Future of economy threatened by expensive real estate

David Carrigg
Province

Vancouver has one of the most unaffordable housing markets in the world, according to a new international report.

Wendell Cox, co-author of the Demographia International Housing Affordability Survey, says Vancouver ranked as the 15th most unaffordable housing market in Canada, Australia, New Zealand, the United Kingdom and the U.S.

Los Angeles topped the list, followed by San Francisco and Honolulu.

The survey also listed the top 20 affordable cities for housing, with Winnipeg coming in fourth behind Buffalo, Rochester and Indianapolis.

Cox warns that in Vancouver and other unaffordable cities, “unprecedented house-price escalation has occurred relative to incomes.”

He says that in the recent past, all cities were considered to have affordable real estate based on the city’s average home price and average household income.

Vancouver now falls into the category of “severely unaffordable.”

“This is a matter for concern,” Cox says. “Home ownership has played an important role in democratizing prosperity in a nation and is a pillar of a sustainable affluent society.

“Those benefits are threatened by the high housing prices that are likely to reduce home ownership and household wealth-creating capacity. A nation with more renters is likely to be less prosperous and less cohesive.”

Cox is critical of business writers who claim high house prices reflect a strong economy.

“Housing prices that escalate to the point that millions of households are denied home ownership is anything but good news for the future of an economy,” he says.

“Many analysts, and much of the business press, have followed the unprecedented housing-cost price escalation with seeming glee — while ignoring the reality that household incomes have not been inflating at a corresponding rate.”

© The Vancouver Province 2006

USA Today

WASHINGTON (Reuters) — Sales of new homes expectedly rose 2.9% in December as mortgage rates dipped, but home prices fell for a third month and the number of houses on the market hit a record, according to a government report Friday.

For the year, the Commerce Department said a record 1.282 million new homes were sold, up 6.6% from 2004, capping a five-year rally in the housing market that sent sales and construction levels to new highs.

Sales of new single-family homes climbed to a 1.269 million unit annual pace in December after falling sharply the previous month. The department revised November’s sales pace down to a 1.233 million pace from an originally reported 1.245 million unit rate.

Economists had expected sales to slow slightly in December to a 1.225 million unit pace.

While sales rose in December, the inventory and price data suggested some cooling in the housing market.

The number of new homes on the market at the end of December climbed 2.4% to 516,000, marking a new high. At the current sales pace, that represented 4.9 months’ supply.

The median home sales price continued to decline as well, down 2.2% to $221,800 in December, the Commerce Department said. That marked the third month in a row of declining prices.

Earlier this week, a trade group said sales of existing homes fell 5.7% in December to the lowest level since March 2004. That marked the third monthly decline in a row. But for the year, home resales hit a record 7.072 million, the National Association of Realtors said.

The cooling began as mortgage rates started to climb in September. Long-term rates dipped in December, but in the latest week, the 30-year fixed-rate loan rose to 6.12%, from 6.10% the previous week, according to data from Freddie Mac.

New-home sales last month soared 22.7% in the Midwest and 11.1% in the West, but fell 23.3% in the Northeast and 2.6% in the South.

The homes sales data are subject to major revisions, as the statistics are estimated from sample surveys.

Kim Davis
Sun

A year-old University of B.C. sustainable construction program is drawing the attention of residential developers and their regulators.

Called the Residential Environmental Assessment Program, it is very much a made-in-Vancouver substitute for an international sustainable construction program, LEED.

Developed through the UBC Campus Sustainability Office and based on LEED, REAP sets out to create a user-friendly and sustainable framework to guide the development of multi-residential buildings on campus.

REAP uses a similar point and designation system as LEED (compliant, bronze, silver, gold) and imposes mandatory design requirements for compliance and champions sustainability or green initiatives.

Unlike LEED, however, which in its present form proves unwieldy for residential buildings at or under four storeys, REAP is a “market driven approach” that aims to address the specific conditions, construction practices and marketing of low-rise multi-family developments in the Lower Mainland.

REAPING DEVELOPERS

The acceptance of REAP among developers of UBC properties has been impressive, particularly given that their involvement was voluntary during its first pilot year.

Jorge Margues, the energy manager for the UBC sustainability office, is not surprised. “When developers submit their projects for consideration to the development permit board they are being asked how they are addressing sustainability. REAP is tailored to local conditions, not nearly as onerous as LEED, and far less costly.”

Matthew Carter, the development manager at UBC Properties, feels that the voluntary aspect of the program was one of the reasons it was so well received by developers.

“Once we had told developers that the system wasn’t mandatory, they really engaged it. When we encouraged them to use it as an agenda or guideline [for sustainable practices] they responded enthusiastically and embraced it.”

REAP’s “user-friendliness” is considered one of the program’s most compelling attributes. “It is a relatively straight forward framework for developers to understand, and the documentation is far less burdensome than LEED,” says Robert Brown, a principal with Resource Rethinking Buildings and one of the consultants who have helped develop and implement the program.

Norm Couttie, an executive with the Adera development company, feels that REAP is “much more practical than LEED.” (Adera now is starting construction of its third REAP project.)

“It isn’t necessary to be so scientific at the beginning [of implementing sustainability],” Couttie says. “It costs $50,000 to get LEED certified, and I would rather put that into the building.”

Easing energy efficiency

As part of the ongoing effort to refine REAP, and make it easier for developers to identify and implement energy efficient strategies, UBC CSO and Adera commissioned an energy modeling exercise for an archetypal UBC multi-family residential building (MURB). The modeling evaluated the impact of a variety of measures, ranging from low-flow shower fixtures to geothermal heating.

The project resulted in the creation of four energy efficiency “bundles” which can be incorporated into the design of new MURBs.

The first bundle, developed for Adera, is expected to save nearly 35 per cent in energy usage over the original baseline design, will be used in the company’s upcoming Legacy development.

The remaining three, developed for UBC and designed to build on each other, will be used to replace REAP’s current performance-based approach. As Marques points out, ” since most residential developers are not familiar with or interested in doing the energy modeling required for determining performance levels, we wanted to go to more of a checklist.”

Too good to be true?

The program is not without its shortcomings. For instance, unlike LEED, which uses third party certification, REAP is what Brown describes as “somewhat self-regulatory.” The program relies on the professionalism of project participants (architect, engineer, consultants, etc.) to submit accurate documentation (usually in the way of a letter) to verify REAP compliance. While Brown believes it is still too early to assess the success of this documentation method, he does feel “they still need to continue to refine it, and nail down the accountability process.” His overall assessment so far, however, is that the program is doing well. “REAP is filling a gap, and moving people along that [sustainable] continuum.” “It has done a good job of finding a balance, and in order to move the market you have to find something that people will adopt.”

COMING SOON

Around March of this year, UBC will release a final version of REAP. All residential developments on the university’s campus will be required to participate and at least meet the mandatory requirements needed for compliance.

While there are currently no plans to make REAP certification available to non-UBC projects, Margues argues that like LEED, REAP can be used as a guide by any developer looking to incorporate sustainable practices into a project.

Adera has already approached the City of North Vancouver about using the program, instead of LEED, for a project in that municipality.

BUY INTO UBC’S UNIQUE HISTORY WITH LEGACY HOME

The 55-home Legacy project is the Adera development company’s third residential and third REAP undertaking on the UBC campus.

The company expects to begin selling the homes in Legacy in March. Call 604-684-8277 of visit www.adera.com to register.

The project’s name was the result of two histories, Adera says.

Its status as “the final residential project in the Hawthorn neighbourhood” on campus is one history.

And the “vision” process that precedes all Adera new-home projects provided another history the name of the project should reflect — UBC’s and local architecture.

CALIFORNIA PIONEER”S INFLUENCE FELT

“A ‘West Coast modern’ character, drawing upon the history of residential design in Vancouver, as well as this movement’s ties with UBC, was thought to be very appropriate….

“One of the events which sparked the adoption of the ‘modern movement’ by West Coast clients and architects was a 1945 visit to Vancouver by Richard Neutra, a California pioneer of the movement. Co-sponsored by the president of UBC, this visit generated public interest in architecture in general and helped lead to the creation of the UBC School of Architecture.”

© The Vancouver Sun 2006

Concord is building the residential towers jointly with the CBC

Sun

TV TOWERS ON ROBSON

Presentation centre: 1550 Homer Mews, Vancouver

Hours: 10 – 5 p.m. daily

Telephone: 604-899-8800

Website: www.tvtowers.ca

Developer: Concord Pacific

Architect: Walter Francl

Interior design: Situ Design

Project size: 2 towers, 454 residences

Residence size: 439 sq. ft. – 1,100 sq. ft., studios, one bedroom, one bedroom +den, two bedroom + den

Prices: $250,000 – $600,000

Warranty: National Home Warranty

Completion: November, 2008

– – –

The 22-storey TV Tower 1 is sold out. The 32-storey TV Tower 2 isn’t, although it could be by this evening.

TV Tower 1 was fully bought after one month of selling in the fall.

TV Tower 2 attracted so much new-home-buyer interest that people lined up three days before the presentation centre opened for business, on Jan. 14.

The developer held back 90 apartments so it would have something to sell at its previously announced “grand opening” today.

“I was a bit surprised by the early lineups, but I wasn’t surprised we did so well,” Concord Pacific’s David Negrin says.

“It’s a great central location. Robson Street is a bustling area, you are close to Yaletown, the library, BC Place and the Ford Theatre. There are not that many residential towers along Robson.”

The TV Towers site is well known as the site of CBC’s regional headquarters.

Concord is building the two towers as a joint venture with the Canadian Broadcasting Corporation to redevelop the block into a sleek residential and commercial complex.

Concord won the bid to buy the property from CBC in 2004, which Negrin believes was partly in response to their proposal to integrate the residential towers with the national broadcasting company.

“We always envisioned the site as integrated with CBC, there’s even a walkway connecting it to CBC. The towers have a very active design, incorporating colour into the building.”

The orange of CBC is on the skin of the building and different mauves and greens are being used in the balcony glass, which again helps to tie the buildings into the CBC.

CBC is revamping its headquarters, to make it an more open and inviting building and more a part of the surrounding community. Construction on the new CBC building will begin in the spring, with completion slated for 2009.

The TV Towers on Robson follow European design trends in the interior spaces. This includes the use of high-glass white cabinetry in the kitchens with glass mosaic back splashes (a stainless steel backsplash upgrade is available as well as granite and stone countertops in the kitchen and bathrooms). There is a strong focus on clean lines and efficient floor plans.

There are nine typical suites per floor, including studios, one bedrooms and one bedroom with den and two bedrooms with den.

Negrin says the contemporary look of the towers appeals to a younger demographic, with most of the buyers in their 20s to 40s. He adds the price point is also affordable for first-time buyers.

“We are very competitive pricing. That’s what appeals to younger buyers. With 25 per cent down you could be paying $1,800 a month. That’s cheaper than renting.”

Negrin adds land is scare in downtown Vancouver and with the city’s moratorium on converting office space into residential developers are having to look elsewhere for projects.

“The key to this project is it’s on Robson. There is not much available downtown so it’s still a good deal for investors. Their investment will pay off.”

The smallest of the units is a studio at 439 sq. feet. Here the architect has used an open plan concept to expand the space.

Situ Design principal David Hepworth says in small spaces it’s important to make the interiors “clean and modern.”

“Small spaces stuffer from too much stuff. It’s a more simplified line of detail. We tried to pare it down to just one uniform palate of materials and colours,” says Hepworth.

For instance, of the two colour schemes , either light or dark, there would be the same countertops used in both the kitchen and bathroom to help unify the space.

Hepworth says the smaller units are geared for either a young professional or as a pied-de-terre home.

Research from Price Waterhouse Coopers recently indicated developers would be wise to build more of these smaller units.

The September Condo Market Review found “there was more demand for smaller units than what was being offered,” says vice-president Craig Hennigar.

“It could be a price point issue or more people living alone or people planning a lifestyle where they want a place to go away on the weekend. The message to developers was you could improve your profitability by selling more smaller units.”

Hennigar says even a bachelor suite, of 420 sq. ft., can be quite livable. “It all comes down to dayout and design and furniture systems,” he says.

Negrin says of the condos held back for sale today there is still a range available, from studios to one bedroom and den to two bedrooms and den.

The towers also have a 97,000 sq. ft. amenity space, with a whirlpool hot tub, steam room, sauna, yoga and pilates studio and full-equipped gym. There’s also a “Hollywood-style” screening room, sports lounge and games room, meeting room and 24 hour concierge.

© The Vancouver Sun 2006

Malcolm Parry
Sun

ARTHUR ERICKSON, the iconic architect, and Concord Pacific development firm chief Terry Hui launched what may be our town’s costliest concentration of residences Thursday. To be called The Erickson, the project continues the twisty-tower theme the architect devised to rescue Simon Lim’s proposed Georgia-off-Bute project from a permit logjam at city hall.

The Erickson’s townhouses-and-tower units run from $2.5 million to $7 million. In a limited sale in November, the closing deal was inked in at $1,837 per square foot. That bar may be raised when sales begin again next month.

Occupancy is expected in 2008, although Concord Pacific’s adjoining King’s Landing came in a year late.

Early residents at the latter Dec. 1 were ad-agency biggie Frank Palmer and wife Marika. Following their 13-year practice of buying and selling two homes yearly, they had already chosen a pad in The Erickson. They will list the King’s Landing unit for sale this summer.

And live where?

“We go to the Terminal City Club,” Ms. Palmer said. “Maid service, a concierge, valet, three restaurants, security beyond belief — the style of living Frank and I would ultimately like to have.”

Regarding the condos, “For investment purposes, they are fabulous,” she said. Should the Palmers hanker for single residency, they do own a house — on the old Desi Arnaz-Lucille Ball spread in Palm Springs.

© The Vancouver Sun 2006

Cheryl Rossi
Van. Courier

A historic Kitsilano building will be demolished in the next three to six months unless city staff can find it another home.

Although the city, its Heritage Commission and the developer debated options to retain the structure — known as the home of the beloved but defunct Black Swan Records at Fourth and Bayswater, they could not reach an agreement to preserve it at that location.

Staff recommended city council allow the developer, Orca West Developments, to proceed with the regular development permit process. Council voted Jan. 19 unanimously in favour of doing so.

As a result, Leo Cooper, his two roommates and the young family across the hall will be looking for new homes.

Cooper has occupied one of the building’s second floor apartments for eight years and has lived in the neighbourhood for 25.

“A great swath of Fourth Avenue has been sterilized and economically cleansed of the young families, students, seniors, writers, actors, artists and especially many of the small business entrepreneurs who gave life to this funky part of town,” he told city council at the Jan. 19 meeting.

Cooper argued the developer should be permitted to build a taller building on the site, complete with lower priced units, so the historical building at 2936 West Fourth Ave. could be retained. “A high-rise is perfectly acceptable as long as it’s affordable for some people,” he said.

City staff will look into relocating the building or its facade.

© The Vancouver Sun 2006

Prices encouraging trend, but experts warn against spectacular increases repeating

Michael Kane
Sun

Strong real estate prices have one in six Canadians planning to buy an investment property in the next two years, a survey suggests.

But experts caution they shouldn’t be counting on the spectacular price increases of the past five years to repeat.

While prices rose 12 per cent in Vancouver last year, and 16 per cent in Victoria and Kelowna, Re/Max Realty is forecasting an eight-per-cent average increase across British Columbia this year, and about five per cent nationally.

British Columbia has more real estate speculators than other areas of the country but they are not a great percentage of the overall investor market, said Elton Ash, regional vice-president of Re/Max for Western Canada.

“Compared to other markets, there is a greater segment of people looking at buying with the intention of reselling in the next one to two years,” Ash said in an interview.

Asked if they are vulnerable to a market downturn, he replied: “We don’t see the market changing dramatically in the next two years.”

Although vacancy rates are relatively high compared to past years — making it tougher to find tenants — and stock markets have bounced back, Ash said the promise of rising real estate values is a major factor influencing investors, particularly in B.C. and Alberta.

The survey of 1,200 homeowners across the country also found that potential investors are fairly young. About 43 per cent of those intending to invest in property in the next two years are under 40.

That concerns Jim Rogers, chair of Rogers Group Financial in Vancouver, because younger investors may think that real estate prices go straight up.

“I would remind these folks that the average Multiple Listing price for a home in Vancouver fell by 20-25 per cent between 1980 and 1981. It took until 1986 to get back to 1980 values.

“Inevitably, when everybody decides it’s a great idea, it is not a great idea any more. It is too late, and that is what I worry about here. They are basing their future decision on the last five years.”

About 50 per cent of investors indicated they plan to hold their properties for 10 or more years, although Ash said they might be inclined to move on to their next income property if they were to realize a tidy profit in the interim.

He added that many younger people are entering the market with help from baby boomer parents who want to help their children before they die.

“I don’t think our younger people suffer from lack of experience,” Ash said. “They are better educated and more sophisticated about investing than the baby boomers were at that age. This is the age of information technology and information wasn’t so accessible back then.”

Close to 30 per cent of those polled already own one or more investment properties and about 18 per cent indicated that real estate represented more than 51 per cent of their total investments.

Rogers said 51 per cent is too much and a balanced portfolio would contain no more than 30 per cent real estate, 30 per cent fixed-income securities such as bonds or GICs, 30 per cent equities, and 10 per cent cash, or cash equivalents. He noted that major pension funds, a handy proxy for how to invest over the longer term, have no more than 10-15 per cent of their holdings in real estate.

The Re/Max survey was conducted by Toronto-based Hart & Associates with results considered accurate within plus or minus 2.5 percentage points, 19 times out of 20.

REAL ESTATE PRICES:

What goes up can go down. Hefty increases in real estate prices are expected this year. However:

16%: Last year’s average increase in Kelowna and Victoria.

12%: Last year’s average increase in Vancouver.

8%: This year’s forecast increase across B.C.

5%: This year’s forecast increase across Canada.

20-25%: Average decline between 1980-81.

Source: Re/Max, Rogers Group

© The Vancouver Sun 2006

After cancellation of a Victoria condo development more fallout from boom expected

Daphne Bramham
Sun

For the past couple of years there have been dire warnings about an acute shortage of construction workers caused by the Olympics, Olympic-related projects such as the RAV line and a booming housing market.

Well, the first dead canary in the mine shaft, if you will, was reported this week.

Anthem Properties cancelled its upscale condo development in downtown Victoria even though it had pre-sold 90 per cent of the units. Buyers will have their deposits refunded plus five-per-cent interest.

The labour scarcity had increased construction cost estimates by more than $10 million to $35 million in little more than six months. And CEO Eric Carlson told the Victoria Times Colonist that even that estimate was based on the assumption that everything would go perfectly — an assumption that he said is completely unrealistic.

“It’s definitely an alarm bell,” the president of the B.C. Construction Association told me. Manley McLachlan said it’s the first project he’s heard of that has been cancelled due to a shortage of skilled workers, but he expects more to come.

And while Anthem’s project was the first dead canary in the residential construction industry, a high school planned by the New Westminster school board was the first victim in the public sector. The school complex, which was to have included a theatre and community centre, has been delayed because what started as a $60-million project was heading toward $80 million and that was even before the sod was turned.

All of this means trouble — Trouble with a capital T as the Music Man said.

Cancelling the Victoria condo project doesn’t only mean a loss of $35 million in economic activity, McLachlan says others may think twice before they invest in construction projects.

If developers stop building homes, not only will economic activity decline, demand will push real estate prices even higher and the near-zero rental vacancy rates in the Lower Mainland and Victoria could become chronic.

In the meantime, the labour shortage can’t help but affect the 2010 Winter Games with its unmovable deadline. Unlike the New West school board or Anthem Properties, the Games must go on and the B.C. government is locked into paying for any cost overruns.

Just how high labour shortages are pushing up costs is unknown. The organizing committee hasn’t released the updated — and now outdated — estimates that were done last fall. But it’s not good. Vanoc’s chief executive John Furlong has been publicly wringing his hands about the skyrocketing costs for a few months, even after Vanoc scaled back projects by $85 million. Colin Hansen, the B.C. minister in charge of the Games, started begging for more federal help in December.

Now, with Stephen Harper’s minority Conservatives in power, it’s unclear what the answer will be.

If Harper says no, then the choices get tough. The B.C. government really has only three choices: Borrow more money, raise taxes, or spend less on badly needed hospitals, schools, bridges, power plants, sewage systems, water treatment or ports.

As hard as this is on the public spending side, things could be worse on the revenue side.

Construction is a huge driver of the economy. In September, the value of the major projects underway in B.C. alone (those worth $15-million-plus) was $33 billion. A further $48-billion worth were proposed and $22-billion worth was in the advanced planning stage.

Hundreds of billions of dollars of investment are at risk over the longer term.

But there’s no simple or fast fix.

McLachlan says British Columbia needs 75,000 additional construction workers by 2013. Alberta needs a similar number and even Saskatchewan is reporting a shortage.

Sure, we’ve got better weather. But why would experienced electricians uproot their families and move to the highest-priced housing market in Canada?

Over the longer term, we simply don’t have enough kids to train. But even if we did, we don’t have enough kids who think being a plumber, pipe-fitter, electrician or construction supervisor is good enough for them.

For too long, Canadians have viewed construction at best as a starter job for their children en route to a better career or a job for immigrants.

We haven’t invested in training and apprenticeships. We haven’t respected the work that tradespeople do. And now we’re paying the price.

© The Vancouver Sun 2006

Investor Presence Growing in Residential Housing Markets Across the Country, says RE/MAX

Other

Kelowna, British Columbia — Recent gains in average price are attracting a growing number of investors to major markets across the country. In fact, one in six Canadians plans to buy an investment property in the next 12 to 24 months, according to a report released today by RE/MAX.

Based on on-line interviews conducted in December, 2005 with 1,200 homeowners across Canada, the report highlights developing interest in residential real estate as an investment. Close to 30 per cent of respondents already owned one or more investment properties and approximately 18 per cent indicated that real estate represented more than 51 per cent of their total investment portfolio.

Why are purchasers turning to real estate as an investment, considering that prices are rising fairly rapidly, vacancy rates are relatively high compared to past years and stock markets have bounced back?

“Certainly, the promise of continued upward trending in housing values is a major factor influencing investors, particularly in British Columbia and Alberta,” says Elton Ash, Regional Vice President, RE/MAX of Western Canada. “Over the past five years, residential prices have appreciated close to 10 per cent on average, nationally. That’s a fairly impressive return on investment.”

The RE/MAX report also found that investors were younger than anticipated. Forty-three per cent of those who intended to invest in the next two years were under the age of 40. Once tagged ´Generation X´, these individuals supposedly rejected more traditional values like owning a home.

“We believe these purchasers view residential real estate as a simple, sound and safe investment — something that is very familiar to them,” says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “The risk factor is greatly reduced compared to other financial vehicles.”

In recognition of residential real estate’s potential for long-term growth, 50 per cent of investors indicated they plan to hold their properties for 10 or more years. However, if an investor were to realize a tidy profit in the interim, he or she may be inclined to move on to the next income property, explains Ash.

The study also confirms that real estate investing is not just a male activity. Females represented 16 per cent of those who say they intend to purchase an investment property in the next two years. Singles are also playing a greater role in investment, with 10 per cent planning to buy an income property in 2006 and 2007.

“Real estate speaks to a broad range of purchasers,” says Polzler. “You don’t have to be a millionaire to invest in housing. According to reported household income levels, today’s investors are solidly within the middle class, with one in five earning $50,000 – $60,000 a year and one in three earning $75,000-$100,000.”

The report found spending intentions almost equally split between those planning to spend less than $200,000 and those considering properties in the $200,000 – $500,000 range, suggesting that investment interest is spread throughout the marketplace, with respect to property, category and geography. For example, 41 per cent of investors say they intend to purchase a home, 35 per cent a multiple unit building, 24 per cent a condominium, and 13 per cent a townhome.

Additional Highlights:

 Corporate executives and entrepreneursü are expected to be the most active investors, representing 25 per cent and 19 per cent of respondents respectively.
 Investors were generallyü well-educated, with most possessing some post-secondary education. Fourteen per cent had gone on to a Master’s or Professional Degree.

The RE/MAX Investment Survey was conducted by Toronto-based Hart & Associates Management Consultants in December, 2005. The results are considered accurate within a margin of error of plus or minus 2.5 percentage points 19 times out of 20.

 

Canadian Investors Flocking to Housing Market

Recent gains in average price are attracting a growing number of investors to major markets across the country. In fact, one in six Canadians plans to buy an investment property in the next 12 to 24 months, according to a report by RE/MAX of Western Canada and RE/MAX Ontario-Atlantic Canada.

Based on online interviews conducted in December with 1,200 homeowners across Canada, the report highlights developing interest in residential real estate as an investment. Close to 30 per cent of respondents already owned one or more investment properties and approximately 18 per cent indicated that real estate represented more than 51 per cent of their total investment portfolio.

Why are purchasers turning to real estate as an investment, considering that prices are rising fairly rapidly, vacancy rates are relatively high compared to past years and stock markets have bounced back?

“Certainly, the promise of continued upward trending in housing values is a major factor influencing investors, particularly in British Columbia and Alberta,” says Elton Ash, RE/MAX of Western Canada Regional Vice President. “Over the past five years, residential prices have appreciated close to 10 per cent on average nationally. That’s a fairly impressive return on investment.”

The RE/MAX report also found that investors were younger than anticipated. Forty-three percent of those who intended to invest in the next two years were under the age of 40.

“We believe these purchasers view residential real estate as a simple, sound and safe investment – something that is very familiar to them,” says Michael Polzler, Executive Vice President and Regional Director for RE/MAX Ontario-Atlantic Canada. “The risk factor is greatly reduced compared to other financial vehicles.”

In recognition of residential real estate’s potential for long-term growth, 50 percent of investors indicated they plan to hold their properties for 10 or more years. However, if investors were to realize a tidy profit in the interim, they may be inclined to move on to the next income property, Ash says.

The study also confirms that real estate investing is not just a male activity. Females represented 16 per cent of those who say they intend to purchase an investment property in the next two years. Singles are also playing a greater role in investment, with 10 percent planning to buy an income property in 2006 and 2007.

“Real estate speaks to a broad range of purchasers,” Polzler says. “You don’t have to be a millionaire to invest in housing. According to reported household income levels, today’s investors are solidly within the middle class, with one in five earning $50,000 to $60,000 a year and one in three earning $75,000 to $100,000.”

The RE/MAX Investment Survey was conducted by Toronto-based Hart & Associates Management Consultants. The results are considered accurate within a margin of error of plus or minus 2.5 percentage points 19 times out of 20.

Copyright © 2006 RE/MAX International Inc. 1/27/06