Archive for March, 2003

BC Housing Sues Leaky Condo Buildiers

Saturday, March 29th, 2003

Repair costs to subsidized units could exceed $100 million: CEO

William Boei
Sun

CREDIT: Bill Keay, Vancouver Sun Subsidized housing complex run by the Hungarian Society, funded and overseen by BC Housing.

A provincial Crown corporation has launched dozens of lawsuits against the building industry over leaky subsidized-housing complexes in the Lower Mainland and on Vancouver Island.

BC Housing is still assessing the damage but fears that more than 250 buildings with 10,000-plus units have suffered “building envelope failure,” chief executive officer Shayne Ramsay said in an interview.

The buildings are owned by non-profit societies, but were built with government funding and operate on BC Housing budgets. Residents pay a set portion of their income as rent.

The damage is expected to run to at least $100 million, but neither the non-profit societies nor their tenants will be stuck with the bills. BC Housing is taking care of the repairs and trying to recover its costs by suing the builders, architects, sub-contractors and others.

Municipal governments, which are often named in leaky-condo suits for failing to enforce building bylaws, are not being sued, Ramsay said, because taxpayers are already on the hook for the bills.

The government is also paying for $100 million or more in repairs for 300 leaky primary schools in coastal B.C. and suing the building industry to recover those costs.

The lawsuits are upsetting both leaky-condo owners and the construction industry, but for different reasons.

Some of the owners of 65,000 or more leaky condos, with an estimated $1.5 billion in water damage, say it’s unfair that they are stuck with complex and expensive damage assessments, repairs and lawsuits while some classes of leaky-building owners are looked after by the government.

“They’ve left the owners of leaky, rotten condos to flounder,” said James Balderson of the Coalition of Leaky Condo Owners .

Balderson said many leaky-condo suits have been abandoned by strata corporations because the owners don’t have the expertise or the money to keep going.

But Housing Minister George Abbott said the government is protecting public investments by taking charge of subsidized housing and school building problems.

“We have an obligation to try to protect the interest of the taxpayer, and that’s what we’re attempting to do,” Abbott said Friday.

He dismissed a suggestion — first made by the Barrett Commission on leaky condos and supported by advocacy groups — that the government should pay for leaky-condo repairs and handle the lawsuits because it can do the job far more effectively than hundreds of individual strata councils.

“The notion of the Crown proceeding on behalf of … private interests is a difficult one, and obviously is fraught with difficult precedents,” Abbott said.

BC Housing has filed between 50 and 60 lawsuits so far against builders, architects, engineers, contractors and other members of the building industry.

Ramsay said all the faulty subsidized-housing buildings date from 1983 to 1997. They suffer from “virtually the same” ailments as leaky condos — they let wind-driven rain in but won’t let it out again, resulting in rot in the wood-frame walls.

“It was a systemic failure in the private market, it was a systemic failure here,” Ramsay said. “There are design issues, there are construction issues, there are material issues. Maintenance in some cases may be a contributing factor as well. It’s about the same basket of causes that you’ve seen across the industry.”

But construction industry officials are grumbling that government law suits will drive its insurance premiums, bonding and other costs through the roof, and there is talk of refusing to negotiate settlements and mounting a test case to argue that a government-imposed building code — not faulty design or construction — is at the root of leaky-building problems.

“I strongly believe that [the code] is the underlying cause,” Gauvin 2000 Construction president Mark Gauvin said in an interview, “and that’s why we’re seeing rot in walls not only in condominiums, but single-family, commercial, institutional, all types of construction.”

Gauvin told a recent Vancouver Regional Construction Association seminar that building walls have always leaked, but that code changes in the 1980s, intended to conserve energy by making walls airtight, made it impossible for them to dry once they got wet.

Ramsay rejected that argument, noting that the building code demands that walls must be built so that if water gets in, it must be able to get out again.

Gauvin said the building industry potentially faces hundreds of government lawsuits — more than 450 in Greater Vancouver alone — and should be fighting back.

“Pick one case and defend it properly,” he told the seminar. “Do the research, hire the building scientists, investigate older buildings, and understand that this whole industry did not suddenly start doing everything wrong because of greed or incompetence.”

Gauvin added: “I don’t believe that contractors, or even architects, are the guilty parties in the whole leaky-condo, school and high-rise nightmare. … Building code changes were imposed on the industry without adequate research.”

Construction association president Keith Sashaw said the government lawsuits “are going to have a pretty profound impact on the industry in terms of its ability to get insurance and bonding, and continue to do work.”

Sashaw said talks have begun among building industry officials, insurance companies and others that might lead to a proposal to the government “to make some changes” on behalf of the building industry.

“I think that would be the preferred option, rather than getting into lengthy and acrimonious legal battles,” he said.

BC Housing said 166 subsidized-housing buildings in the Lower Mainland and 88 on Vancouver Island are likely “subject to some form of building envelope problems.”

The 254 buildings average 40 to 50 units each, which means between 10,000 and 12,000 units are affected.

Fifty of the most damaged Lower Mainland buildings have either been repaired or are undergoing repairs, and another 62 buildings that need fixing are going through detailed assessments. Repairs to the most seriously damaged buildings are expected to be finished by 2005-2006.

Ramsay acknowledged that the $100-million repair estimate could rise.

“You really don’t know the true picture until the siding or the stucco comes off,” he said, agreeing that initial repair estimates often rise as problems are uncovered, but seldom go down.

None of BC Housing’s suits have come to trial or been settled. Ramsay said the Crown agency is not necessarily looking for a test case and is open to “creative and innovative ways to resolve these [suits] outside of litigation.”

BC Housing has created an internal “building envelope repair group” with five or six full-time staff to oversee building assessments and repairs, he said. The agency also hires technical experts and outside lawyers to press its lawsuits.

Balderson said leaky-condo owners are still looking for more financial help from the provincial government, which already provides interest-free repair loans and forgives provincial sales tax on building materials.

Only 20 to 25 per cent of condo owners qualify for those programs, Balderson said, calling on Premier Gordon Campbell to fulfil the second half a promise he made in the 2001 throne speech — to obtain federal funding for a second Vancouver convention centre, and for “a fair program of relief for owners of leaky condos.”

Abbott, who first asked Ottawa for more leaky-condo aid in 2001, said he’s still trying and hopes to lobby federal officials again at a federal-provincial housing meeting in April.

© Copyright  2003 Vancouver Sun

Mortgage rates rise amid war concerns

Friday, March 21st, 2003

Increase not likely to panic prospective home buyers, real estate professionals tell The Sun’s Joanne Blain

Joanne Blain
Sun

Canada‘s big banks began increasing mortgage rates by a quarter-point across the board Thursday as uncertainty about the war in Iraq made the bond market nervous.

But even the second uptick in rates this month likely won’t cause prospective buyers to panic, real estate professionals predict.

At most banks, the five-year mortgage-lending rate moves to 6.85 per cent, while the rate on a one-year closed term is 5.35 per cent. A six-month open mortgage carries a term of 6.6 per cent.

The start of the U.S.-led war on Iraq – and a recent shift of investor money towards stocks — has caused interest rates to rise in the bond market, where banks borrow money to finance their mortgage lending.

With uncertainties about the war, oil prices and the global economy, investors are demanding higher rates before they buy bonds from corporate and government issuers in financial markets.

The rate hike may encourage real-estate shoppers with pre-approved mortgages at lower rates “to kind of get off the fence,” said Tom Gradecak, an agent with Re/Max Crest Realty in Vancouver.

But he doesn’t think the second quarter-point rate hike in a month — the last was a March 4 increase in prime lending rates — will drive many prospective buyers out of the market.

“I don’t see it as being a big panic in the streets. I think the rates are still pretty low,” said Gradecak.

“It just depends on the price range. If you get a five-per-cent-down, first-time buyer, you may lose some of those.”

Gradecak, who specializes in West Side Vancouver houses and townhouses, said he wouldn’t expect to see any substantial impact on the pool of potential buyers until five-year mortgage rates climb over seven per cent.

For those deciding between a variable and a fixed-rate mortgage, Thursday’s hike may nudge them to pick the sure thing, said Frank Greschner, a senior mortgage consultant for Invis Financial Group.

“A lot depends on their own comfort zone and their personal situation,” said Greschner, who has been in the business for 25 years.

“Some people are not very tolerant of any rate fluctuations at all and would prefer a five-year rate at an all-time low. That’s sort of my personal choice if I were making a decision right now as well.”

Some buyers will continue to choose a variable rate “because historically, floating rates have been cheaper,” Greschner said. But he suggests that people who are on a budget that would be thrown out of whack by another rate hike should “take the five-year term and don’t worry about the rate.”

As for what will happen to rates in the future, “no one knows for sure [but] I think there’s a much better chance they’re going to go up than down.”

In its annual report, released Thursday, the Bank of Canada hinted the same thing.

The bank admitted that inflation rose faster than expected in the last months of 2002. Although it hit 4.5 per cent in January, the bank remains confident it will slip back to about two per cent within a year.

But that might require more interest rate hikes, the report indicated.

An increase in the prime rate is more likely to affect short-term and variable rates, said Greschner, while long-term rates are tied more closely to the bond market.

On Thursday, TD Bank led the mortgage hikes by raising rates by a quarter of a percentage across the board — from its six-month convertible mortgage to its 10-year closed mortgage.

For example, its five-year “best rate” mortgage rose to 5.65 per cent, effective Friday.

CIBC followed TD’s lead by raising mortgage rates by a quarter point. Its five-year closed mortgage is now at 6.85 per cent.

“There’s a fair amount of uncertainty out there as you can imagine and bond rates for the last week at least have been increasing quite dramatically,” said David Fallon, associate vice-president of lending products with TD Canada Trust.

“We’ve held off, frankly, for as long as we could because of the uncertainty,” he said. “Given [Wednesday's] events overseas, we didn’t know how the markets would react so we waited as long as we could but it was just an unsustainable spread.”

As well, more money is going into the stock market from the bond market as some investors bet the Iraq conflict will be a short war. That’s also raising interest rates in the bond market to attract investors, Fallon said.

“At the end of the day, we have to piggyback the bond rates.”

- – -

SAMPLING OF THE NEW RATES

Rates for many mortgage categories are rising effective today, generally on the order of a quarter of a percentage point. Some new fiexed rates at two major banks, and the increase:

Royal BMO 6-month open 6.60%/+0.65% 6.60%/+0.25% 1-YEAR CLOSED 5.10%/+0.20 5.35%/+0.25% 4-YEAR CLOSED 6.40%/+0.35% 5.55%/+0.20%

© Copyright  2003 Vancouver Sun

How to avoid the tenant from hell

Sunday, March 16th, 2003

Rental Property: Reporter Wyng Chow picks up some pointers for new landlords on choosing their renters

Wyng Chow
Sun

CREDIT: Ian Lindsay, Vancouver Sun Apartment building owner Elizabeth VanderZaag works in the planter she added to the parking area.

In the thriller Pacific Heights, a couple’s dream house turns into a nightmare as they try to evict a deadbeat tenant, but find no help from the legal system.

Actor Michael Keaton plays a sociopathic tenant who weasels his way into an apartment in the couple’s home, pays no rent, drives out other tenants and ultimately gets the owners barred from their own property.

While overdramatized for entertainment value, the scenario isn’t so far-fetched for many Greater Vancouver landlords, who can relate their own “tenant-from-hell” stories.

But, according to the B.C. Apartment Owners and Managers Association, a lot of the pitfalls associated with being a property owner can be avoided through better screening of tenants.

“There’s a fair amount of fraud you have to watch for out there,” said Lynda Pasacreta, the association’s chief executive officer. Her group has 1,200 members representing 77,000 rental suites, the majority of them in the Lower Mainland.

“Some landlords have some horrific stories to tell. You really need to understand the business, including carrying out proper screening, along with reference and credit checks.

“You have to do a lot of due diligence in order to bring in a good tenant who you want to stay for a long time. That should be the goal of most landlords.”

Pasacreta was reacting to recent reports that a record $394.5 million worth of rental apartment buildings sold in 2002 in Greater Vancouver, as investors — novices as well as sophisticated individuals — discovered a safe haven for their money during times of stock market volatility.

The 142 properties changing hands marked a 45-per-cent increase from the previous year, when 98 units, totalling $190.5 million, were transacted. The 2002 performance was the best since 1992 when 134 buildings, valued at $309 million, sold during a hot market then fuelled by a flood of Asian investment.

Becoming a landlord entails much more than just figuring out how much rent to charge, Pasacreta said. Landlords must also educate themselves about municipal bylaws, taxes and B.C.’s landlord and tenant legislation, which is currently being amended.

For novices like Elizabeth Vander-Zaag, who paid more than $500,000 for a 90-year-old, 12-suite rental building on Fraser Street, it also helps to be handy with tools.

“I do a lot of my own repairs,” she said Friday. “But I have a lot of time.”

In Pasacreta’s view, the most vital aspect of being a landlord is to learn how to properly screen tenants, since once you rent a unit out to them, it is often extremely difficult, time-consuming and expensive to evict them.

Under current legislation, it could take up to six months to get rid of an undesirable tenant, even if that person were involved in illegal activity such as a marijuana growing operation.

Tenants who fail to pay rent can also stall for months before the bailiffs — paid by the landlord — are authorized by the courts to remove tenant belongings from the premises and the locks can be changed.

“Some tenants who are served with eviction notice just move on,” Pasacreta said. “But some who have learned how to [live rent-free] can hang on for three to six months, costing landlords $3,000 to $5,000 and more, and you’re hoping they won’t cause any damage.

“They know the system and milk it for what it’s worth until it’s time to move on.”

Pasacreta said it is essential to do credit checks on prospective tenants to find out, among other things, how they pay their bills, whether they have ever gone bankrupt, if there have been a lot of other inquiries about their credit as well as their previous addresses, then comparing the latter with information they have volunteered.

Employer references should also be checked closely, including asking a tenant’s boss how that employee takes care of work tools and how they get along with fellow workers.

Other advice includes:

- Always insist on two landlord references, the current and the previous one, since the most recent landlord may tell fibs just to get rid of a bad tenant.

- Demand to see picture identification, such as a driver’s licence, and check it closely, since these can easily be forgeries. For example, real B.C. driver’s licences have a holograph of the word “British Columbia” as well as seven numbers. Phoney licences have either six or eight numbers.

- Do not accept cellular telephone numbers given for references; insist on getting land lines that can be verified through the phone book.

Vancouver commercial realtor David Goodman said many landlords don’t like to personally “put up with any b.s.,” so they hire professional property management firms to look after rentals.

“A lot of landlords don’t want to have to deal with [tenants'] NSF cheques, stealing coins from the paid laundry or with plugged toilets,” said Goodman, who sold 13 rental apartment buildings in Greater Vancouver in the past five months.

“But others know that s–t is going to happen once in a while, and it’s to be expected. It’s the nature of the business. You live with it.”

The provincial government says amendments to B.C.’s Residential Tenancy Act, scheduled to be implemented this summer, are designed to streamline regulations, strengthen protections for both landlords and tenants, and help revitalize investment in the rental housing market.

Issues addressed by the changes include screening fees, security deposits, fair rent increases, inspection of premises, pets and illegal tenant activities, such as marijuana growing operations.

© Copyright 2003 Vancouver Sun

Demystifying the buying process for the first timer

Sunday, March 16th, 2003

The annual seminar for first-time home buyers can answer key questions

Rod Nutt
Sun

Although record-low mortgage rates are enticing Vancouver-area young people to purchase their first homes, many of them need help to de-mystify the process. What location is best? What type of home is best matched to needs? What mortgage type and term to choose? What are the legal considerations? What are the benefits of builder licensing, warranties and homeowner protection?

These and other key questions will be answered by a panel of housing experts at the ninth annual seminar for first-time home buyers presented by the Greater Vancouver Home Builders’ Association (GVHBA) on Tuesday, April 1 from 7 p.m. to 9 p.m. in the Guildford Sheraton Hotel Ballroom, 15269 — 104 Ave., Surrey.

Admission is free thanks to the sponsorships by The Vancouver Sun, The Province, Homeowner Protection Office, Canada Mortgage & Housing Corp., Real Estate Board of Greater Vancouver, GE Capital Mortgage Insurance Canada, TD Canada Trust, St. Paul

Guarantee Insurance Co., Shaw Cablesystems G.P., Real Estate Weekly, CKNW, Rock 101, MOJO Radio, 99.3 the FOX and Homebase Media.

Speakers are Cameron Muir, senior market analyst, Canada Mortgage and Housing Corp.; Bob Maling, director of licensing and registrar, Homeowner Protection Office; Susan Shepherd, regional director, GE Capital Mortgage Insurance Canada; Nick Douce, manager of residential mortgages, TD Canada Trust; Adnan Habib, partner, Baker Newby Barristers and Solicitors; Bill Binnie, president-elect, Real Estate Board of Greater Vancouver; and Darryll McDonald, vice-president, St. Paul Guarantee Insurance Co.

GVHBA president Jake Friesen is the moderator.

“Seminar presenters will help first-time buyers to do their homework before they take that important first step into homeownership.” GVHBA chief operating officer Peter Simpson said. “More than 800 people attended last year and, because the market is hot these days, we expect an even larger turnout.

“We invite people to arrive around 6 p.m. to view displays showcasing affordable homes, financial options, warranties and other relevant housing data.”

Pre-registration is required. Call 604-588-5036 from 8:30 a.m. to 5 p.m. Monday to Friday.

Registrations will also be taken by answering machine at the same phone number on weekends.

© Copyright 2003 Vancouver Sun

Polygon continue its artistic theme in the Miro

Saturday, March 15th, 2003

Sun

Housing Booms in BC Suburbs

Tuesday, March 11th, 2003

Construction roaring with triple-digit growth in starts, CMHC report shows

Derrick Penner
Sun

Triple-digit growth in housing construction for Richmond, the Tri-Cities and Surrey pushed Greater Vancouver’s February new-home starts to a five-year high of 1,008 units, the Canada Mortgage and Housing Corporation said Monday.

“Pent-up demand” is the technical term realtors give to one of the factors driving the market, which simply means renters who have avoided buying homes are now snagging them — often faster than they can be built — to take advantage of low interest rates.

While mortgage rates have crept higher marginally from one year ago, Cameron Muir, senior market analyst at Canada Mortgage and Housing said that likely has not been enough to slow sales.

“They [interest rates] are still historically low, and low by any measure,” Muir said. “The message is that mortgage rates have really helped the market, giving it a short-term punch in the arm to get people buying, and building pent-up demand.”

Maple Ridge realtor Ron Antalek, with Re/Max Ridge Meadows, said people are looking to the suburbs because they’re able to buy a townhouse or detached home for the price of a condominium in Vancouver.

“Many listings are selling on the day they’re listed,” Antalek said. “I’m doing a development of single-family homes and rarely can we even get the carpeting in the houses before they’re sold.”

Antalek said the key markets are first-time buyers and people who have equity in their homes and use it to trade to more spacious homes. The ability to own detached homes close to green spaces is what draws them to the suburbs.

While the over-all real-estate market is somewhat slower than it was at the start of 2002, “interest rates are on the rise now, hat either stops them from buying, or pushes them further east,” Antalek said.

One of the hottest growth areas was just to the west of Antalek.

There were 239 housing starts in the Tri-City zone of Coquitlam, Port Coquitlam and Port Moody in January and February, a 163-per -cent increase from 2002.

In Surrey, there were 433 starts, a 112-per-cent increase from a year ago.

Richmondhad the greatest growth in percentage terms. The 255 homes started in the first two months of the year is a 184-per-cent increase from 2002.

Vancouver, however, had housing starts fall by 49 per cent, Burnaby and New Westminsterdropped by 50 per cent and North Vancouver’s starts were down 76 per cent.

“We have some concerns that the inventory seems to be shrinking,” said Glenn Temes, a realtor with MacDonald Realty-Westmar in Richmond.

“One thing to be aware of [is that] this kind of activity puts a lot of pressure on markets. But continued demand, at this point, has not diminished.”

He said buyers appear to be optimistic about the future unlike they have been in the recent past.

Temes said immigration from Asiafuelled plenty of Richmond’s growth until the mid-1990s.

Today, he said, buyers are also attracted to the municipality because of its central location.

“With the way traffic is going, we’re seeing a lot of people who are not prepared to pay the price and time to commute [from the Fraser Valley],” Temes said.

Kevin Cowie, with Re/Max 2000 in Surrey and Delta, said CMHC increased the maximum mortgage allowed to first-time buyers with a five-per-cent down payment to $300,000.

“First-time buyers always generate the market from the bottom,” Cowie said. “They always seem to be doing a bit here and there to keep the incentive for first-time buyers.”

He said low interest rates, in combination with poor stock-market performance, has drawn investors back to real estate.

CMHC found that a large number of the 1,008 Greater Vancouver housing starts, 575, were multiple units — townhouses and apartments — which was a 102-per-cent increase over the same period last year.

The 433 detached homes under construction in January and February was an 85-per-cent increase.

Provincewide, there were 2,811 new housing units started in B.C.’s urban areas during February. Extrapolated, that creates an estimate of 23,000 starts for all of 2003, an increase of about eight per cent.

Many of the starts were multi-family projects which, from month to month, is a more volatile segment of the construction market.

However, Muir said strong economic and job growth will be required to sustain the real estate market over the long term.

Helmut Pastrick, chief economist of the Credit Union Central B.C. said his five-year forecast anticipates recovery of the U.S. economy, stronger demand and prices for B.C. commodities, increasing exports and a growth of inter-provincial population migration to B.C.

Improved exports should also spur an increase in capital investment in B.C., and Pastrick estimates B.C.’s economy will grow 2.5 per cent in 2003, increase to 4.3 per cent by 2006, then slow in 2007 to 2.3 per cent.

“[However], if we have a fallback into recession, or sluggish growth, we’ll alter that forecast,” Pastrick said. “[Then], we could see housing volumes begin to top out.”

Nation-wide, CMHC said starts surged by 34 per cent in February, mostly due to the start of several large condominium projects in downtown Toronto.

The report was released on the heels of Friday’s robust employment numbers of 55,000 new jobs created last month, which shows Canadians are maintaining their end of the economy, said Craig Alexander, a senior economist with TD Bank Group.

Derek Holt, assistant chief economist at the Royal Bank, predicts construction will begin this year on 201,000 homes, a pace that will slow to 178,000 starts in 2004.

He said more than a year of record-low interest rates is finally beginning to trim the demand for new homes and many who waited through the last decade to buy a home have now satisfied their desires.

The recent developments seem to support the Bank of Canada’s decision last week to raise its rate a quarter-point to three per cent as a way of heading off inflation. The bank cited high housing prices as one of its reasons.

The dollar is another sign of strength in the economy. It closed Monday at 68.26 cents US, up about seven per cent from a low of 63.40 cents in late December.

© Copyright  2003 VancouverSun

Condo-buying rule: Be Wary

Sunday, March 9th, 2003

Old fears are alive and well despite new warranty rules

Susan Lazaruk
Province

CREDIT: Arlen Redekop, The Province Tracy Anderson worries about her as-yet-unbuilt Yaletown condo.

When Tracy Anderson and Jordan Doell finally took the plunge to buy a home, they were haunted by leaky condo nightmares from previous building booms.

“I was quite paranoid, it’s very scary,” said Anderson, 32, a graphic designer who, with fiance Doell, bought an as-yet-unbuilt Yaletown two-bedroom suite for more than $250,000.

“What with all those owners having a lot of problems, I don’t have a lot of faith that the same thing wouldn’t happen to us.”

Before choosing, the couple compared the quality of fixtures in display suites and warranties available and researched developers’ and architects’ reputations as best they could.

The couple is happy with their choice, but Anderson says she’s nagged by that feeling that as a layperson she couldn’t independently assess the information she received.

“There has to be a [government] watchdog overseeing these developers,” she said. “My parents are looking for a condominium in the Coquitlam area and some of the new buildings are already having problems.”

The building industry and B.C.’s Homeowner Protection Office say self-regulation protects consumers.

Victoria’s tough new mandatory warranty provision, that came into law since the Barrett Commission’s report detailing the industry’s shortcomings, puts new buildings and repairs through rigourous scrutiny and provides a healthy reserve for any leaks.

The warranties — a minimum two years for materials and workmanship, five years for the building envelope and 10 years for structural defects — provide peace of mind, they say.

“The system is working very well,” said HPO registrar Bob Maling. “Insurance companies have to underwrite the new buildings and have to guarantee any claims, and they don’t write them loosely or lightly.”

But, said CMHC senior consultant Allan Dobie: “We think that the issue is not dead yet. It’s still a quality control issue, and the quality control rests with the builder. There is no 100-per-cent guarantee, that’s for sure.

“The insurance companies aren’t going to like me saying this, but quite frankly, most warranties don’t offer coverage beyond five or 10 years and the kind of crises that we’ve seen really happen after that,” said Dobie.

“A leaky window is going to show up pretty quickly, but if you’ve got a small leak that goes into the structure, it could be 10 to 15 years before you see the effects,” he said.

As in the mid-90s boom, presale condos are being snapped up in record time, sometimes solely on glossy pamphlets and a browse through stylish display suites.

One such pamphlet lists 50 largely cosmetic features. Only three discuss construction details.

In the popular pre-sales, homebuyers may be purchasing without a real-estate agent who acts on their behalf.

They may agree to a sales agreement that doesn’t include a “subject to inspection” clause, standard elsewhere in real estate.

Leaky condo advocate and realtor Carmen Maretic said it’s not certain homebuyers are better protected in this condo boom.

She says it’s worrying that the Municipal Insurance Association is urging its members, B.C. city halls, to pass bylaws that would shift liability for inspections to engineers and architects to avoid huge lawsuits, for instance.

But Maling said the MIA is “closing the door after all the cows have got out,” because it’s basing its fears on what’s happened in the past. Construction and materials have improved duringthe past decade and most condos are now built with rainscreens, designed to allow water to escape if it does penetrate the building’s outer shell.

More reputable developers may be beefing up quality, but that doesn’t mean all will, warns Maretic. And Dobie points out there is still a shortage of skilled labour and a rainscreen is only as good as its construction.

A Yaletown highrise built with a rainscreen in 1996 was inspected by an inspector hired by The Province. He found more than half of the weep holes visible from one balcony plugged with caulking. Six years later, its cladding is stained in several places with black-and-green mould icicles, a warning sign for possible leaks.

“There’s got to be a real understanding of the design by both the builders and the inspectors on the importance of these things,” said Dobie. “And the builders are still trying to maximize their profits and they’re going to do things as cheaply as possible. That’s the nature of the business.”

Regular maintenance and inspections — by independent professional engineers or inspectors — are essential and this is an area that appears to have been improved upon since the last boom.

Some developers provide homeowners’ manuals similar to those buyers might get with a new car so they can follow the schedule and not miss any warranty deadlines.

Maretic said it’s important not to rely on the developer and warranty provider to handle maintenance in the crucial first five years because she’s heard of instances where they apply Band-Aid solutions on a serious problem until it’s too late to make a claim.

© Copyright 2003  The Province

Portico – A taste for the unique

Saturday, March 8th, 2003

Sun

Download Document

Rental apartment sales set record

Thursday, March 6th, 2003

Uneven equity markets are driving the boom, writes Wyng Chow

Wyng Chow
Sun

A record $394.5 million worth of rental apartment buildings sold in 2002 in Greater Vancouver as investors discovered a safe haven from volatile equity markets, according to a commercial real-estate study released Wednesday.

Another major motivation is proposed new provincial rent legislation which, investors say, would “level the playing field” for landlords and tenants while providing property owners with “reasonable” returns.

“Rental buildings now make sense as investments,” said Vancouver real-estate entrepreneur David Andrews, who has formed a syndicate to go on a buying spree this year.

BC Assessment Authority data and Multiple Listing Service sales figures show 142 apartment buildings changed hands last year in Greater Vancouver. It was the highest number since 1992, when 134 properties — totalling about $309 million — sold during the hot market then fuelled by a flood of Asian investors coming to B.C.

The 142 transactions last year marked a 45-per-cent increase over 2001 when 98 units, valued at $190.5 million, were sold. The 10-year low was in 1998, when 51 units, totalling $130.7 million, changed hands.

“What’s equally impressive about the current bull market for apartment buildings is that everybody is getting into the act,” said Vancouver realtor David Goodman of Macdonald Commercial Real Estate Services, who compiled the study.

“Of the 13 buildings I sold in the last five months — representing over $30 million in volume — the buyers included first-time apartment investors, landlords adding to small and large portfolios, and offshore buyers,” said Goodman, an apartment specialist.

“If the sales volume of the past eight weeks is any indication, we will definitely see another banner year for 2003.”

He said the current buyer profile ranges from individuals to institutional investors such as giant GWL Realty Advisors Inc., to real-estate investment trusts (REITs).

“With the uneven performance of equity markets and historically low interest rates, investors are looking for the solid and steady growth offered by the apartment asset class, and this strong demand will likely continue,” noted Macdonald Commercial president Tony Letvinchuk.

Andrews and his Vancouver-based limited partnership, called Western Income Properties Corp., will be among those with insatiable appetites this year.

Since November, the group of 60 investors has snapped up four buildings — located in Burnaby, Coquitlam, Surrey and White Rock — totalling 231 units for $16 million.

“We intend to spend another $70 million to buy 1,000 more units this year,” said Andrews, broker-owner of Re/Max Real Estate Services. “We have enough offers out there to do that.”

Goodman conceded that while rental buildings don’t necessarily generate “spectacular” returns for owners, “they’re solid and provide a safe sanctuary for investors in a troubled [financial] world.”

Said Goodman: “Investors want long-term stability and predictability. They want to be able to sleep nights.”

Typical apartment capitalization rates range from 4.9 per cent to 6.5 per cent on Vancouver’s west side, and from 6.75 per cent to 7.5 per cent in locations such as Vancouver’s east side, Burnaby and the North Shore, he said.

Goodman’s market study included interviews with various property appraisers and his own proprietary research, which he cross-references with BC Assessment and MLS data.

Last fall, the provincial government proposed changes to the Residential Tenancy Act that tenant advocates fear could lead to rent increases of up to 20 per cent. In recent years, landlords have been allowed to routinely raise rents by only token amounts of about three per cent, without being required to show their financial records to tenants.

The amendments would permit landlords to introduce annual rent hikes of three to four per cent, in addition to increases in the consumer price index, currently hovering between 1.5 and 2.5 per cent. That could result in total rent hikes exceeding six per cent.

However, landlords would also be permitted to defer making rent increases for up to three years, which means that if a fourth-year hike was included, tenants could be hit with a sudden rise of more than 20 per cent.

The new law, expected to be enacted this spring, also forbids tenants from disputing a rent increase that falls within the limits set by the government. Currently, any rent hike can be disputed.

“This shows a clear direction by the B.C. government,” Andrews said.

“The upside of owning existing apartment buildings include rents going up, along with both population and job growth.

“Supply is also dropping as older buildings are being demolished to make way for new condos. [Developers] aren’t building many affordable rental buildings any more.”

© Copyright  2003 Vancouver Sun

 

Rental Apartment Sales Set Record

Thursday, March 6th, 2003

Sun