The first sale day for Yaletown Park, on Feb. 28, perhaps best illustrated just how frenzied 2004’s condominium market was, a frenzy that likely will not be repeated in 2005.

Some buyers camped out overnight and the lineup grew around the block in front of the development’s Georgia and Granville showroom.

In a single day, 494 yet-to-be-built units were snapped up.

Condo pre-sales have long been an accepted and increasingly necessary part of project financing, said Tsur Somerville, director of the Centre Urban Economics and Real Estate at the University of B.C.‘s Sauder School of Business

However, he added, the lineups and almost instant sell-outs were particular to 2004’s fit of excitement.

Somerville said the market recovery, fuelled by low interest rates and an improving economy, had begun before 2004, but was perhaps sparked by a bout of optimism following Vancouver‘s selection to host the 2010 Winter Olympics.

However, with four months worth of declining year-over-year sales to close out 2004, Somerville thinks the over-heated action won’t be sustained in 2005.

“The froth is off the market,” he said.

And with a flattening of prices in the downtown sector, he added that potential buyers “aren’t going to be feeling like ‘I have to buy, or tomorrow it will be double the price.’ “

And Somerville thinks downtown — the hottest spot in 2004’s market — is also the location most likely to suffer a downturn in 2005.

“It’s the market that most people are concerned about in terms of possible market weakness,” he said.

“The reason is [that] so many units there were purchased by investors. So you have the combination of rising interest rates and weakened rental market that puts a lot of pressure on those investors.”

Greater Vancouver‘s rental vacancy rate, tracked at 1.3 per cent by late 2004 by the Canada Mortgage and Housing Corporation, is predicted to rise as uncounted, unfinished investor-owned condominiums bought in 2004 reach completion and hit the market.

And Somerville noted that the rising Canadian dollar — which gained steadily on the U.S. currency in 2004 — will likely slow the flow of American investment buyers.

The recovery of stock markets, he added, will also draw investment money away from downtown real estate.

“The people who have those units perhaps [will be] under more pressure to sell,” Somerville said.

Whatever transpires in 2005, however, will not resemble anything like a correction because the fundamentals that drive demand, such as population in-migration, are expected to remain strong, said Carol Frketich, regional economist for CMHC.

“We’re looking at more of a plateau in multiples she said.

She predicts that overall, 2005 will see just over two-per-cent growth in multiple housing starts, which is nothing like the 21-per-cent growth seen in 2004.

Frketich looks at new arrivals, some from interprovincial migration but most — some 30,000 people per year — via offshore immigration, as primary drivers of new demand.

New arrivals, she said, tend to start out renting, which should take up some of the slack in the rental market.

But they will also drive future permanent-housing demand as they become established and, Frketich said, condominiums will become a greater part of their permanent housing choices because condos will be the more affordable products in Vancouver‘s top-dollar market.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said there is no reason to celebrate the average price for a single detached house in the region topping $300,000.

He said rising construction costs, municipal development-cost-charges and, above all, land costs increasingly make the single-family home on its own lot with a little yard a dream for many buyers.

“Even before we put a shovel in the ground, in some cases the land costs are higher than the complete house prices in other jurisdictions,” Simpson added.

The building industry, he added, is doing what it can to respond. He expects demand will still be high, but costs will push it out to the suburbs.

Simpson said builders are bringing with them newer styles of housing as much as possible to give buyers at least the feel of a single-family home in townhouse-style developments, “manor homes” that combine several separate units at ground level.

“As an industry, we’re trying to find ways to carve up that available land and make it more affordable, and at the same time give people what they want,” Simpson said.

GREATER VANCOUVER‘S TOP 10 MOST EXPENSIVE SALES, 2004:

#1. 3330 Radcliffe Ave.

West Vancouver

$17,000,000

#2. 5365 Seaside Pl.

West Vancouver

$8,500,000

#3. 1461 Minto Cres.

Vancouver

$4,880,000

#4. 1388 Balfour Ave.

Vancouver

$4,280,000

#5. 2934 Rosebery Ave.

West Vancouver

$4,100,000

#6. 13660 Marine Dr.

White Rock

$4,100,000

#7. 848 Eyremount Dr.

West Vancouver

$4,080,000

#8. 2189 123 St.

South Surrey

$3,900,000

#9. 4378 Ross Cres.

West Vancouver

$3,860,000

#10. 2940 Palmerston Ave.

West Vancouver

$3,850,000

Greater Vancouver‘s real estate market topped the nation in price both on average and in absolute terms in 2004.

The average selling price for a Vancouver home hit $383,000 in November, the Canadian Real Estate Association found, and while that is expensive, it pales compared with the $17 million an anonymous buyer paid for a West Vancouver waterfront mansion on Radcliffe Avenue. That buyer promptly re-listed the property for a cool $19.8 million.

And in Greater Vancouver, the luxury home market proved a strong draw with sales of million-dollar properties up substantially all around the region.

The realty firm RE/MAX, in a market-trends report, noted that sales in the upper-end market on Vancouver’s west side between January and July hit 237 — a 60-per-cent increase over the same period last year — with most priced in the $1-million to $2-million range.

In West Vancouver, $222 million-dollar-plus properties changed hands — a 96.5-per-cent increase.

The South Surrey, White Rock and Delta area saw its share of expensive transactions. Upper-end in the suburbs translates to $800,000 or more, but the region still saw five homes in the $1-million-plus range sell.

Source: Derrick Penner

© The Vancouver Sun 2004