A 14-per-cent drop in housing starts across Greater Vancouver in September compared with the same month a year ago is no sign that the region’s red hot real estate market is leveling off, Canada Mortgage and Housing says.

The decline was entirely in the highly cyclical multiple-unit sector offset by an increase in single family starts, explained CMHC senior market analyst Cameron Muir.

Builders started construction on 1,210 units in multiple-unit projects across Greater Vancouver in September, according to CMHC figures, 317 fewer than in September 2003, a 21 per cent drop.

September’s single family home starts, however, rose by 53, a 13-per-cent gain.

“The first thing I do is look at the multiples and the singles,” Muir said. “If the multiples are down and the singles are trending up, I know home builders are still confident that the market is there.”

Muir added that multiple-unit projects take a long time to plan and can involve hundreds of starts per project, so a project’s start date can skew overall statistics.

Housing inventories, he said, historically low on the multiple-unit side with about 100 units unoccupied, are a better indicator of the market.

In that respect, Muir sees that there is still room for developers to expand operations over the next year.

Housing starts across the province edged up two per cent to 2,782 units, CMHC has reported, and year-to-date figures of 23,592 units represents a 31-per-cent gain from 2003.

On the resale side, sales remain on target to set a record in 2004, but the Real Estate Board of Greater Vancouver reports declining sales over the past three months.

Statistics Canada has also tracked declining building permit values over the past two months.

Muir said those figures do not yet set a trend toward a cooling market and added that the market likely won’t see the double-digit price increases that it has over the past couple of years. But resale levels are still strong by historical standards, he said.

“My view of the market is that it is changing from a hot, hot market to just a hot market,” he said.

Housing starts across Canada in September fell due to a decline in multiple-unit projects, CMHC said Friday. Nationally, housing starts dropped to a seasonally adjusted annual rate of 231,000 from 241,100.

In urban areas, the agency found a 5.9-per-cent increase in starts of single detached homes to 106,200. The overall starts were down 4.7 per cent, however, because of a 14-per-cent decline in multiple-unit starts.

Monthly figures are adjusted to remove normal seasonal variations and multiplied by 12 to reflect annual levels.

B.C. was one of three regions to see a decline in urban housing starts along with Ontario, which recorded a 6.5-per-cent drop, and Quebec, which saw a 1.6-per-cent decline.

Urban housing starts rose by 9.2 per cent in the Prairie provinces and 2.1 per cent in Atlantic Canada.

The estimated number of rural starts in Canada came in at a seasonally adjusted annual rate of 26,800 units.

© The Vancouver Sun 2004

CREDIT: Bill Keay, Vancouver Sun Architect Peter Busby says developers increasingly want their projects to leave a smaller footprint on the earth.

Going “green” is becoming mainstream in B.C., said well-known Vancouver architect Peter Busby who is one of Canada‘s leaders in sustainable design.

Busby, who designed his first sustainable project more than a decade ago, said more and more developers understand homeowners care about living in spaces that are environmentally responsible. This wasn’t always the case.

“Two years ago no one was interested in this [sustainability]. Now it’s catching on very quickly,” said Busby. “We are seeing more developers coming to us who understand in the Vancouver marketplace they need to achieve LEEDS silver or gold.”

LEEDS (Leadership in Energy and Environmental Design) is a rating system devised by the U.S. Green Buildings Council in Washington, D.C. which evaluates the environmental impact on buildings. It provides a standard on just what is a sustainable building.

Criteria such as energy-efficient design, construction waste management, use of recycled materials and environmental impact are taken into account when assigning a rating.

Busby explained the higher the rating the more energy and water efficient a building is, with platinum being the highest rating. The lowest level is simply certified, followed by silver, gold then platinum.

Busby is currently designing a Calgary residential project that will be the first North American home to achieve a platinum LEEDS rating. That project will be completed in eight months.

“If we can sell LEEDS platinum to Calgary there’s no reason it can’t happen in Vancouver. Vancouver is greener than Calgary,” said Busby. “People who move to the west coast are here for a host of reasons, but one is the environment. People here have that in their set of values.”

Busby said the city of Calgary like the City of Vancouver are leading the way, by insisting all their new buildings must achieve a LEEDS gold rating.

Busby is also optimistic Victoria may soon follow suit, pointing out a request for proposals for a large inner city dockside development has requested it achieve a LEEDS rating.

He is currently designing Vancouver‘s Mount Pleasant new community centre, which will include a library, daycare and affordable housing. It will be completed in the next two years and have a LEEDS gold rating.

“Most of the new projects [in Vancouver] are at least silver or gold. There’s competition in the marketplace,” said Busby.

The additional costs to create a sustainable silver project is two per cent higher than a conventionally constructed building, four per cent higher for gold and 10 to 15 per cent higher for platinum, said Busby.

“I think they [developers of large housing projects] will pay for silver or gold LEEDS but not platinum yet in this marketplace,” he said.

He pointed out developers are increasingly marketing their LEEDs rating because consumers understandably appreciate living in healthier and environmentally-friendly environments.

Busby said the Calgary home, soon to become the first platinum residential building in North America, is very energy efficient. The toilets are flushed with rain water. Solar panels collect 20 per cent of the home’s heating needs, while the remainder is conventional gas heating; all the materials used are sustainable and the “grey water” from the sinks and shower are treated with a biofilter on site while the toilet water goes to the regular sewage line. The water consumption in the home will be about 40 per cent of a conventional building.

He added the environmental impact has been reduced by half by using materials grown by nature, such as wood in the structure and floor and wheatboard for the cabinets.

“An ideal situation is a building that has no negative impact [on the environment]. We’re not there yet, even a platinum LEEDS building has a footprint impact.”

But Busby added the “bar has been set” and it’s up to the builders of tomorrow to raise it even higher.

SOME OTHER NOTABLE ‘GREEN’ PROJECTS BY BUSBY

-Busby’s first sustainable project was in 1989 for Coupe Roger Curtis, a Bowen Island development that has yet to go ahead.

-Busby’s first completed “green” building was North Vancouver District city hall, completed in 1992.

-Some other “green” buildings by Busby include the head office for Burnaby city engineers in 1996, the Architectural Institute of B.C. building, in Vancouver, completed in 1997, and the Revenue Canada office in Surrey in 1998.

-He also completed Canada‘s first LEEDS gold project in 2003 — The City of White Rock’s Operations Building. That project achieved a reduction in site water usage by 90 per cent or two million litres a year; a reduction in building water usage by more than 20 per cent and a reduced energy consumption of about 55 per cent.

-Busby’s Brentwood Skytrain station on the Millennium Line won the 2004 Governor-General’s medal for architecture.

Ran with fact box “Some Other Notable ‘Green’ Projects by Busby”, which has been appended to the end of the story.

© The Vancouver Sun 2004

Vancouver‘s housing sales remain on target to set a record in 2004, but monthly figures from September indicate the heated market from the past year and a half is cooling.

For the third straight month, sales dropped in comparison to the same period a year earlier. In September, sales of detached homes fell dramatically, by 26.8 per cent compared to September of 2003, according to figures released Wednesday by the Real Estate Board of Greater Vancouver.

While apartment sales were up by 6.5 per cent, the sales of all housing for September in the Greater Vancouver area fell by 15 per cent compared to the same month last year.

July was the first indicator month that the real estate market was slowing. That month, sales fell 25 per cent compared to the same month a year ago.

In August, the sales dropped by 22.8 per cent compared to August of 2003.

But despite the recent slippage, board president Andrew Peck said that at the current rate of sales, 2004 will be a record for the real estate market because of the strong figures from the early half of the year.

“We saw a considerable drop off. Does this mean it’s the end of our good market?” Peck said Wednesday. “The strong economic factors are still there. We couldn’t continue to break records.”

In the Greater Vancouver real estate market — which excludes Surrey, but includes Whistler — the total number of sales for September was 1,128. In August, the total was 1,061. In September of 2003, 1,540 properties were sold.

Prices, however, continue to rise. The benchmark price — the board’s unit to define a typical house — increased to $504.650, up 14.8 per cent from a year ago.

There is continued strength in the resale market because of three factors — low interest rates, strong job growth, and high level of consumer confidence — said Carol Frketich, regional economist for the B.C. and Yukon region of the Canada Mortgage and Housing Corporation.

“We’re still seeing strong demand and supply increasing,” she said. “It’s a symptom of a healthy market. The level of resell is still very high, everything remains quite healthy even though it’s slowing. It reflects in part the rising interest rates.”

On Wednesday, the posted five-year mortgage rate was 6.3 per cent. In September of 2003, the rate was also at 6.3 per cent, but during the 12 months in between the rates has dropped as low as 5.7 per cent.

Senior mortgage broker Ajay Soni, with Invis Financial Group, said the market in the past year moved at a pace 25- to 30-per-cent faster than a normal real estate market.

“The market has a way of reinforcing prices. No one is going to sell if they’re not going to get the price they want. I have a direct example. I was trying to sell a property 15 months ago when things were very hot and it took nine months to sell it,” Soni said.

Soni, who has been in the business for 17 years and remembers the boom and bust of the 1990s, said he anticipates prices will begin dropping in the new year.

“During the early to late ’90s, there was a slow erosion of prices, about a two-per-cent reduction,” Soni said. “Realtors will always tell you, it’s in their nature, like brokers, to always stay positive, that it’s always a good time to buy.”

But as a specialist who deals in private financing, Soni said he has to be realistic in looking at the pricing of properties and whether the true value is reflected in prices.

Anson Realty realtor Grace Kwok said prices will not fall, but remain stable.

“It’s a very happy, balanced market,” she said Wednesday. “There was tight supply and pent up demand and now everybody is a bit calmer. The supply and demand are better able to match each other.”

Across Canada, the housing market is also showing signs of cooling following three years of record price increases and sales.

Tsur Somerville, the director of the UBC Centre for Urban Economics and Real Estate at the Sauder School of Business, said buyers hoping for a market crash will be disappointed.

“It will never be inexpensive to buy in Greater Vancouver,” he said. “We will always expect Vancouver to have the most expensive housing market in Canada.”

Somerville said the downtown condominium market is the weak point in the market. Investors purchased into units expecting their mortgage payments would be covered by rent.

“There has to be rent to support their investments and it’s all linked. With rental vacancies rising, it’s harder to achieve.”

When renters can’t cover mortgages that may lead to a big sell-off of downtown condo properties or the other alternative may be that prices are attractive enough that buying downtown is more appealing than buying a house in New Westminster.

“All housing markets are linked in some way,” Somerville said. “No one can predict what’s going to happen.”

The drop in sales for three consecutive months is an indicator that the housing market may have peaked, Somerville said. “But it’s like a recession. You don’t announce a recession is happening. You know it’s happened afterwards. Like the housing market, there are too many things that can cause numbers to bounce around,” he said.

HOME SALES DECLINE:

Vancouver‘s total real estate sales fell for the third month in September. Here’s how it compares to September 2003:

15%

Total sales

26.8%

Detached homes

30.6%

Attached homes

6.5%

Apartments

© The Vancouver Sun 2004

The value of Greater Vancouver residential building permits fell for the second straight month in August, but the housing bubble hasn’t burst, industry observers said Wednesday.

Statistics Canada said there were $236.4 million worth of residential building permits issued in Greater Vancouver in August, nearly 21 per cent below the July total, which was about 50 per cent lower than June activity.

But the value of non-residential building permits throughout the region rose by more than 16 per cent in August to $98.1 million. Increases in retail construction intentions accounted for much of the gain.

Greater Vancouver Home Builders’ Association chief executive Peter Simpson said the home construction market remains strong, despite the two-month decline in building permit values.

“A trend gets established over a number of months so two months is no trend at all,” he said. “There are some big projects coming up from major developers, so I think it’s just a timing thing. There are always going to be times of the year when it’s a little slower.”

StatsCan said the value of residential building permits issued throughout B.C. fell by 14 per cent in August to $402.9 million, while the value of non-residential permits increased by 19 per cent to $197 million.

The value of permits issued in the trade and services category in B.C. — mainly for retail construction — rose from $17.9 million in July to $43.8 million in August. (StatsCan officials note the category is extremely volatile, rising from $11.5 million in May to $74.8 million in June.)

Building permit values for the first eight months of this year have risen by more than 33 per cent in B.C. to $5.4 billion, with a 43-per-cent increase in residential permits to $4.04 billion and a 12-per-cent increase in non-residential permits to $1.37 billion.

Simpson said buyer interest in new homes remains strong, despite recent mortgage-rate increases.

“We don’t see interest rates going up enough to cause us any worries right now,” he said. “The affordability threshold is still fairly low, which means more people can qualify for mortgages.”

Simpson said the market remains strong at all price levels, low end and high end, and he knows of one Whistler builder who has built three multi-million-dollar homes on speculation — without buyers committed to the properties.

“The bubble hasn’t burst,” he said. “There was never really a bubble in the first place because it has been a steadily increasing market. It hasn’t gone up like a rocket or down like a rocket.”

Credit Union Central of B.C. economist Dave Hobden said the two-month downturn in B.C. residential building permits is a “blip” caused by developers who fast-tracked their permit applications to beat a July 1 deadline to avoid higher development cost charges.

He said his department is sticking with its forecast that calls for B.C. housing starts to rise from 26,200 last year to 32,400 this year and to 35,200 in 2005.

“There has been a slight drift upwards in mortgage rates, but not enough to really dampen the market,” Hobden said. “Pent-up demand is still very strong, although there may be a slowing in the growth rate of the market.”

StatsCan said the total value of building permits issued across Canada fell by 4.6 per cent in August to $4.5 billion, but the total is still 7.4-per-cent higher than the average monthly level in 2003, which was considered an exceptional year.

BUILDING PERMITS DECLINE:

20.7%

decline in residential permits, for a total of $236 million

16.2%

increase in non-residential projects, for a total of $98 million

Source: Statistics Canada

© The Vancouver Sun 2004