On the back of a phenomenon industry watchers are calling “the Danny Williams effect” – after the Newfoundland and Labrador Premier who hammered out the oil deal – home sales in St. John's surged 68 per cent from October to November, data from the Canadian Real Estate Association (CREA) show.
St. John's is the latest in a string of Canadian cities including Calgary and Saskatoon to experience big surges in housing sales activity, often on the backs of their booming commodities markets.
In fact, Canada seems to have “barely blinked” in the face of the global tightening in the credit markets, along with the real estate woes south of the border, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.
“At least one Canadian economic train fully decoupled from the U.S. this year – the housing market,” Mr. Porter said in a report yesterday.
Existing home sales across the country beat expectations in November, rising 3.2 per cent from October and 7.6 per cent year over year, according to CREA.
It was an unexpected rise in a market expected to show a slight decline in activity, the second successive month in which expectations have been “confounded” by stronger-than-expected sales, said CREA chief economist Gregory Klump. CREA continues to expect a decline in home sales activity in 2008, he added.
“Eastern Newfoundland had Canada's biggest single market increase last month, Mr. Klump said. “I've spoken to a number of people about this amazing surge, and they're attributing it to the ‘Danny Williams effect,' ” he said.
In St. John's and its suburbs, home sales really started to take off in September, shortly after Mr. Williams reached the deal for the province to take a 4.9-per-cent equity stake in the $5-billion Hebron project, said Denise Brophy of Re/Max Realty Specialists in St. John's. Many of those real estate deals would have closed in November, and would therefore be reflected in the latest resale home data from CREA.
“The entire eastern section of this market is selling hand over fist. I will tell you unequivocally, without one hesitation, that Danny Williams and the oil announcement are what is driving this market,” Ms. Brophy said. “I haven't seen anything like this before.”
A total of 559 resale homes were sold in Newfoundland and Labrador in November, a 72-per-cent increase from the same month last year. The total value of existing home sales was $76.8-million, an 81-per-cent jump from last year.
Any “decent” home is now subject to a bidding war, and even run-down properties are selling quickly, Ms. Brophy said. New homes are selling as soon as the foundations are laid, she added.
The positive sentiment also appears to be spilling over into the commercial market in St. John's, said real estate lawyer Bruce Chislett.
Mr. Chislett's three-partner law firm recently purchased the two-storey former town council building in the St. John's suburb of Paradise, a town in which there are lots of real estate deals taking place.
“We believed it was a good place to win business, and a good time to stop renting and purchase something due to our long-term view of where property values are headed,” he said.
In addition to the Hebron agreement, Newfoundland and Labrador's economic momentum continues to build with Mr. Williams' announcement yesterday of a formal agreement to expand the White Rose offshore oil field, along with contemplation of the expansion of the Hibernia project, said Andy Wells, mayor of St. John's.
“Clearly people see there's opportunity here, and people buying real estate believe there's something of substance happening,” Mr. Wells said.
Many recent home buyers are Newfoundlanders returning home from Alberta, Ms. Brophy said.
It's important to keep in mind big jumps in price or activity often take place in smaller cities, said Phil Soper, president and CEO of Royal LePage Real Estate Services.
“In smaller markets like Saskatoon, Regina and St. John's, it's much easier to have these huge spikes due to their smaller base,” Mr. Soper said. “Nonetheless this is a dramatic increase that is both culturally important and economically unique.”
The booming atmosphere of St. John's reminds him of Calgary, said Mr. Soper, who plans to hold his company's national conference in St. John's next year.
Part of the region's challenge will be how it manages its future growth and deals with the labour shortages it is likely to face, Mr. Wells said.
“It may end up being a problem, but based on past history, this is one of the nicer problems we could have,” he said.
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source: reportonbusiness.com
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