Low interest rates make home ownership possible

Ashley Ford
Province

B.C. retains its dubious record of having the most expensive housing in the land, but according to data released yesterday, low interest rates still make home ownership here possible.

“B.C.’s housing market is back into a seller’s market as there is not enough housing supply to keep prices from rising,” RBC Economics said yesterday.

In separate reports, both Scotiabank and RBC Economics say a record number of Canadians now own their homes.

Last year, records were set for both the number of home sales and average prices. It also was the biggest year for housing starts since 1987 and the third-straight year of double-digit percentage increases in average selling prices, RBC Economics said.

The bank’s affordability index slightly improved to 33.3 per cent in the fourth quarter of 2004, from 33.6 per cent the previous quarter.

The index for major cities were: Vancouver, 47.7 per cent; Toronto, 42.5 per cent; Montreal, 31.4 per cent; Ottawa, 30.6 per cent; and Calgary 27.2 per cent.

The index, compiled since 1985, is based on the costs of owning a detached bungalow. The higher the index, the more costly it is to afford a home. For example, an index number of 50 per cent means that home ownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

But how long can Canada‘s hot housing run last? The factors driving home ownership — affordability and the relative cost of owning versus renting — “may be turning,” Scotiabank said.

“Low mortgage rates will maintain affordability, but some erosion is already under way due to the rise in home prices. At the same time, rising apartment-vacancy rates are improving the relative attractiveness of renting over buying,” it says.

Home prices have also been rising faster than rents, widening the gap between the cost of the typical monthly mortgage payment on an average priced home and the average rent on a two-bedroom apartment to about $300 in 2004.

That’s still only half the $600 gap that existed in 1990, when the previous housing boom went bust, but up from the low of approximately $100 in 1998, it said. And the gap will likely widen further this year pricing some potential buyers out of the market, said Scotiabank economist Adrienne Warren.

Scotiabank estimates that 67 per cent of Canadian homes are now owner-occupied, up from 65.8 per cent in 2001, meaning almost half a million households have bought homes in that period.

© The Vancouver Province 2005

Low mortgage rates, strong job growth enable 67 per cent of all Canadian households to own their homes

Michael McCullough
Sun

Home ownership has hit a new high across North America, but rising home prices will likely halt or reverse the trend, a couple of bank reports released Tuesday predicted.

Aided by low mortgage rates and the affluence that generally comes with age, 67 per cent of Canadian households now own their homes, compared to 65.8 per cent four years ago, a Scotiabank Group report said. In the U.S., where mortgage interest is tax deductible, the rate has hit 69 per cent.

Home ownership in B.C. lags the national average slightly, at 66 per cent — likely because, as a separate report from RBC Financial Group noted, the province trails the country in affordability.

Part of the rising home ownership trend has to do with demographics, Scotiabank said. The baby boom generation is in its prime home ownership years.

But ownership rates have risen in virtually all age groups, especially among seniors.

“A number of factors, including rising disposable incomes, strong job growth and low mortgage rates, have brought home ownership within the reach of an increasing number of households,” the report said.

First-time buyers, who historically represented 40 to 45 per cent of the market, accounted for 70-75 of sales in recent years, Royal LePage Real Estate Services Ltd. president and CEO Phil Soper said in a real estate forum organized by Scotiabank. People who tended to rent in the past, such as single women and unmarried couples, now buy. People who get divorced increasingly go from owning one home to two.

Part of the change relates to costs. The gap between the cost of carrying a typical mortgage and renting a two-bedroom apartment — which stood at $600 a month in 1990 — narrowed to just over $100 in 1998. Thanks to the recent run-up in home prices, it has since widened to nearly $300, Scotiabank said.

The switch from renting to owning still works for Jamee Justason, 28, and her fiance, Charles Hough, 30. Currently paying $1,500 a month to rent a house on Vancouver‘s west side, the couple recently bought a three-bedroom townhouse in Champlain Heights.

“To buy a place, we’re going to end up paying less,” said Justason.

Despite rising home prices, affordability improved in the fourth quarter of 2004 due to declines in average mortgage rates and taxes and a rise in incomes, the RBC report said.

British Columbia remains the least affordable province and Vancouver, the least affordable city in the country, however. Average home ownership costs took up 47.7 per cent of average household income in Vancouver, RBC said, compared to 27.2 per cent in Calgary and 33.3 per cent nationwide.

“British Columbia‘s economy is resurgent, optimism is running high and there just isn’t enough housing supply to keep prices from shooting up,” the report said.

Both reports predict the rise in home prices — Scotiabank forecasts a further 4.5-per-cent rise nationwide in 2005 — and rising vacancy rates will tip the scales back in favour of renting and put a cap on home ownership levels.

“Low mortgage rates will maintain affordability, but some erosion is already underway due to the rise in home prices,” Scotiabank said.

REAL ESTATE TRENDS:

A series of real estate reports Tuesday highlighted key factors about Canada‘s housing sector, namely, British Columbia remains the most expensive place to own a home, and that although home ownership is at a high, rising prices will erode that trend.

66% of B.C. households own their own home. — Scotiabank

48% of average household income in Vancouver is spent on home ownership, compared to 27.2 per cent in Calgary and 33.3 per cent nationwide. — RBC

Scotiabank Group, Vancouver Sun

© The Vancouver Sun 2005

 

Michael McCullough
Sun

B.C. housing starts rose 12.2 per cent from January to February, and 14 per cent over February 2004, Canada Mortgage and Housing Corp. reported Tuesday.

Construction began on 2,016 housing units across the province last month, up from 1,909 in January.

“Last month’s sunny skies allowed homebuilders to make up for ground lost during January’s inclement weather,” said CMHC senior market analyst Cameron Muir.

The rebound, which was felt in all provinces except Quebec, returns home-building activity to levels consistent with CMHC’s forecast for the year, the federal agency said. Across Canada, there were 11,907 housing starts in February, up 5.3 per cent from January.

CMHC has forecast B.C. will be the only province to see an increase in housing starts this year. There were 32,925 starts in 2004.

“We’re not too far off last year’s pace,” said CMHC regional economist Carol Frketich, who expects activity to pick up more in the spring.

She said the market fundamentals in B.C., such as low interest rates and strong income growth of 4.4 per cent last year — ahead of the national average — support further home building.

In a market report, she noted B.C. was far and away the most active real estate market in Canada last year, with 23 home sales per 1,000 population. Next up was Alberta, with 18 sales per 1,000 residents.

The 1,210 housing starts in Greater Vancouver represented a 15-per-cent increase over the same month a year earlier. But while multi-family units increased 36 per cent, detached starts declined 16 per cent. CMHC forecasts starts will top 20,000 in Vancouver this year.

© The Vancouver Sun 2005

Buyers crazy about new tallest building

David Carrigg
Van. Courier

When condo-sales king Bob Rennie accepted a contract to sell almost 300 units in what will be the city’s tallest building, the realtor was sure he could sell at least half by the end of this year.

That was the promise he made to Ian Gillespie and Ben Yeung, the developers behind the 600-foot Shangri-La project, at the corner of Georgia and Thurlow.

Rennie went through a list of potential buyers interested in Shangri-La, added others who missed out during the Yaletown condo frenzy in February, and came up with 1,000 names.

At the beginning of this month, Rennie’s staff sent out letters inviting those on the list to the Shangri-La sales opening day, scheduled for Sept. 23. At the bottom of each letter, he offered potential buyers a chance to meet him and his staff and get an early peek at floor plans for the units.

“We were inundated and everybody who came in wanted to buy. Out of the 227 live-work suites, we have 20 left, and the only reason they weren’t sold is because we needed to keep some for the opening party so I’ve got something to sell,” Rennie said. “It’s the only reason, otherwise they could have been all sold in a day.”

The cheapest suite was $400,000, which bought 595 square feet on the 25th floor, facing east.

The live-work suites occupy floors 16 to 42, atop the Shangri-La Hotel chain’s 120 rooms, while floors 43 to 60 are private units, with ten-foot ceilings.

Rennie said he has sold 20 of the 66 strictly residential units, including one to Jim Pattison, whose company Urban Fare will operate a grocery on the building’s ground floor. The residential units range in price from $1.6 million to $5.5 million, the latter of which buys 3,800 square feet at the peak of the building, facing north, south and west, and a private pool.

“We haven’t gone after that buyer until now, because they really need to spend more time with the architect to discuss finishings and customizing,” said Rennie, adding two of the three penthouse suites have already been sold to local buyers.

In addition to the grocery store, the Shangri-La will include public art managed by the Vancouver Art Gallery, a restaurant and a 6,000-square-foot spa.

As part of the deal with the city to develop such a tall building, Gillespie and Yeung have agreed to spend $3 million restoring the historic Church of Christ, Scientist at 1120 West Georgia St.

Michael Gordon, city planner responsible for tall buildings, said Shangri-La will likely be the city’s tallest building for at least a few years after its completion in 2008.

The next tall building being developed is architect Bing Thom’s 510-foot glass tower behind the Hotel Georgia.

Gordon said six sites remain in Vancouver where city planners will potentially accept a building higher than 400 feet.

Staff are in discussions with developers interested in one of those sites, which is directly across the road from Shangri-La on the 1100-block West Georgia.