If you’re a buyer, then you may have to settle for a $500,000 tear-down in my neighbourhood

Pete McMartin
Sun

In my neighbourhood this year, the favourite topic of conversation is:

How Much Did The Shack Down The Street Sell For?

The answer always produces gasps. The nondescript 1950s three-bedroom bungalow with the thrashed roof: $430,000! The renovated 1,200 sq. ft. two-bedroom cottage a block off the beach: $479,000! The ghastly three-bedroom cedar-sided dog’s breakfast utterly without charm: $500,000!

Tear-downs — or, at least, anything that in saner markets might be considered as unfit for kennels, much less homes — cannot be had for less than $320,000.

Even harder to believe:

Anything for sale gets sold.

And I don’t know how people do it. It bewilders me, and frightens me, that buyers no longer quail at the idea of the half-million-dollar suburban tract house. That is, the idea that my house, The Hovel, could fetch, as I have been assured, at least $450,000 produces in me two very conflicting emotions.

The first is: Isn’t that nice! I am kind of semi-well-off . . . if I didn’t have a debt load as buoyant as the Titanic.

The second is: When someone is willing to pay $450,000 for my place, or maybe more, I can’t help wondering if it is market forces at work here or some kind of neurosis. The dizzying size of the numbers seem to contradict the comforting and conservative idea of Home. When did home-owning become more like a high-wire act than a safe, long walk down Mortgage Lane? And should I be worried about vertigo?

Cameron Muir thinks not, or at least, that’s what his best guess tells him. Muir is the senior market analyst for the Canada Housing and Mortgage Corporation. He has lived in the same Fraser Valley home since 1986, and I took comfort in the fact that he regards the current housing prices with the same astonishment I do.

From his office window, he can look across the street at a condo development being built where the average unit price is $1,050,000. The development, he has been told, is nearly fully subscribed, and 75 per cent of the buyers are locals.

“As a consumer, I see the prices and I think, well, I like looking at Ferraris, too, but I can’t afford to buy one. Not unless I win the lottery.”

But Muir doesn’t see anything out of the ordinary in this market, either. He doesn’t see it as a bubble about to burst — at least, not in the way it burst in the early 1980s, when runaway inflation and high interest rates had homeowners facing insolvency. A flattening of the market? Maybe. But a full-scale implosion, no.

There is, he said, a lot of money out there chasing both residential and commercial real estate. There is some speculation going on, he suspects, but no wide-scale evidence of the property-flipping that ramped up prices in the frenzy of the early 1980s. And the central banks and lending institutions have become much more vigilant in reining in inflationary forces since the collapse that followed that frenzy, he said.

“The fundamentals for the housing market are very, very strong, more than they have been in the last 10 years.”

A rebounding economy, rising wages, growing inter-provincial and international immigration to B.C., the lowest jobless rate since the Jurassic period, a strong bond market keeping interest rates low — all these forces have conspired to pull housing prices along in the economy’s slipstream.

Add to that the geographic constraints of the Lower Mainland and the accepted wisdom here that one must always pay top dollar for “life-style” rather than mere living accommodations, and voila, million-dollar downtown condos are not the aberrations they appear to be.

(Interesting trend factoid: The average annual price of an apartment condominium in Greater Vancouver, Muir said, has only gone down three times over the last 20 years — in 1995, 1998 and 2001 — and the most it had gone down in any of those years was three per cent. Each year after, he said, the market had always rebounded to wipe out that downward trend.)

What, I asked him, of the accepted wisdom that housing prices will collapse when Baby Boomers all sell their homes at the same time, cash in and downsize?

“Not true. The demand is still going to be there. There will be more than enough people in the Baby Boom Echo generation and in the immigrant population to make up for the sellers. And the Boomers who have sold will create an additional demand because they’ll want all types of housing.”

His long-term prediction?

“Over the next three to four years, the market will be robust. It’s hard to predict over five years, and I am always reluctant to do so.

“The first thing you learn in forecasting school is it’s not how right you are, but how wrong.

“But I would say over the next 10 years, we’re going to see some ups and downs, but overall, homeowners are going to be better off than they were 10 years ago.”

Reassured by this, and taking comfort in his prognosis, a thought came to me only after we hung up.

I forgot to ask him how home buyers would fare.

© The Vancouver Sun 2005

Brian Morton
Sun

Housing starts in the Greater Vancouver area were down by nearly half in April over the same period last year, according to statistics released by Canada‘s national housing agency Monday.

However, the chief economist of Credit Union Central of B.C. said the drop in starts isn’t surprising because a large number of multiple-unit projects all started in the same month last year, boosting starts in April 2004 to a record level.

“[The April 2005 number] is down, but it’s off a very big April 2004,” said Helmut Pastrick in an interview. “There was a huge surge in multi-unit apartments and townhouses [in April 2004]. The trend is still heading upwards.”

According to the Canada Housing and Mortgage Corp. survey, all housing starts in the Vancouver metropolitan area fell 46 per cent to 1,348 units in April over the same month last year.

Multiple housing starts declined 49 per cent to 974 units, according to a news release issued by the CMHC, while single-detached starts dipped 36 per cent to 374 units compared to the same month last year. From January to April 2005, housing starts dropped 12 per cent compared to the same period in 2004 — to 5,460 from 6,177 starts.

The CMHC survey said it’s no surprise that housing starts in Greater Vancouver in April were below April 2004 levels, because “numerous large multiple projects were coincidentally started in the same month last year, boosting multiple starts to a record level.”

The survey also said that multiple starts in Greater Vancouver last month were the second highest for the month of April in 10 years.

“April 2004 had the strongest numbers ever for multiple units,” said Cameron Muir, senior market analyst for CMHC, in an interview. “We expected the numbers would be down. In April 2004, there were 1,898 multiple units in Greater Vancouver. Last month there were 974. That was a large decline, but it’s not bad historically.”

He said the large drop in starts from March to April is not very significant, because multiple units “swing wildly month to month. It’s hard to gauge one month as a trend.”

While multiple starts continue to be strong, the survey noted the number of new single-detached units under construction has been trending down for several months.

Muir said the main reason behind the decline is rising land and building costs.

He said that in the Fraser Valley, new single-detached home prices now exceed $500,000 in some areas, making it unaffordable for many. “The market at that level of pricing is smaller. As a result, there’s a shift towards multiple units.”

CMHC also noted that 20 years ago, just 44 per cent of housing starts in Greater Vancouver were multiple units, such as apartments and townhouses. Today, three-quarters of all housing starts are multiples.

According to the CMHC news release, B.C. saw urban housing starts, multiple starts and single detached starts all decline 23 per cent over the same month last year.

Year-to-date housing starts across urban B.C. fell seven per cent to 8,947 units over the same period last year, with most of the decline attributed to a drop in single-detached starts.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said in an interview that the April numbers may be “the calm before the storm.”

He said there are a lot of projects in the Lower Mainland coming on stream and the numbers should shoot up when they do.

“We still believe we’ll be slightly better than last year,” he said. “We’re not seeing a trend [down]. If it continues, then I’d say that something is happening.”

Simpson agreed that expensive single-family homes are having an impact on the market. “We have the highest prices in Canada and that’s nothing to be jubilant about.”

Another reason for the falling numbers, he said, is that many smaller builders with multiple sites on the go are slowing down because of a shortage of skilled trades.

Pastrick said one reason the building boom likely won’t abate is that B.C. now has a net inflow of people from other provinces.

Citing Statistics Canada, Pastrick said 54,730 people from other provinces moved to B.C. in 2004, compared to 47,650 from B.C. who moved out of the province. “That’s a net inflow of 7,080.”

Meanwhile, George Pahud, president of the Real Estate Board of Greater Vancouver, said in an interview that the Greater Vancouver market is still very strong and he sees nothing to worry about with the drop in housing starts.

“We’re about 1.5-per-cent below what we were in 2004 with regards to sales [for the first four months of 2005],” he said. “As far as we’re concerned, the market is as strong as it was in 2004.”

According to the board’s statistics, sales of properties reached 4,043 units in April 2005, compared to 4,103 in April 2004.

Pahud said demand is being driven by low interest rates, a positive job market and confidence in the economy.

VANCOUVER BRINGS DOWN THE HOUSING STARTS:

As housing starts declined sharply in the Vancouver census metropolitan area last month compared to April 2004, they rose even more sharply in Kelowna and Prince George census areas. While Prince George saw a 164.3-per-cent increase April 2004-April 2005, this was driven by just 23 housing starts. Kelowna, however, recorded a 146.2-per-cent April-to-April increase driven by 326 more starts.

Housing starts, April 2004-April 2005, percentage change:

Vancouver -45.6

Victoria -14.2

Abbotsford -2.1

Kelowna +146.2

Prince George +164.3

Other centres +2.0

Urban B.C. average -22.7

© The Vancouver Sun 2005

COVER Upstart service challenges PricewaterhouseCoopers for latest info on Vancouver

No sign of housing market bubble

Bruce Constantineau
Sun

Fragile housing market bubbles have not emerged anywhere in Canada yet but Vancouver remains most vulnerable to a boom-bust phenomenon, according to a BMO Financial Group report.

The report said the city’s high house prices make the market susceptible to collapse if prices keep rising quickly over the next two years — a time when mortgage rates are expected to increase by two percentage points. That could push affordability to dangerously low levels.

“Right now, there’s no evidence of bubble conditions,” BMO Financial Group assistant chief economist Paul Ferley said in an interview. “But if we had to highlight which market is at greatest risk, it would have to be Vancouver.”

He said a two-percentage-point increase in five-year mortgage rates, expected by April 2007, should moderate future price increases in all Canadian markets because monthly mortgage payments would become significantly higher.

“The real test comes when we see what happens with house prices after we move into a rising interest-rate environment,” Ferley said. “If there’s no moderation in price increases, then there’s cause for concern.”

The Real Estate Board of Greater Vancouver says the benchmark price of a single-family home in Greater Vancouver has increased by about 12 per cent in the past year to $540,000.

The BMO report said Vancouver homeowners pay by far the highest percentage of their income to cover monthly mortgage payments — 70.2 per cent of average labour income in the city, compared with 52.8 per cent in Toronto and a national average of 40.6 per cent.

The Vancouver rate remains below its historical average of 74.9 per cent but the rate gets pushed up to 78.5 per cent when mortgage rates peak in about two years.

“Even at that level, it’s still not as high as we saw during the earlier housing boom [in the late 1980s],” Ferley said. “But it shows more of a deterioration in affordability than we see in any other market.”

He said a surging Vancouver housing market in the late 1980s caused mortgage payments to rise to more than 90 per cent of the average labour income in the city — a rate that was not sustainable.

“There was a real deterioration in affordability back then yet housing prices continued to rise, which indicated that speculation buying was at play,” Ferley said. “In our view, house price increases now don’t reflect a lot of speculative activity. They’re going up because mortgage rates are fairly low and housing remains affordable.”

He said a major increase in mortgage rates, like five percentage points, would clearly damage housing affordability all across Canada but stressed there’s little chance of that happening because inflation rates in the country remain low.

Sun

Demand for housing continues to remain strong in Greater Vancouver as demonstrated by vigorous homes sales in April on top of record sales in 2004.

“The market is strong, with sales up compared to 2003 year-to-date sales and just slightly lower than 2004’s record-breaking activity,” said Georges Pahud, Real Estate Board of Greater Vancouver president in a news release.

“The number of listings for April was slightly lower than the same time last year, while demand remains high across all three residential property types.

“The demand is driven by a continuing combination of factors, including low interest rates, positive job market and consumer confidence in the economy and in the real estate market.”

Real estate sales are a key economic indicator in British Columbia.

In 2004, dollar volume sales of homes in Greater Vancouver reached an all-time high of more than $13.8 billion.

Based on this figure, Greater Vancouver home sales in 2004 generated more than $1 billion in spinoffs.

– – –

APRIL HOME PRICES

Median selling price

Detached house Townhouse Apartment

April-05 April-04 change April-05 April-04 change April-05 April-04 change

Abbotsford $300,000 $275,642 8.8% $170,000 $184,900 -8.1% $121,000 $99,000 22.2%

Burnaby $503,000 $465,000 8.2% $268,500 $273,500 -1.8% $225,000 $182,000 23.6%

Coquitlam $465,000 $423,000 9.9% $301,900 $229,000 31.8% $185,500 $147,000 26.2%

Delta North $321,300 $313,200 2.6% $164,000 $179,500 -8.6% $72,500 $105,000 -31.0%

Delta South $440,750 $420,000 4.9% n/a n/a – $235,000 $186,000 26.3%

Langley $382,500 $329,474 16.1% $236,000 $219,303 7.6% $151,000 $139,000 8.6%

Maple Ridge $340,750 $312,900 8.9% $206,500 $188,000 9.8% $155,000 n/a –

Mission $270,000 $250,000 8.0% $182,000 $159,000 14.5% $58,000 $105,000 -44.8%

New Westminster $432,500 $325,000 33.1% n/a n/a – $194,000 $162,500 19.4%

North Vancouver $620,000 $550,200 12.7% $404,500 $394,500 2.5% $255,000 $213,000 19.7%

Port Coquitlam $372,500 $355,000 4.9% $262,500 $240,000 9.4% $161,550 $138,500 16.6%

Port Moody – Belcarra $601,000 $430,000 39.8% $312,631 $189,000 65.4% n/a n/a –

Richmond $465,000 $428,000 8.6% $310,000 $287,000 8.0% $225,000 $185,000 21.6%

Squamish $376,500 $310,000 21.5% n/a n/a – n/a n/a –

Sunshine Coast $292,000 $265,000 10.2% n/a n/a – n/a n/a –

Surrey $351,000 $333,000 5.4% $238,000 $216,169 10.1% $137,000 $119,000 15.1%

Vancouver East $465,000 $415,000 12.0% $336,500 $285,000 18.1% $194,000 $168,000 15.5%

Vancouver West $875,000 $790,000 10.8% $505,500 $450,000 12.3% $320,000 $275,000 16.4%

West Vancouver – Howe Sound $967,000 $871,650 10.9% n/a n/a – $550,000 n/a –

White Rock $525,000 $450,000 16.7% $310,000 $320,000 -3.1% $204,000 $209,500 -2.6%

Sources: Fraser Valley Real Estate Board, Real Estate Board of Greater Vancouver

© The Vancouver Province 2005

 

Eric Beauchesne
Sun

A new building boom, potentially even greater than during the late 1980s, may be in the offing.

It’s not a home-building boom, but rather a boom in non-residential construction.

“Businesses and governments planned to invest massively in the construction of buildings,” Statistics Canada said Thursday, reporting a “blistering” increase in non-residential building plans in March.

The value of residential and non-residential building permits rose five per cent from February to $5.27 billion, the second highest level on record.

But unlike most months in recent years, the surprising increase was driven by non-residential building intentions.

“The most important aspect of the March report is that total permits remained near record levels as a major shift toward non-residential construction more than offset a moderation in the residential sector,” observed J.P. Morgan economist Ted Carmichael.

Non-residential construction permits surged nearly 40 per cent to $2.3 billion.

“This level surpassed the previous record-high reached in August 1989, and was 50.1 per cent higher than the average monthly level in 2004,” Statistics Canada noted.

And all sectors contributed to the gain, suggesting widespread strength in non-residential construction in the months to come.

The surge in non-residential construction plans, which have been on an upward trend for years, couldn’t have come at a better time, as there was evidence of the long-awaited slowdown in the housing boom.

Regionally, Toronto has led the way with increases in both the non-residential and residential construction plans. There were also strong increases in all municipalities west of Winnipeg.

A dramatic increase in building permits in Abbotsford comes as no surprise to area realtor Jake Siemens, president of the Fraser Valley Real Estate Board. He says residential and non-residential development is booming in the town.

“We have had a lot of growth in big box stores along Sumas Way and the Mount Lehman corridor, with retail development growing by leaps and bounds on both sides of the Fraser Valley. There are also new residential subdivisions growing up to the west and south-east of town.”

Many projects have been in the works for years, said Siemens, who has been with Abbotsford’s Landmark Realty for 18 years.

“All of a sudden, a lot of the stuff is coming on stream at the same time. There is huge, huge demand, especially for residential.”

He said buyers typically come from Surrey and other areas south of the Port Mann Bridge, attracted not only by price but also because Abbotsford typically offers more privacy with larger lots and more rural settings.

Nationally, the demand for housing is cooling, Statistics Canada said, noting that the number of housing units authorized in March fell to a two-year low.

BUILDING INVESTMENTS:

The total value of building permits issued by Canadian municipalities in March reached $5.27 billion, the second highest level on record.

Growth in value of permits for the first quarter of 2005, compared to the same period a year ago: +10%

Vancouver +39%

Victoria +128%

© The Vancouver Sun 2005

Derrick Penner
Sun

The cooling trend predicted for the Lower Mainland’s real estate market does not seem to be materializing as prices continue to climb, although sales in April tailed off compared with the red hot market in the same month of 2004, figures from regional real estate boards show.

The Real Estate Board of Greater Vancouver recorded 4,043 Multiple Listing Service sales in April, down 1.5 per cent from the 4,103 sales realtors saw in the same month of 2004.

Median prices, however, were up. A detached home in east Vancouver hit $465,000 in April, a 12 -per-cent increase from a year ago.

Meanwhile, a west side Vancouver apartment reached $320,000, up 16.4 per cent from April, 2004.

The Fraser Valley Real Estate Board saw 1,937 sales in April, down four per cent from the 2,016 MLS sales recorded in 2004.

The median price for a detached home, however, reached $377,088, a 10.4 per-cent increase from a year ago.

“The market itself is a little bit stronger this spring than we had anticipated,” Cameron Muir, senior market analyst with Canada Mortgage and Housing Corp. said. “The reason for that is that the provincial economic recovery has occurred much faster than most analysts predicted.”

Muir said continued low interest rates, strong employment growth and rising wages “all bodes well for the housing market this spring.”

He added that affordability remains an issue for Lower Mainland buyers, but the low mortgage rates and job growth that has occurred over the last year have helped offset increasing costs.

Jake Siemens, president of the Fraser Valley Real Estate Board, said the predictions that Lower Mainland real estate sales would cool off were made when analysts predicted that mortgage interest rates might climb by 1 1/2 per cent to two per cent during 2005, which now appears unlikely.

“Consumer confidence that interest rates are going to stay affordable has been a big driving factor,” he said.

Siemens said the Fraser Valley‘s housing inventories have improved, so realtors are seeing fewer instances of bidding wars and sales over list price.

However, listings still haven’t entirely caught up with demand, so prices are being pushed up, though the increases are not as large as those experienced in 2004.

Georges Pahud, president of the Real Estate Board of Greater Vancouver, said the bidding contests and sales over list prices tend to occur where properties are “well listed,” or priced close to the property’s market value.

“We have heard a couple of situations where properties are under-listed, probably by design in order to create a high level of activity,” he added.

And while affordability is a concern, Pahud said “it’s not a huge concern.”

He said some 60 per cent of sales in 2004 were at prices below average market prices, and first-time buyers are still finding properties in markets such as Richmond, so “affordability is still here.”

Pahud said the market fundamentals — interest rates, employment growth, consumer confidence — are still strong, so he’s not surprised at the level of activity being seen.

“[Those factors] are what’s really driving things, Pahud said. “People want to own real estate.”

© The Vancouver Sun 2005