Archive for February, 2006

Vancouver City Planners need guts to chart a dynamic new direction

Tuesday, February 28th, 2006

Sun

VANCOUVER SUN FILES The seawall along False Creek is just one of the attractions drawing people to choose a downtown lifestyle.

Eric Carlson

Trevor Boddy raises some fine issues. Unfortunately, he misses the main reason there have been few offices added to the downtown core over the last five years: Taxes!
   Commercial taxes imposed by the City of Vancouver are astronomically high, and seriously skew location decisions for businesses. My own office occupies 2,000 square metres of space on Homer Street, for 60 employees. Our annual municipal taxes have risen Peter Busby threefold over the last four years, to $108,000 a year. Imagine the outcry if residential taxes had tripled in the same period.
   We are growing, and need to move, so we are seriously considering a non-urban location. But wait: Most of our employees live downtown in condos, walk and bike to work. A number rent from condo owners who are investors, and have created a large, reasonably affordable rental housing pool. They love downtown, and don’t want to live anywhere else.
   It seems the condo boom that Boddy laments is part of a bigger picture of a vibrant urban core with housing, jobs, recreation and entertainment in a great balance. The condo boom over the last 10 years can be seen as a historic correction, people returning to live near their places of work, much as they were in Vancouver until the Second World War. Politicians and planners at City Hall have been a large part of this phenomenal success story.
   Everyone has benefited from the reduced traffic congestion, better amenities, recreation and schools.
   Now what about commercial growth — and where should it be? The downtown area is largely built out. To keep the current vibrant growth and economic wave intact, we should actively be planning a new downtown core now, in the False Creek Flats. That’s the largely empty area of land east of the Science Centre bisected by Terminal Avenue and the ugly buildings that line it.
   Boddy should address his energies, not at what has changed, but instead to spur a sweeping new vision for this area, as a high-density futuristic core for the next 100 years of Vancouver’s growth.
   Perhaps he can lobby for lower commercial taxes at the same time.
   We will soon have a new director of planning. The last ones have given us a fabulous city that captures the urban spirit of the present. Let’s hope the new director(s), have a vision.
   PETER BUSBY
   Architect
   Vancouver
   One of the most important events in our city this year will be the appointment of new chief planners to take the place of Larry Beasley and Ann McAfee who have announced their retirements. New and vigorous redirection needs to be taken, and Trevor Boddy has hit the mark.
   Beasley and McAfee have been endlessly praised in the media and by the corporate elite for their “vision.” The result of their tenure has been an array of disconcertingly similar condo towers and townhouses, which will be cursed in the future for being boring and repetitive. They’re set in the midst of our city, which seems to have forgotten that a strong economic centre of commerce and industry is vital to its welfare.
   I suspect the ardour with which this “vision” has been embraced has, in large part, rested on the irrationally exuberant increase in property/condo values instead of any thoughtful analysis of what makes cities flourish as dynamic centres of diverse activity.
   My concern is that the appointment of new chief planners will not receive the scrutiny it demands. If the appointments are made through the usual channels at city hall, few of us will know anything about it until they’re done.
   Can we rely on Mayor Sam Sullivan and Councillors Suzanne Anton, Peter Ladner et al. to grasp this incredible opportunity and find new planning leaders who will have the depth, knowledge and plain guts to set us in a new and revitalized direction? I hope so.
   But I’m very concerned that they won’t because they show little sign of either reflection or innovation — they seem stuck in the rut of convention where the rules of the past, rather than the realities of the future, apply. Witness, for example, their cavalierly spiteful direction on the Southeast False Creek lands.
   A special process for these appointments should be established and it should be open to public scrutiny and debate. As the selection is made, let’s recognize that the 2010 Olympics are not an end-goal, but rather a stepping-off opportunity. Take a look at Barcelona.
   In the 1970s, Vancouver turned its back on a Los Angeles-like maelstrom of traffic and smog, and embraced livability. We stand now on the brink of a similar moment where the beauty and setting with which we are endowed, and the livability that we have created can be carried much much further. But that will only happen if we heed the message of Boddy and others like him. I challenge Sullivan and his colleagues to let us do that.
   GEORGE STEPHENSON
   Vancouver
   For the second time in six months, I have read Trevor Boddy lambasting the residential development in downtown Vancouver over the last half decade or so.
   True, Boddy successfully demonstrates that much of the construction has been residential. Yet he erroneously asserts that the relatively low level of office development is killing downtown’s vitality.
   I have been working in downtown Vancouver since 1982. Lots of people worked downtown then. More people work downtown now.
   In 1982, downtown was dead after 6 p.m. and on Sundays. The best restaurant was the William Tell. The hip restaurant was Hy’s. The best night life was in a cinderblock discothèque called Misty’s. Robson Street was a Strauss, Coal Harbour was a rotting shipyard and the north shore of False Creek and Yaletown were rat-infested warehouse districts sitting on polluted land. And so on.
   Today the city buzzes all day, all week. It vibrates with lots of people, many who work downtown and many who live downtown. Any one of 20 restaurants could be claimed as the city’s best and there are dozens and dozens of eclectic diverse hip ones, too. There is night life everywhere, some cool, some rough — something for everyone.
   Robson Street has more buzz than 20 years ago, as does the reemerging Granville corridor. The north shore of False Creek and Yaletown are among the most vibrant downtown neighborhoods in the world, let alone North America. Coal Harbour is green, modern (not post-modern), and well-used. Just go running on the extended seawall on any lunch hour. Great city, Vancouver.
   The old world model of people living in suburbs and commuting downtown is environmentally unsustainable, inefficient and inhuman. Downtown Vancouver has never been more cosmopolitan or more vital. It is an international success story. Its planning policies are now being copied and implemented in many large North American cities including Seattle, Los Angeles, San Diego, Dallas and Phoenix.
   Residential housing construction is booming downtown because people want to live there. Office buildings aren’t booming because large corporations don’t want to be there.
   And that has little to do with zoning or planners. Rather, it’s because of commercial property taxes that are five times higher for office than for residential space, the shrinking of the average work unit afforded by the microchip, corporate consolidation that has seen Telus, Finning, West Coast Energy and MacMillan Bloedell absorbed into other companies with head offices in more business-friendly cultures and cities, and so on.
   This is all okay because city planners, thankfully, had the foresight to see that if Vancouver wasn’t going to be a world corporate headquarters city, it was at least a beautiful city with a diverse population that could be very cosmopolitan. They facilitated that by allowing residential uses on poorly utilized, transitioning downtown sites.
   As long as people want to keep moving downtown, developers will be happy to keep providing them with urban homes. As soon as businesses want to come to downtown and pay the rent to justify new construction, developers will be happy to build them an office. There will be plenty of sites in and around downtown when and if that time comes.
   I just don’t get Boddy’s assertion that reverting to the old model will somehow make Vancouver a better, more vital city. I think he is wrong. I hope city councillors and planners put his column where it belongs — the recycling bin.
   ERIC CARLSON
   President
   Anthem Properties Group
   Vancouver

Home sales down 2.8% in January

Tuesday, February 28th, 2006

Noelle Knox
USA Today

WASHINGTON — Sales of existing homes fell for the fifth month in a row in January, and consumer confidence slid to a three-month low as Americans worried about job prospects and their income potential.

Existing home sales dipped 2.8% last month to a seasonally adjusted pace of 6.56 million, down 5.2% from January last year. The news followed a government report Monday that said new-home sales dropped 5% last month to the lowest level in a year.

“The primary factor driving down the market were condos and co-ops, which fell 10.6%,” said Phillip Neuhart, an economic analyst at Wachovia. “That’s the real story here, the condo market, at least in January, was quite slow and has been trending downward since summer.”

Single-family home sales, by contrast, were off just 1.5%.

Regionally, home sales suffered most in the Northeast, falling 10%, followed by a 7.7% drop in the Midwest, and a 3.5% dip in the West. The only strong market was in the South, where sales rose 2.6%, according to the National Association of Realtors, which released the data Tuesday.

The rising number of home shoppers who aren’t buying may be in part because fewer people can afford the median-priced home. That price — half cost more, half less — was unchanged last month at $211,000, 11.6% higher than in January last year.

The inventory of homes for sale rose slightly and now stands at a 5.3-month supply.

Home shoppers’ reluctance also may be because of concerns about financial security. The Consumer Confidence Index fell in January to 101.7 from 106.8, the Conference Board said Tuesday.

The drop in home sales came despite record warm weather and cash and give-away incentives from builders. “Imagine if the weather had been terrible,” Neuhart said.

Sales of both existing and new homes set records for a fifth year in 2005, but analysts believe sales of existing homes will fall about 5% this year as rising interest rates cut into demand.

The five consecutive declines in existing home sales represented the longest stretch of weakness since a stretch of six monthly declines from July through December of 1999.

Analysts say the rising supply of unsold homes will likely slow the rapid increase in home prices of recent years. Instead of double-digit gains, Lawrence Yun, senior economist at the Realtors, said he was looking for a more moderate rise of 5% in prices this year.

The big concern has been whether the slowdown in sales would cause home prices to come crashing back to earth. But most analysts believe the housing market is headed for a slowdown but not a crash.

Hackers aiming at all computer devices

Tuesday, February 28th, 2006

Expert: Cellphones, PDAs ‘are also likely targets’

Jim Jamieson
Province

Andy Walker, a technology journalist, believes that, in the near future, electronic viruses will affect any device connected to computers, including the iPod. Photograph by : Jason Payne, The Province

Apparently, nothing is sacred.

Technology writer Andy Walker predicts that malicious hackers are on the verge of writing insidious computer code that will target, amongst other devices and platforms, Apple’s iconic iPod.

In a wide-ranging interview with The Province yesterday, Walker said the recent reports of the first worm written for Apple’s OS X operating system simply point to a wider proliferation of so-called malware as virus writers look farther afield for platforms to infect.

He warned that devices such as PDAs and cellphones will also be under greater threat.

“Apple has been bragging about having the most secure operating system, but there’s no free lunch in security,” said Walker, a Toronto-based journalist and broadcaster, who has just published Absolute Beginner’s Guide to Security, Spam, Spyware and Viruses.

“I think somebody is trying to make a point, but they also may smell an opportunity if sales ramp up with Apple going to the Intel chip. Apple would be a great place to experiment because the iPod is so strongly linked to the operating system. I think the honeymoon is over for Apple.”

Walker said the attraction of the iPod is its dominant position in the MP3 player market (78 per cent) and the fact it also works in the much larger Windows world.

“Can you imagine looking at the latest episode of Lost and having some video ad come on?” he said. “Or getting audio spam when you’re listening to a song you downloaded. What a great way to sneak in adware.”

But Walker said Microsoft Corp. is also heading into a crucial period in terms of its own battered reputation regarding security to its flagship product, the Windows XP operating system. The much- delayed launch of XP’s successor, Vista, is due out this fall and Walker said the new OS must be airtight.

“Microsoft is running scared right now,” said Walker, whose next project is a book on Vista. “Windows and Office are what pay the bills at Microsoft, so if it’s not secure it’s going to be their undoing.”

Walker speculated that if Microsoft stumbles, Google will offer competition in the space, if not with a Google OS then some sort of all-encompassing technology.

Walker says the minimum precautions for safe computing are software for anti-virus and anti-spyware, making sure your firewall is turned on and updating your operating system as often as possible. Other key rules are not opening unsolicited e-mails and avoiding filesharing networks.

“If you ignore the potential problems, you could potentially suffer financial damage,” he said.

Walker‘s comprehensive but accessible book also suggests free alternatives to most types of security software.

“Computer security problems are not your fault, so you shouldn’t be forced to pay a lot of money to fix them,” he said.

© The Vancouver Province 2006

 

New-home sales fall in January

Monday, February 27th, 2006

USA Today

WASHINGTON (AP) — Sales of new homes fell for the second time in three months in January, providing further evidence that the nation’s five-year housing boom is slowing.

The Commerce Department reported Monday that sales of new single-family homes dropped 5% to a seasonally adjusted annual rate of 1.233 million units last month.

That was a bigger drop than analysts had expected and provided support to the view that the housing market, after setting sales records for five straight years, is slowing as mortgage rates rise.

The 5% January drop in sales followed a revised 3.8% increase in December. Sales fell 7% in November.

The number of new homes available for sale at the end of January rose to a record 528,000. At the current sales pace, that represented 5.2 months’ supply — the largest inventory since November 1996.

Despite the fall in sales, the median price of a new home was up in January to $238,100, compared with $229,000 in December. The median is the point where half the homes sold for more and half for less. The January figure was the highest since an all-time high of $243,900 set in October.

Economists had expected sales to be supported last month by the warmest January in more than 100 years of record-keeping. Unusually mild weather pushed up construction of new homes and apartments 14.5% last month, the biggest increase in more than three decades.

However, the milder weather did not have the same positive effect on sales which fell in all regions of the country except the West.

The biggest decline was a 14.9% decrease in sales in the Northeast, which followed an even bigger 23% plunge in sales in December. Sales in the Midwest were down 10.8% after having risen by 21.2% in December.

Sales fell 10.3% in the South in January following a 1.2% gain in December.

Bucking the national trend, sales in the West posted an 11.3% increase in January after a 6.3% gain in December.

Top 10 RRSP Dos and Don’ts

Monday, February 27th, 2006

Wayne Cheveldayoff
Sun

Don’t take funds out of your RRSP unless you are in a dire emergency. Photograph by : Getty

Here are 10 guiding principles in RRSP investing that will help you achieve your ultimate goal of having enough money for a comfortable retirement.

1.Don’t pay fees unnecessarily unless you are getting good value for your money. Fees drag down returns, so you definitely want to minimize that unless you are getting something useful in return. Not all advisors will volunteer what the fees are, so be ready to ask for a full explanation. You’ll also have to judge if the fees are worth it. A prime example is a bond fund holding government bonds and charging a management expense ratio (MER) of 2 to 2.5 per cent a year ? thus chewing up half or more of the expected return. Similarly, it doesn’t make much sense to own a balanced fund where the usual 2.5-per-cent-plus MER is applied to the bond and cash components as well as the equity component. Paying that much for a pure equity fund may be worth it but you should try to invest directly in government bonds or at least in a low-fee bond fund, such as one of the iUnit bond exchange traded funds (ETFs) that charge an annual MER of less than 0.5 per cent.

2.Do your homework. Research investment alternatives or use an investment advisor to achieve the highest possible longer-run returns. An initial sum of $10,000 will grow into a lot more at a 7-per-cent return compounded over 30 years than it will at a 5-per-cent return. If you doubt it, check this on one of the free RRSP calculators located at a bank or mutual fund website or at www.investorED.ca.

3.Don’t take funds out of your RRSP unless you are in a dire emergency. Not only will the withdrawal be fully taxed as income, you will miss out on the tax-free compounding of your nest-egg. With interest rates low, it may make more sense to borrow the money you need. Even for tax-free sums taken out for education or a house purchase, there will still be a drag on RRSP growth since they will earn no return until they are paid back.

4.Don’t borrow to contribute into your RRSP unless you are sure you can easily pay the money back within a year. Interest on such borrowings is not tax-deductible. While some people can’t bring themselves to save unless they are paying back a loan, it would be wiser instead to adjust your budget and start up and stick with a ‘pay yourself’ regular monthly contribution plan. The sooner you start, the more you’ll have in retirement.

5.Do contribute to an RRSP as early in the year as possible. By waiting until the last minute, you are giving up tax-sheltered investment returns that can compound into a sizeable amount over the years.

6.Don’t ignore the income-splitting benefits of contributing to a spousal RRSP. Depending on your situation, it may lower your tax rate when you and your spouse ultimately withdraw the funds to pay for your retirement.

7.Don’t forget to diversify your RRSP investments. Large pension funds spread out investments among stocks, bonds, and income trusts. They also use hedge funds but such investments are not easily accessible for most Canadians except through principal-protected notes.

8.Do make use of international investments. Diversification lowers risk while maintaining or increasing returns over time. By sticking only with Canada, you are missing out on potentially greater opportunities. Canada has few world-class companies, especially in technology and pharmaceuticals, which can dominate their markets and thereby profitably reap the rewards.

9.Don’t make the mistake of thinking that trust is enough when dealing with any financial institution or investment advisor. Yes, you need to feel you can trust, but you also need to verify. Particularly when you are unsure about an investment product or the advice you are getting, ask for things in writing and read the fine print.

Don’t drift or procrastinate when it comes to contributing to an RRSP or managing the investment. It’s not going to happen by itself. The problem won’t go away if you ignore it. You need to take action and be decisive. Make the time. Seek whatever help you need. It’s your money and your life in retirement.

Wayne Cheveldayoff is a former investment advisor and professional financial planner. He is currently specializing in financial communications and investor relations at Wertheim + Co. in Toronto. His columns are archived at www.smartinvesting.ca and he can be contacted at wcheveldayoffyahoo.ca.

© Canadian Press 2006

Building boom likely to continue

Monday, February 27th, 2006

Statistics Canada predicts a fourth straight year of significant increases

Derrick Penner
Sun

British Columbians will spend $34 billion on new buildings, businesses and public works in 2006, according to Statistics Canada, which will make this year the fourth straight year of significant increases in investment in the economy.

The forecast is in Statistics Canada’s latest survey of public and private investment intentions, and represents a 6.5 per cent increase in investment spending from 2005.

Helmut Pastrick, chief economist for Credit Union Central B.C., believes Statistics Canada’s 2006 forecast, which he referred to in Credit Union Central’s latest Weekly Economic Briefing, could even be a bit low.

Statistics Canada forecasts that investment in building new homes will account for $11.2 billion of 2006′s overall investment intentions, an increase of five per cent from 2005.

Capital spending however, which includes non-residential construction and business purchases of machinery and equipment, are forecast to hit $22.5 billion in 2006, a 7.2-per-cent rise.

“One thing I was encouraged by is that the construction industry itself had expected to show a pretty solid gain [amounting to] a 29-per-cent increase over 2005,” Pastrick said.

“That’s the construction industry itself investing so it can increase output.”

Pastrick added that if that comes to pass, overall investment spending for 2006 could surpass the $34 billion figure when Statistics Canada makes its final report in early 2007.

Inflation, however, will factor into the overall investment numbers as labour shortages help push up construction costs. Pastrick noted that construction inflation during 2005 was in the range of six to seven per cent.

However, Keith Sashaw, president of the Vancouver Regional Construction Association, said the rising forecast for investment spending is not just the result of inflation.

“I think the survey would indicate an increasing expectation of more capital projects being undertaken,” he said.

Sashaw noted that the latest edition of the provincial government’s Major Projects Inventory counted some $83 billion in major capital projects being planned between now and about 2011. He added that some $34 billion of those are listed as being currently under construction.

“Certainly [Statistics Canada's forecast] seems to be consistent with everything we’re hearing,” Sashaw said. “It is a robust time in the economy for B.C.”

In his weekly briefing, Pastrick noted that some of the expectations for rising investment spending are driven by public-sector initiatives, such as the provincial government’s own capital spending plan.

Pastrick added that construction of commercial and industrial buildings is expected to increase, and some of the investment spending will be made to advance “engineering projects,” such as the Canada Line and provincial highways.

However, Pastrick noted that a couple of industries that have been hot lately are expected to see surprising declines.

Statistics Canada projects that B.C.’s hot mining and oil and gas extraction sectors will see a 13 per cent drop in investment spending in 2006, and manufacturing will see a seven per cent decline.

© The Vancouver Sun 2006

Financial insecurities are today’s last taboo

Monday, February 27th, 2006

Money is still the subject of secrets and lies

Inez Dyer
Province

We are conditioned from birth to have one face for the public and one face for our private lives. Photograph by : The Associated Press file

EDMONTON – These days you can hardly open a magazine or turn on the television and avoid hearing someone discussing their most intimate sexual practices or fantasies.

If that turns you off, you can always flip to another channel and watch someone having breast implants or giving birth.

No matter how personal, just about everything is in your face

24/7. So why is it, with all this over-the-top public display, people’s personal finances are still hidden deep within their closets and not a subject for polite conversation?

It’s way past time to wake up and smell the coffee, folks!

All those dark financial secrets you’ve been keeping are likely the root cause of most family fights, insomnia, alienation from your grown children and why so many of you will eventually find yourself slugging it out in divorce court.

Sad as it sounds, I hear from readers who tell me they buy their kids expensive gadgets, even though they can’t afford it, because they don’t want them to feel left out. How inappropriate is this, and what kind of message are we sending kids who are growing up in a fool’s paradise, believing mom and dad are human bank machines with endless supplies of cash?

There is no question society is to blame for all the secrets people feel they must keep about their money. We are conditioned from birth to have one face for the public and one face for our private lives. The public face must be consumer-

driven, in charge and always positive. Admitting you have a problem with money is admitting you have a chink in your armour: It’s just not acceptable in this age of perfect white teeth, perfect hair and a perfect size-four body.

Our consumer culture has elevated money to the most desirable commodity on Earth, often ahead of honesty and personal integrity, and if you happen to be lacking it, you mustn’t admit it or risk losing your place in society or, worse, disappointing your family.

If we want to stop this nonsense and improve things for the next generation, we have to start now, preferably around the dinner table, and begin to discuss money like we discuss school, sports, politics and relationships. Your children need to understand that money is not a way of evaluating a person’s character or substance and especially not a yardstick of measuring their own self-worth.

We polite, oh-so-proper Canadians have a long tradition of keeping our mouths firmly shut about our personal finances.

While it may be hard to start talking candidly about your money, I guarantee it will reap substantial rewards, both on the home front and with your bank balance.

You’ll also feel less personal stress because you’re no longer alone in dealing with your financial problems and insecurities.

It’s way past time we searched within ourselves and began to understand why we allow money to rule our lives, define who we are and feel embarrassed and inadequate about talking about it.

It’s been my experience that once people get over the fear of being judged for admitting they have a problem, financial or otherwise, they take advice to heart and start making excellent progress in overcoming their problems.

When it comes to your money, silence is not golden!

© The Vancouver Province 2006

Should you buy a bond fund?

Monday, February 27th, 2006

Management fees can eat up much of your return

Wayne Cheveldayoff
Province

It is definitely a good idea to have bonds in your RRSP to provide regular income or to balance out the risks of holding equities.

But many Canadians make costly mistakes in how they invest in bonds.

Investors are usually encouraged to own bond or balanced mutual funds. The problem is that the annual mutual-fund management fees, which benefit the advice-givers, draw away a substantial amount of the annual return to investors.

Take, for example, the Talvest Bond Fund, which Globefund.com says returned 5.32 per cent annually in the past 10 years.

The fund has an annual management expense ratio of 2.12 per cent, which is approximately the amount by which it lagged the Scotia Capital Universe Bond Total Return Index, which had an annual return of 7.49 per cent over the decade.

In the case of balanced funds, bonds are mixed in with equities. Yes, it is a convenient, one-fund solution to having a balanced portfolio, but the high MER is applied to the bond component as well as the equity component.

A good example is the Fidelity Canadian Balanced-A Fund, with its 2.36-per-cent MER applying to its 45-per-cent holding in bonds.

With Canadian yields for high-quality bonds in the four- to five-per-cent range, almost half of the expected yield-to-maturity on the bonds is being drained away by fees.

Unfortunately, Canadians choosing bond or balanced funds may be attracted by the decent long-term returns.

However, historical bond returns were boosted by capital gains on bonds as interest rates fell gradually over the years. With interest rates expected to be stable or to rise slightly in the future, investors should expect only the coupon return on bonds, and that makes it all the more important that fees be minimized.

The smart approach, therefore, is to invest directly in high-quality bonds (or GICs). This is fairly easy to do.

One can replicate the work of a fund manager simply by buying a package of bonds known as a bond ladder (one bond maturing in each year for the next 10 to 15 years).

The only time it makes sense to use a bond fund is when you want to invest in high-yield, risky corporate bonds.

Studies show you need to diversify into 20 such bonds in your portfolio to effectively insulate against a bankruptcy or two, and unless you have a very large portfolio, this can only be achieved through a fund.

One can also easily own real-return bonds directly. These inflation protectors are ideal for an RRSP since they provide a real return, currently about 1.5 per cent, plus the rise in the consumer price index.

For anyone preferring the simplicity of a fund for their core bond holding, the best choice would be one of the iUnit exchange-traded funds offered by Barclays Global, given their low annual MERs of 0.35 per cent or less. The TSX-listed funds replicate their respective bond indexes.

Even these low-fee funds, however, can’t provide the benefits of owning strip bonds in your RRSP.

A strip, also known as a zero-coupon bond, is a bond’s principal sold separately from its coupons.

The advantage is not only convenience, since you don’t need to reinvest coupon interest each year, but also the insurance factor.

If stock markets fall apart, bond yields would likely eventually decline, and the resulting capital gains in bonds would offset losses on equities. In the case of strips, a decline in yield produces a bigger capital gain.

Wayne Cheveldayoff is a former investment adviser and professional financial planner.

© The Vancouver Province 2006

Shaughnessy home restored

Sunday, February 26th, 2006

RENO: This rickety rooming house is fabulous again

Jeani Read
Province

Curved window in the living room is the ideal spot for a mini music area. Photograph by : Wayne Leidenfrost, The Province

Fireplace after the reno above and before below. Photograph by : Wayne Leidenfrost, The Province

Fireplace after the reno above and before below. Photograph by : Wayne Leidenfrost, The Province

The dining room (below) was far from the red-and-gold inviting space it is now (right). Photograph by : Wayne Leidenfrost, The Province

The dining room (below) was far from the red-and-gold inviting space it is now (right). Photograph by : Wayne Leidenfrost, The Province

Below right newly created built-in shelving is identical to the original. Photograph by : Wayne Leidenfrost, The Province

Buying an older home and renovating is one option people take to attempt to avoid the skyrocketing costs of new housing.

Of course, not everyone can buy a Shaughnessy mansion, but this great reno couldn’t help but catch our eye.

The beautiful home, which turns 90 this year, was more of a wreck than the owners imagined when they called Ralph Belisle of TQ Construction to do the work. “I sometimes wondered why (it) was still standing,” he says.

Constant renos over the years had compromised structure and finishings. By the 1990s it was a rickety rooming house. The original huge structural beams in the roof had rotted, been replaced inadequately and rotted once more; the bedroom level was full of unnecessary rooming-house bathrooms; and the main floor was not even a shadow of its former grandeur. Within 18 months, however, it was a beautifully restored gem.

“The owners were very careful and conscientious,” says Belisle. “Their first priority was to the structure, which may not sound very glamorous. But if your work is dictated by the structure, the decor will follow. If you just go for a ‘beautiful’ home without adherence to the basics, it doesn’t always work out the way you hoped.”

Some of the work Belisle and architect Jonathan Ehling did is shown here.

LIVING ROOM

- The living room had been broken up into two smaller rooms. When a two-piece powder room was added near the entrance in the 1980s, it interrupted the crown and baseboard moulding, plumbing, electrical and duct work. Belisle’s crew moved the powder room to a more central location, and re-located fancy double-pocket doors for a grand entry. They removed walls to restore the living room to its original size, and re-created the crown and base moulding.

- The flooring was all different, at different levels. The hardwood now is oak with a honey finish; the entry marble.

- Gas fireplaces that had been installed were removed and original wood-burning fireplaces replaced with gas. The original mantle design was re-created in natural wood with contemporary lighter stain and slate treatment.

DINING ROOM

- Badly maintained wood floor was repaired and refinished.

- Mouldings were re-built. Newly created built-in shelving is identical to the original.

- Some windows throughout the house had been replaced. They were in bad shape but the originals were in good condition. The replacement windows were replaced and the originals kept.

© The Vancouver Province 2006

 

REVERSE MORTGAGES: Seductive advertising doesn’t tell the whole story, critics say

Sunday, February 26th, 2006

Long look needed at short-term solution

Wendy McLellan
Province

Together with his wife, Patricia, former retirement planner Konni Bernaschek is a member of the Canadian Association for the Fifty Plus. Photograph by : Nick Procaylo, The Province

The ads are seductive: Unlock the equity in your home. Access tax-free cash to supplement your income. Stay in your own home and don’t make payments until you move.

Reverse mortgages offer everything the TV ads promise, but advocates and financial planners worry seniors don’t have enough information about what they’re getting into when they sign the loan papers.

In Canada, reverse mortgages have been available to seniors for 20 years and the business is growing as steadily as the aging population and property values.

A reverse mortgage advances up to 40 per cent of a home’s value and requires no monthly payments. The interest, which is calculated semi-annually, is added to the mortgage balance every year.

Instead of paying down the mortgage, homeowners can allow the balance to increase every year as the interest compounds. The mortgage continues to grow until the homeowner, or the estate, sells the property, at which time the loan is paid off.

In Canada, only one national company, Canadian Home Income Plan, or CHIP, sells reverse mortgages. CHIP, a wholly owned subsidiary of the publicly traded Home Equity Income Trust, sells the loans directly as well as through mortgage brokers and by referral from financial institutions. The current interest rate for a three-year term is 8.6 per cent.

According to CHIP’s financial statements, the reverse-mortgage business is growing by about 10 per cent a year in Canada. At the end of 2004, the company reported $472.3 million in outstanding mortgages, an increase of almost $37 million from the beginning of the year.

At the end of September last year, the company said it held $520 million in mortgages, about 25 per cent registered against B.C. homes. The company advances 250 to 300 mortgages a year in B.C.

It’s the compounding interest on reverse loans that worries advocates and financial planners.

“Reverse mortgages are just a short-term solution and I’ve yet to see one that made sense,” said Scott Hannah, executive director of the non-profit Credit Counselling Society.

“The interest keeps compounding, and if you live 20 more years, you get to stay in your house, but you can’t leave because you could be walking away with nothing.”

He said seniors who are accumulating debt might see reverse mortgages as the perfect solution but, before signing up for a loan, they should get a firm grip on expenses and discuss their options with family and a financial advisor.

“People don’t look at all the implications, and they don’t think long-term.”

Cathie Hurlburt, a registered financial planner with the Vancouver-based Integrated Planning Group, said some of her clients signed up for a reverse mortgage because they wanted to stay in the family home but couldn’t afford the upkeep on their income.

But, after five years of watching the mortgage increase, the couple asked Hurlburt for help.

“The mortgage allowed them to stay in the house, but in the end, he was 80 years old and so distraught about how much he owed it was driving him out of his mind,” she said.

“And they were still spending a lot of money on the house. They didn’t understand that having no debt payment wouldn’t solve the problem — they were living a fantasy.”

Hurlburt advised them to sell the home, downsize their living arrangements and put their remaining home equity into investments.

With a little more financial planning, she said, the couple is far happier, even though they had to move.

Konni Bernaschek, a local member of the Canadian Association for the Fifty Plus (CARP) and a former retirement planning counsellor, said reverse mortgages are useful for a select few.

“I believe reverse mortgages are a form of assistance that is a last resort for someone who has no other financial means and wants to stay in their home until the very end,” said the Coquitlam resident. “In this regard, they are useful. But people need total, full disclosure to know what they are getting into.

“With our aging population, there will be a much larger group on fixed incomes, and reverse mortgages could experience exponential growth. We need to be sure the product is well evaluated and regulated.”

A report released this month by the Vancouver-based Canadian Centre for Elder Law Studies recommends the province develop regulations specifically for reverse mortgages, with improved disclosure statements and a 10-day cooling-off period so people have more time to consider their decision.

“We have a number of concerns,” said Kevin Zakreski, a staff lawyer for the law studies centre. “This is not a type of loan people are familiar with — it’s not like a traditional mortgage, it’s a rising-debt loan.”

The centre suggests B.C. follow Manitoba’s lead and develop specific legislation for reverse mortgages.

But CHIP president and CEO Steven Ranson said borrowers receive disclosure statements and the company requires everyone to get independent legal advice before the money is advanced.

CHIP is regulated under B.C.’s Mortgage Brokers Act, which includes a 48-hour cooling-off period for borrowers. The legislation also requires a disclosure statement, but advocates say the document is geared to traditional mortgages and doesn’t clearly explain the rising debt aspect of reverse mortgages.

Ranson said setting up a reverse mortgage takes an average of 30 days, so a longer cooling-off period is not needed.

“We are completely in favour of disclosure and more disclosure, but we don’t see the need for more legislation,” Ranson said. “This is really unnecessary.

“To us, there is already regulation of reverse mortgages in B.C.”

© The Vancouver Province 2006