The cost of building a $250,000 house could increase by more than $50,000

Gillian Shaw
Sun

A shortage of skilled tradespeople could push labour rates up by as much as 50 per cent within five years, according to B.C. Construction Association president Michael Geoghegan.

That could add over $50,000 to the cost of building a $250,000 house, excluding land, in Greater Vancouver by the year 2008.

Geoghegan said simple economics could drive wages up as demand for skilled trades exceeds supply.

“If the supply issues are not addressed, and we don’t see an uplift happening … we think it is quite possible that wages could go up 50 per cent in the next three to five years,” Geoghegan said. “That is basic economics.”

Geoghegan, whose association has 1,700 member companies, mostly in commercial and industrial construction, said there are one million people working in construction in Canada and that number is projected to grow by six per cent a year for the next three years.

“After that, we are predicting the numbers will drop to two per cent and it’s not because of a lack of demand, but because of a lack of supply,” he said.

If Geoghegan is right, today’s $35-an-hour plumber or boilermaker would command more than $50 an hour by 2008.

Industry experts agree trade rates are likely to rise sharply.

Wayne Peppard, executive director of the B.C. Building Trades Council, which represents 35,000 tradespeople in the province, concurred that a 50-per-cent increase is possible. He said with apprenticeship training programs being changed so that apprentices don’t have to spend the time getting their full qualifications, those that do will be able to command a premium

“People with papers will be valuable and they could be demanding those types of prices, there is no doubt about it,” he said. “Whether we can negotiate that in agreements is a whole other story.”

Peppard pointed to U.S. rates, which are higher than rates here, as evidence B.C.’s trades earnings aren’t in line with industry standards in other parts of North America.

In the U.S. Pacific Northwest, Peppard said, the negotiated union wage, including benefits, for boilermakers is $40.51 US an hour ($52.89 Cdn) with a projected increase of $7.23 US ($9.44 Cdn). By comparison, boilermakers here make $35 Cdn an hour in wages and benefits. The average craft rate across the board for the Pacific Northwest tradespeople is $38.50 US or $50.27 Cdn. Many trades here earn around $35 Cdn an hour.

Kerry Jothen, chief executive officer of Human Capital Strategies and a labour market analyst, said Geoghegan’s projections aren’t unrealistic if measures to change the demand/supply scenario aren’t taken.

“I don’t think that’s way out of line,” he said. “On the demand side, there could be a lot of activity, not just with the [2010 Winter] Games but with other big projects, and you combine that with the supply side in construction, which has some of the oldest work force, and he [Geoghegan] may not be far off.”

Jothen pointed to a Conference Board of Canada prediction that suggested that by 2010, the shortage of skilled trades will cause problems such as higher wages and risk of rapid inflation.

“They pointed to problems already showing up in Western Canada, where projects are delayed and cost overruns have been experienced,” he said.

Jake Friesen, president of the Greater Vancouver Home Builders’ Association, said he also believes wages will rise sharply.

“I’m not going to predict the future,” he said, “[but] wages will go up and they should, because a lot have been kept down for the last 10 years; wages were kept down because of supply and demand.

“I would venture to say wages will go up severely, because there aren’t enough new tradespeople being trained,” he said.

Of the several experts contacted by The Vancouver Sun, only M.J. Whitemarsh, chief executive officer of the Canadian Home Builders Association of B.C., said she thought Geoghegan’s projections were out of line.

“The home-building industry for B.C. does not agree with the construction industry, with Michael Geoghegan and what he is saying about the increase in salaries for our industry,” she said. “It’s just not going to happen.”

Geoghegan said if wage rates increased, more young people may be convinced that a career in trades is worth pursuing.

“The downside of the increase is that construction will be more expensive, but it will bring more people into the sector,” he said.

Geoghegan said labour costs account for about 70 per cent of a construction project, and he pointed out that large labour increases will inflate the bill for such upcoming projects as the Olympic venues, the Sea-to-Sky Highway construction, rapid transit and the convention centre.

He said while young people are encouraged to go to university, many could be acquiring a skill that would offer them job security and the ability to find work virtually anywhere in the world.

“We don’t need another young person spending four years and going $40,000 into debt to end up serving lattes,” he said. “What we need are people who will earn while they learn, developing skills, so by the end of four years, they’re already buying their first home or driving a new truck or family sedan.”

© Copyright 2003 Vancouver Sun

Developer’s $13M offer for downtown lot outbids entertainment venue pitch

Wyng Chow
Sun

In a serious blow to Vancouver‘s arts scene, city council is selling a prime downtown development site to the highest bidder rather than to an entertainment entrepreneur proposing a multi-use project designed to enhance the city’s performing arts and culture.

The difference in price between the competing offers for the 27,000-square-foot vacant lot is about $3 million.

Council voted at an in camera meeting to accept the top bid from Millennium Group, a Vancouver-based condominium development firm that was willing to pay $13 million for the choice property.

The existing zoning on the site on the northeast corner of Robson and Richards allows for a total of 135,000 square feet of residential and commercial development, indicating Millennium is shelling out nearly $100 per buildable square foot — a record price for the Downtown South area.

By contrast, vacant waterfront land along Coal Harbour — where luxury condo units have been selling at prices ranging up to $6 million — has barely topped $90 per buildable square foot.

“We have been told we are the successful bidder,” said Millennium president Peter Malek. “But the deal hasn’t been finalized.”

Council rejected a $10.1-million bid ($75 per buildable foot) from impresario Dennis Law, whose family business, Four Brothers Entertainment Co., owns and operates the nearby Centre in Vancouver for Performing Arts, at 777 Homer.

Commercial real estate sources — who earlier predicted a bidding war for the city-owned site at 788 Richards from among more than a dozen major developers — said Cressey Development Corp. was among the finalists, making its pitch at $10.8 million ($80 a foot).

“Millennium blew everybody out of the water,” one realtor said. “It’s insane.”

Said Cressey vice-president Scott Cressey: “It’s more than I wanted to pay. But (Millennium) must have it figured out. They’re smart business people.”

Law, whose family paid $7.75 million for the 1,849-seat, state-of-the-art former Ford theatre in December 2001, had envisioned building a highly visible arts-oriented complex on the coveted site, connecting it to the existing centre via a glass-enclosed bridge over the lane, creating a “focal point” for the performing arts district.

Instead, he now fears Vancouver will end up getting just another mundane downtown condo tower.

“I think it’s nuts,” Law said in an interview. “We were trying to create a focal point for arts and culture that would help Vancouver demonstrate what a great city it is so it can really showcase the 2010 Olympics.

“But I guess in the final analysis, council decided it needed the extra $3 million, or whatever.”

Law and other development industry sources said the $13-million price that Millennium is reportedly paying doesn’t appear to make economic sense.

“The only thing they can build is residential condos. Otherwise they’ll lose their shirts,” Law said.

Malek said Millennium hasn’t decided what to build on the site, currently used for parking.

“We’re working on a concept,” he said. “We’re considering various options, but there will definitely be a residential component.”

In Greater Vancouver, Millennium’s best-known condo projects have included the $220-million City in-the-Park master-planned community in Burnaby, the $36-million Lumiere in the West End, and the $31-million Edgewater in West Vancouver.

Law made an earlier offer in May to purchase the Richards Street site, but the city — fully aware of his intentions and vision for the land — decided instead to call for public tenders.

Law had commissioned noted Vancouver architect Bing Thom to design a multi-use project that would have included a hotel, some condos, restaurants and retail shops, reinforced by a 200-seat cabaret-style theatre.

Commercial realtor Bryce Margetts, who presented Law’s offer, pointed out the city had the leeway to decide against simply selling to the highest bidder.

“There could be other considerations,” said Margetts, of Colliers International. “[Councillors] might see a significant benefit in selling to an adjacent property owner. They have the ability to pre-empt the tender process.”

Brian Sears, Vancouver‘s senior property development officer, confirmed the city was not obligated to accept the highest bid, or any of the offers at all.

“Council was fully aware of Law’s interest and ideas,” Sears said. “But they decided to sell to the highest bidder.”

Contacted for comment, two councillors defended council’s action, although they remained coy on the subject, saying the deliberations were made behind closed doors.

“In looking at offers, we had to look at the financial benefits to city taxpayers and weigh all the factors,” said Non-Partisan Association Councillor Peter Ladner.

“Any time you don’t take the top bid, you’re in effect subsidizing somebody.”

Meanwhile, COPE Councillor Jim Green pointed out it was the NPA’s past practice to always accept the highest bid when selling off city-owned property.

However, he conceded: “In terms of building cities, that’s not necessarily the best way.”

Green, himself a patron of the arts, said he has asked for a staff report from the city’s real estate division to explore possible alternative guidelines when dealing with the tendering process in future.

“Price is an important issue, but what are the other issues that we could consider?” Green said. “Can we use the fact we’re trying to develop an area as a cultural area, for instance, or other aspect like that?

“How can we use our (city-owned) properties and their sale to advance the public good?”

© Copyright  2003 Vancouver Sun

 

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Record prices across Canada predicted with Vancouver in lead

Wyng Chow
Sun

With Greater Vancouver leading the country, average housing prices are expected to hit record levels in 17 major Canadian markets by year end and continue their climb through next year, according to an annual report released Monday by Re/Max.

In its latest market outlook, the national real estate organization predicts the average price for a home in Greater Vancouver — already the highest in Canada — to reach $330,000 this year, surpassing the previous record of $308,000 set in 1995.

For 2004, Re/Max forecasts a further five per cent increase to $346,000.

Multiple Listing Service figures show that as of the end of September, the year-to-date average price for a residence in all housing categories in Greater Vancouver stood at $324,400, up 7.6 per cent from $301,600 in 2002.

Meanwhile, the number of units sold through the first nine months totalled 29,522, an improvement of 9.5 per cent over 26,956 units the previous year.

(In Greater Vancouver, residential properties include detached houses, townhomes, condominium apartments, multi-family revenue homes, and building lots.)

Re/Max, which lists or sells about one out of every three homes across Canada and enjoys the largest single market share in the Lower Mainland, predicts total MLS unit sales in Greater Vancouver to hit 36,440 by year-end 2003, compared to 34,909 actual transactions in 2002, and to climb to 37,150 sales in 2004.

“Once again, Canadians have chosen real estate as their investment vehicle of choice,” said Elton Ash, vice-president of Kelowna-based Re/Max of Western Canada.

“Despite coast-to-coast disasters of epic proportions — [ranging] from raging forest fires, mad cow disease and SARS, to an Eastern-seaboard blackout and a hurricane — residential real estate activity continues unabated in virtually every major centre.

“The tremendous strength of the market has taken both industry experts and analysts by surprise.”

As in 2003, Re/Max expects housing sales in 2004 to be bolstered nationwide by low interest rates and continuing job growth.

Nationally, Re/Max estimates the average residential price will reach $203,200 by year end, up eight per cent from 2002’s actual average of $188,100. For 2004, the company forecasts another three per cent rise to $209,300.

For MLS unit sales, Re/Max estimates the national total to hit 433,900 this year, up three per cent from 421,227 actual sales in 2002. No change is anticipated for 2004 over 2003.

Of the 18 major markets surveyed, other Re/Max findings include:

– Following Vancouver, Toronto will rank as Canada’s second most-expensive housing market with a 2003 year-end average price of $291,000, then breaking the $300,000 mark for the first time in 2004.

– Victoria will finish the year at an average residential price of $280,000 — the country’s third highest — up 15.5 per cent from the actual $242,500 in 2002, then rise a further four per cent in 2004 to $291,200.

– Canada’s most affordable markets can be found in Regina, at a year-end average of $103,900, climbing to $107,000 in 2004; Moncton, N.B., ($104,000, inching up to $107,650); Saint John, N.B., ($104,000, rising to $111,400); and Winnipeg ($107,200, increasing to $112,500).

– Kelowna homes are expected to see a 2003 year-end average of $192,800, up 8.4 per cent from $177,800 last year, then appreciate a further five per cent to $202,400 next year.

“The rebuilding after a significant natural disaster [devastating forest fires] typically brings with it a measurable boost to the local and regional economy,” Re/Max noted in its Kelowna outlook.

“As a result, 2004 will see the Kelowna area experience a mini-economic boom, similar to the situation faced by Quebec and Eastern Canada after the great ice storm of 1998.

“This, in turn, will fuel the underlying market fundamentals needed to sustain the upward trend in [Kelowna‘s] residential real estate market.”

© Copyright  2003 Vancouver Sun

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Housing can’t keep up with waiting lists

Craig McInnes
Sun

VICTORIA — Waiting lists for subsidized housing are growing in B.C., even though the province is one of the few in Canada still building new units.

In the past two years, the waiting list has grown from 8,000 applicants to 10,000, while the number of units available for needy families, couples and singles has grown by only a couple of hundred, according to Alice Sundberg, executive director of the B.C. Non-Profit Housing Association.

“It’s been a big, huge jump in the last two years.”

George Abbott, the minister for community, aboriginal and women’s services, says housing has been a priority for the Liberal government, which has cut back services in other areas.

“I think we’re doing very well,” said Abbott, who says the long waiting list is partly a result of the tight rental market in Vancouver and Victoria. “In terms of meeting 10,000, it’s probably a gap that will not be filled,” he said in an interview.

“I think in part when there’s low vacancy rates, people look for lower-cost alternatives and B.C. Housing is one of the places that they look for that.”

The shortage of affordable housing has been cited by some activists as part of the reason for an increase in the number of people living on the street. But Lundberg and others say that while a shortage of affordable housing is a major problem, it is only one piece of the complex puzzle of homelessness.

“They’re all interrelated, but we can’t just build more housing and the problem’s solved.”

The growing waiting lists, especially in the Greater Vancouver area, mean the effective criteria for qualifying for subsidized housing have been getting tighter, however.

Some people have been on the waiting list for five years or more, Sundberg said and may never get off because they will continue to be bumped by people with greater need.

Officially, people are supposed to be eligible for subsidized housing if their rent in private market accommodation is 30 per cent of their gross income. In practice, the figure has become more like 50 per cent, Sundberg says.

“So if you are living in a two bedroom with four kids and you are paying less than 50 per cent of your income, chances are you are going to wait and wait and wait.”

The province has budgeted $153 million this year for subsidized housing, an increase of about 13 per cent since the Liberals took office. Part of that is funding for new construction, but most goes into subsidies for existing units.

The federal government is spending about $90 million on housing in B.C. through various programs, according to B.C. Housing.

After taking office in 2001, the provincial Liberal government cancelled 1,000 of the 1,700 units of subsidized housing that were in the planning stages under the NDP.

The 700 that were allowed to go ahead were aimed at people deemed to be most at risk, rather than ordinary people who have fallen on hard times.

The government also allowed work to continue on a couple of thousand more units that were already in some stage of construction.

In total, there are 42,400 units of subsidized housing in the Greater Vancouver area targeted to low- to moderate-income families, seniors, single mothers fleeing from abusive relationships and people with mental and physical disabilities, according to B.C. Housing.

Abbot said the private sector has to be encouraged to start building affordable housing through zoning changes and tax reform at the federal level.

“I don’t think affordable housing is something that can be generated simply by direct government spending. We need to have a combination of appropriate tax reforms and appropriate regulatory reforms to try to encourage the marketplace to provide more affordable housing as well,” he said.

Linda Mix, coordinator for the Tenants Rights Action Coalition, says there is more rental housing being built but most of it is high end.

And although there is some anecdotal evidence that housing vacancy rates have gone up since the last official figures were released last November, rents have not responded by coming down, she said. “Vancouver and Victoria still have among the highest rents in the country and in between tenancies, the landlord can raise the rent to whatever the markets will bear,” Mix said.

That means it is not available to people with low incomes. “There could be some vacant units on the market, but who can pay $1,100 a month?” Sundberg said.

Sun Legislature Bureau

© Copyright  2003 Vancouver Sun