes,” he said.
Earlier this month, TD Bank reported that the average price of a house in the Vancouver area was $490,000 in February, up 26 per cent from $387,000 recorded the same month last year.
Drummond added that Vancouver residents are paying 42 per cent of their pre-tax household incomes to pay mortgages on an average home in the city.
“That’s the highest it’s ever been,” he said. “Absolutely affordability is a big problem.”
Housing prices in Vancouver’s resale market are expected to continue rising, with double-digit gains forecasted for this year and next, said Carol Frketich, regional economist for the Canada Mortgage and Housing Corp.
“There’s just been a lot of demand out there,” she said, adding that demand is being fueled by solid job gains and population growth in B.C.
Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, added that interest rates may creep upward, but will not likely cool Vancouver’s real estate market any time soon.
“That won’t be enough to put the brakes on the market,” he said.
BUILDING BOOM
The price of new homes in Vancouver edged up in February, although prices did not rise as rapidly as some other major urban centres (Percentage increase compared with February 2005):
Vancouver 6.5%
Victoria 7.0%
Calgary 22.8%
Edmonton 12.4%
Winnipeg 9.6%
Toronto and Oshawa 4.6%
Ottawa-Gatineau 3.0%
Montreal 3.9%
Quebec 6.6%
Halifax 6.5%
Canadian average 7.0%
Source: Statistics Canada New Housing Price Index February 2006
© The Vancouver Sun 2006
Housing starts show no letup
Tuesday, April 11th, 2006Fraser Valley up 71 per cent over last year
Ashley Ford
Province
Construction of new homes like these in Surrey continues to boom. Photograph by : Ric Ernst, The Province
Another month and another blazing housing-start performance across the Lower Mainland.
Canada Mortgage and Housing Corp.’s latest numbers show Fraser Valley starts jumping an astonishing 71 per cent from March a year ago to 833 starts from 485.
Vancouver‘s performance was also impressive with a 30-per-cent increase over a year ago to 2,016 units.
The performance from all urban areas in B.C. was also impressive with starts increasing 27 per cent to 7,934 units.
“Despite a limited supply of land and skilled trades, home builders are managing to increase production,” said Cameron Muir, senior market analyst for CMHC in Vancouver. “Growth in the overall stock of housing is crucial to affordability,” he said.
“We are running ahead of where we expected to be at this time of the year. It’s not really surprising given the obvious demand of first-time homebuyers in the Greater Vancouver area,” said Peter Simpson, CEO of the Greater Vancouver Home Builders Association.
“It wouldn’t surprise me if CMHC now adjusts its housing starts forecast up slightly from their 18,500 for the year for Greater Vancouver,” he said.
Last year, there were 18,820 starts and in 2004 it was the best performance in a decade at 19,435. “If we keep up this pace, we might beat that 2004 mark.”
The rest of Canada also showed no sign of cooling last month and in fact set a construction pace not seen in 18 years. Housing starts rose to 252,300 units in March, up from 242,500 in February, marking the strongest March on record since 1987.
“With today’s data, it goes without saying that there is still not a shred of evidence that Canada’s housing market is tapering off,” said Marc Levesque, chief fixed-income strategist at TD Securities.
© The Vancouver Province 2006
Vancouver 3rd best place to live in world
Monday, April 10th, 2006City places first in Canada in international survey
Wency Leung
Sun
BEST CITIES IN WHICH TO LIVE (SEVERAL CITIES TIED) 1. Zurich, Switzerland 2. Geneva, Switzerland 3. Vancouver, Canada 4. Vienna, Austria 5. Auckland, New Zealand 6. Dusseldorf, Germany 7. Frankfurt, Germany 8. Munich, Germany 9. Bern, Switzerland 9. Sydney, Australia
WORST CITIES IN WHICH TO LIVE: 1. Baghdad, Iraq 2. Brazzaville, Congo 3. Bangui, Central African Republic 4. Khartoum, Sudan 5. Pointe Noire, Congo 6. Ndjamena, Chad 7. Sanaa, Yemen Arab Republic 7. Port Harcourt, Nigeria 7. Nouakchott, Mauritania 8. Ouagadougou, Burkina Faso
Vancouver is the best city in Canada in which to live, and the third-best place in the world, according to an annual quality of life survey.
Of 215 cities polled, Vancouver came behind only the Swiss cities of Zurich and Geneva, Mercer Human Resource Consulting said in its annual Worldwide Quality of Living Survey.
Vancouver kept the same ranking as last year, while Toronto edged up one spot to 15th and Ottawa climbed three spots to 18th place. Montreal ranked 22nd and Calgary 25th.
Mercer consultant Rebecca Powers said Vancouver topped the other Canadian cities due to its natural environment and recreational sites.
“It’s the relative nearness of the mountains, skiing, the ocean . . . as well as the moderate climate relative to the rest of the country,” Powers said by telephone from San Francisco.
But, she added: “The rest of Canada shouldn’t feel that slighted [by Vancouver’s high ranking]. The difference . . . in the scheme of things, isn’t that large.”
The survey is tailored to help governments and multinational companies place employees on international assignments.
It is based on 39 indicators, including political, social, economic factors, personal safety, and health, education, transportation and public services. It also examines environmental factors, such as climate and each city’s record of natural disasters.
While the survey did not directly factor in the cost of housing, it does consider the availability and quality of housing.
Canadian cities scored higher than all U.S. cities included in the survey.
New York City, which was used as a base against which all other cities were compared, rated 46th.
Honolulu, the top city in the U.S., dropped two positions to 27th, while San Francisco remained at 28th.
“Overall, U.S. cities continue to slip slightly or remain stable in the rankings, except Chicago, which has moved up 11 places due to decreased crime rates,” Mercer stated in a report accompanying the survey results.
It noted that declines south of the border have often been the result of increased air pollution, crime, natural disasters or terrorism.
Canada‘s natural environment is seen as better than the U.S., while crime in the U.S. is generally considered a bigger issue, Powers said.
Baghdad scored the worst place in the world for expatriates to live, unchanged from last year. Congo’s capital of Brazzaville was the second-worst.
Broadening instability in the Middle East also affected Cairo’s rating, causing it to plummet nine places to 131st position.
Rankings for most of Western Europe either improved or remained unchanged, but Dublin fell two places to 24th, mostly due to traffic congestion.
The quality of living in Eastern European cities showed gradual improvement, as did scores for Asia-Pacific cities.
Mercer anticipated Chinese cities such as Beijing and Shanghai will see higher quality of living scores in the next few years due to increased foreign investment, while India would also benefit from improved political relations with other countries.
Shanghai placed 103rd, the highest rank in China, and Mumbai ranked 150th.
Source: 2006 Worldwide Quality of Living Survey, conducted by Mercer Human Resource Consulting
© The Vancouver Sun 2006
After selling your home, leave info when you move out
Sunday, April 9th, 2006STYLE FOR LIVING: Things to help the buyer of your home
LYNDA REEVES
Province
Once, when I bought a house, the former owner taught me how to leave a house in a way that will make its new owner feel grateful and touched.
First, it was clean. Incredibly clean, right down to the kitchen drawers and shelves, ovens, fridge from the basement to the attic. The windows and mirrors sparkled. Even the broadloom had been cleaned. It felt brand new, even though it was an old house.
All the nail holes where her pictures had been were patched and the walls repainted. Fresh toilet paper and paper towels waited in their holders.
In the basement she had left a shelf of things that I would need. There were lightbulbs, paint cans, labelled by room, firewood, parts for appliances, hardware that matched each door and window, leftover shelves and pins for the bookcases, shutters, bathroom tiles, baseboard, mouldings and trim. She even left extra pieces of broadloom in case I needed to patch something.
In the bathrooms and bedrooms, she left me some privacy in the form of drapes on the windows. A note asked me to return them to her once mine arrived.
On the kitchen counter was a box filled with the things I would need to help make my new house a home. It was so kind and thoughtful and, as I came to learn, incredibly helpful.
There was a piece of cardboard for each room, with a dab of paint from the walls along with the paint name, number and manufacturer. Then there were lists. What kind of furnace, when it was installed and the name and number of the company that had serviced it and when.
The trades who had worked in the house were listed with contact information, including window washers, chimney cleaners and eaves-trough experts. She provided the name of the sewing room who had made the drapes and the carpet installer she really liked.
She noted her favourite stores and services. She provided garbage-pickup calendars. And she left instructions for when to turn on the sprinkler system and which trees needed spraying in the spring.
There were the blueprints from her renovation, before and after photos of every room, and of the garden in each season. She listed what was planted, since it was winter and I couldn’t tell.
Of course, there were instruction and warranty packages for every appliance.
She told me the things that she was planning to do next, had she stayed in the house: Install a new sprinkler system because the old one didn’t reach many of the flowerbeds, for example. Of course I forgot about that list until my flowers started to dry up. After that, I paid attention to the list and did most of what she had planned.
And finally, there was the welcome package in my fridge. In it were the breakfast basics you never have on your first morning in your new house. Plus bottled water, great snacks and cold drinks for the moving crew.
I could not believe the work she had gone to to make me feel welcome. I remember hoping she would receive the same gift at the other end, knowing it was unlikely. Who would do all this? Someone who understands how it feels to love and care for a house and hope that the next person will do the same.
I have no plans to move, and yet I find myself collecting every warranty and spare tile, and bit of extra hardware. I imagine it must feel great to leave things as she did and if I’m ever a seller, I have to at least try to do the same.
Lynda Reeves is the host of House &
Home with Lynda Reeves, Monday and
Friday on the Global Television Network
and Saturday on PRIME.
Vancouver is No. 15 in the world in Lonely Planet survey of 200 cities
Sunday, April 9th, 2006JOSEPH KULA
Province
So, how do you think Vancouver rated in Lonely Planet’s massive The Cities Book — A Journey Through the Best Cities in the World (Raincoast)?
Very nicely, thank you, placing 15th out of 200 cities around the globe. We even beat out rivals such as Rio de Janiero (17), our sister city of Montréal (20), Florence (27), Krakow (30), Athens (38), Venice (40) and Los Angeles (49).
The other Canadian cities that made the list are Toronto (31) and Quebec City (95).
And No. 200? It’s Ashgabat (The City of Love, in Arabic). Haven’t heard of it? Neither have I, but this city in Turkmenistan is described as one of the oddest.
Each city gets a two-page spread and, refreshingly, the photos used aren’t your predictable picture-postcard variety.
The text also is not the usual pablum dished up by guidebooks. Instead, we get the following gems (here we use Vancouver as an example):
Typical Vancouverite: “With the knowledge that they live in an all-round ‘top foreign city’ known for its ‘best quality of life,’ have a laid-back mind-set, happy to be part of a pioneering Pacific Rim city where marijuana is tolerated and the foodie scene has exploded.”
Strengths (among others): Vancouver Art Gallery, Wreck Beach, Stanley Park, Museum of Anthropology and Coal Harbour seawalk.
Weaknesses: The rain — 170 days a year; house prices; blocked-off streets for film sets.
Gold star: Granville Island (need we say more).
Cityspeak (a little bit of editorializing): “Safe-injection sites — controlling drug use or promoting drug abuse.”
Starring role in . . .
(somewhat dated): The X Files, Double Jeopardy, Douglas Coupland novels.
Import: Hong Kong/ Chinese citizens and money; Hollywood productions.
Export: Greenpeace, Generation X, k.d. lang, Michael J. Fox, Pamela Anderson — you get the picture.
All in all, it fairly profiles the character of our city, albeit in simplistic terms.
So, which city is No. 1 in Lonely Planet’s eyes? You guessed it. It’s Paris, the City of Light.
It’s not surprising, considering that Paris draws more tourists than any other city in the world and that France is the No. 1 country for tourism.
If you want to see how your favourite city rates, be prepared to shell out $65 for the privilege.
It’s the cheapest tour of the world’s finest cities you’ll ever find.
