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Briefing highlights

  • Victoria's secrets: Jobs, housing
  • What to expect in CREA report
  • Global markets largely down
  • FTSE up as pound slips
  • Luxottica, Essilor in huge merger

Victoria's secrets

As Mike Nugent puts it, “You can’t sell something that isn’t there.”

Mr. Nugent made that comment earlier in the month when, as outgoing president of the Victoria Real Estate Board, he released record numbers highlighting the area’s housing boom.

Indeed, the British Columbia capital and its surrounding regions are seeing soaring home prices and enviable labour market stability that go hand in hand.

On the jobs front, Victoria boasts an unemployment rate of just 5 per cent, among the lowest in Canada.

It’s not that the labour market is surging, but rather is solid.

Employment rose 2.1 per cent last year, supported by technology, tourism, the Esquimalt Canadian Forces base, postsecondary education and the fact that Victoria is the seat of the provincial government, among other things.

“It’s a pretty stable labour market there,” said Bank of Montreal senior economist Robert Kavcic.

Both Victoria and Vancouver, he added, are enjoying sectors that are strong at this point, such as construction and professional services.

That, in turn, is helping to fuel the housing market. That, and anecdotal evidence that foreign money is flowing into Victoria properties, having been driven out of Vancouver by a 15-per-cent tax on non-Canadian buyers.

The housing boom has been linked to the strong labour market “notably when jobs were growing well above 4 per cent year over year in the second half of 2015 and in the first quarter of 2016,” said National Bank senior economist Marc Pinsonneault.

“Let me add also that Victoria’s market does not have the same affordability problem as Vancouver.”

We’ll see further evidence of the boom later in the morning when the Canadian Real Estate Association releases its monthly look at cross-country sales and prices for December.

We’ve already seen Victoria’s strong showing, with Mr. Nugent’s group reporting record 2016 sales and an annual jump of almost 24 per cent in the benchmark price of a single family home in the city’s core, to $758,500.

This came as the supply of homes for sale dwindled, with active listings down almost 41 per cent in December from a year earlier.

“We expect sales to continue to be strong but we don’t expect to see the phenomenal activity we saw in 2016 for 2017,” Mr. Nugent said.

“Inventory continues to be low,” he added.

“You can’t sell something that isn’t there. There is certainly an ongoing demand for properties.”

There are various measures of Canadian housing markets, and they all show Victoria booming.

The latest reading of the Teranet-National Bank home price index, for example, showed prices up almost 18 per cent on an annual basis.

The ratio of new listings to sales shows that Victoria has been a seller’s market since April, 2015, as “sales increased regularly up to December, 2015, followed by a spike that extended up to April, 2016,” said National Bank’s Mr. Pinsonneault.

“True, sales have decreased since then, but in November they were still 16.5 per cent over their level of March, 2015, while new listings were about the same. So market conditions remained rather tight.”

The region obviously has a lot going for it, from Vancouver Island’s natural beauty to cool neighbourhood favourites like the Blue Fox Cafe and the frequent back and forth of float planes.

Like every city, it also has its problems.

Take, as an example, the provincial government’s efforts to overhaul a prominent area near the Victoria courthouse and turn it into playground space.

“The testing of soil samples determined the presence of residual contaminants, including lead, gasoline, diesel and trace amounts of methamphetamines, following the existence of a homeless camp,” the province said last week, announcing a plan for soil remediation.

Cooling expected

Those CREA national housing numbers, by the way, are expected to show that the “modest cooling trend” continued in December.

Vancouver numbers have already been released, showing the slump deepening, while Toronto’s numbers show that market still on fire.

“Calgary and Edmonton continue to show signs of bottoming as oil prices have perked up, but there’s no evidence of a rebound yet,” said BMO senior economist Benjamin Reitzes.

Mr. Reitzes expects the latest national numbers to show that sales fell about 3 per cent in December from a year earlier.

“The new mortgage rules, which took effect in the second half of October, likely restrained activity in higher-priced markets,” he said, referring to recent federal measures aimed at cooling things down.

The MLS home price index, said Mr. Reitzes, is expected to show price gains still strong at about 14 per cent on an annual basis.

Markets mixed

Global markets are mixed so far, though largely down but for London.

Tokyo’s Nikkei and Hong Kong’s Hang Seng eached lost 1 per cent, and the Shanghai composite 0.3 per cent.

In Europe, London’s FTSE 100 was up slightly by about 8:30 a.m. ET, while Germany’s DAX and the Paris CAC 40 were down by between 0.5 and 0.6 per cent.

New York is closed for Martin Luther King Jr. Day.

London is up as the pound slips on expectations for British Prime Minister Theresa May’s Brexit-related speech Tuesday.

“Weakness in sterling has been the primary means by which the FTSE 100 has notched up its record-breaking run, but it promises to be a fun few days for the pound, what the PM up tomorrow and Mark Carney speaking this evening,” said IG chief market analyst Chris Beauchamp.

How markets ended Friday

THE GLOBE AND MAIL » SOURCE: QUANDL

Luxottica, Essilor strike deal

A global eyewear-industry giant is in the making through the merger Italy’s Luxottica Group, owner of the Ray-Bay and Oakley brands, and France’s Essilor International, the top maker of prescription lens.

The new company, to be called EssilorLuxottica, will have a market value of almost €50-billion ($53-billion U.S.), annual sales of €15-billion, annual operating income of €3.5-billion, 140,000 employees and sales in 150 countries. The merger marks one of the Europe’s biggest cross-border deals, The Globe and Mail’s Eric Reguly reports.

In addition to forming the largest eyewear company by a long shot, the deal would solve two problems that had the potential to damage both companies.

The first was succession planning at Luxxotica, whose 81-year-old founder and controlling shareholder, Leonardo del Vecchio, one of the richest men in Italy, has had problems keeping his senior executive team in tact. His successor will almost certainly be Hubert Sagnières, 61, Essilor’s French Canadian chairman and CEO, though the two companies did not specifically mention succession plans.