Interest rates are low, but do the math on the newer products

Province

TORONTO — The mortgage shopper has never had it so good — nor so complicated.

The overwhelmingly good news for the home shopper is about interest rates. The posted rate for a closed five-year mortgage at Royal Bank in late January was 6.65 per cent. But a special offer available during the month made the same term available at 5.59 per cent.

At the same time, there are more and more vehicles for the mortgage shopper to use.

For example, in the past year, amortizations have zoomed to 40-year terms, and consumers can also apply for mortgages where only the interest is paid for a certain term.

All this takes place against a background of tough competition between financial institutions for your money — and mortgage brokers who will do the leg work for you and shop around for the best mortgage.

“In today’s environment, it is far more competitive,” observed Patricia Lovett-Reid, vice-president at TD Waterhouse.

“There is far more out there, and doing your homework before you go shopping for the house makes sense.”

Even before you start thinking about mortgage terms and who will get your hard-earned bucks, you have some work to do — it’s critical that consumers get to know their own numbers first.

That’s because you aren’t going to get the best rate going if you are viewed as not having your finances in order. So, you want to sit down and add up all your assets and liabilities, including credit-card debt, RRSPs, car loans and so on.

You also want to make sure your income taxes are up to date, because you may not get a mortgage otherwise.

You want to be armed with proof of income, in the form of pay stubs or a letter from your employer — and they must be recent.

Before you phone the real-estate agent, you will want to visit your financial institution — or mortgage broker — to find out just how much money you can spend on a house.

“There aren’t many real-estate agents that will work with people who are not preapproved, these days,” said Lovett-Reid.

“Why bother?”

She noted that the general rule of thumb is to allocate about 32 per cent of your pretax income to housing costs.

Mortgage brokers have been growing in popularity in recent years as fewer Canadians feel loyalty to one institution to a point where they do all of their financial business at a single place.

A recent survey by the Canadian Institute of Mortgage Brokers and Lenders indicated that more than 31 per cent of Canadians sought the advice of a mortgage broker in 2006, up from 25 per cent in 2006.

Consumers can find themselves asking for trouble if they opt for some of the newer products with much-extended amortization terms and interest-only provisions.

In the case of longer terms, “you run the risk of buying too much house,” said Lovett-Reid.

“You look at the number of luxury autos on the road. And people are leasing them because they can’t afford to buy them. And they can get much more car than they could if they were buying it.”

She offered a few tips for the prospective mortgage shopper.

– Pay weekly. If you had a weekly payment of $415.10 or a monthly payment of $1,640.42 on the same principal amount, the balance will be paid off about three years earlier with weekly payments.

– Check out how much you can pay off on your mortgage each year and how much you can increase your payments.

– Portability: Ask a mortgage specialist if your existing mortgage is transferable if you decide to move.

“It might not be,” said Lovett-Reid, “. . . particularly if you already have a really attractive rate.”

© The Vancouver Province 2007

 

Bob Ransford
Sun

This is typically a slow season for real estate sales, with most consumers trying to catch up on credit card accounts from a month or two of shopping sprees. January real estate numbers could buck the normal trend, however, just as the whole real estate market has over the last year.

As a new year dawns, making sense of the one that just passed is still a real chore. It seems like the economic surge that we experienced this last year was almost wholly driven by a real estate-based frenzy that perhaps peaked over the last twelve months but remains the only visible engine of economic growth in these parts.

It was easier to make sense of earlier real estate booms in Vancouver when our resource-based economy used to go through cycles of expansion and contraction tied to commodity price fluctuations. It was even easier to make sense of the record-setting real estate boom of the mid-1990s when a new international market discovered Vancouver as Hong Kong’s sovereignty was about to be handed over from Britain to China.

Pinning down what exactly fuelled our latest trend-setting real estate boom is harder.

Job growth is certainly one fundamental driving the market. Many new jobs created by the institutional projects that are part of the pre-Olympic period provided the wealth that brought new homebuyers to the market.

The residential construction sector itself also was a significant job creator. Kind of like the chicken and the egg. It is somewhat scary that we have little more than this to point to as our engine of growth.

One reality accompanied the widespread preoccupation with residential real estate in Vancouver over the past year. We finally realized that our land supply is finite. We also realized that there is a connection between the amount of land available for development and that other word “affordability.”

The “D” word–density– is also no longer taboo because it is the other element in the magic affordability formula when you have a finite amount of land.

Believe it or not, these realities are now actually popular topics of conversation. In Vancouver, the word “density” is especially trendy if it is preceded with the three-letter largely undefined prefix “eco.”

During the next year, perhaps someone may connect all the dots and stumble on this simple formula that holds the magic solution for the affordability problem.

It seems like we are not the only ones in the world preoccupied with finding a magic solution to the housing affordability problem.

The following quote is from an editorial published in the New York Sun newspaper a couple weeks ago.

The editorial lamented how New York City politicians, while intoning about the need for affordable housing and proposing more rent and construction subsidies and other handouts, operate a system of onerous and costly regulations that drive developers away.

The editorial writers implored Michael Bloomberg to cut red tape as a means of making housing more affordable.

“If the mayor is serious about making New York an affordable place to live for people with middle-class incomes, the answer is neither more subsidies nor more regulation. The right way to go is to make it possible for developers to do their developing by slashing the regulations that discourage building, keep the housing supply down, and push prices up.”

New York has seen a building boom, like Vancouver has, where you would expect new housing would add to the supply and keep prices affordable. Critical market observers in New York point out however that onerous regulation has led to less development of ordinary housing and instead developers have focused on higher value projects where the overall numbers are bigger.

These and other realities of urban development and the real estate market will continue to be topics for discussion in our city over the next year and probably well into the future.

I wasn’t surprised the other day to learn of the opening of a new business in Vancouver that symbolizes how preoccupied Vancouverites have become with owning a home and participating in the real estate market. A unique new coffee shop is soon to open on Commercial Drive between Second and Third Avenue.

The proprietor is a neighbourhood realtor who plans on displaying real estate listings on the wall and allowing patrons to access the MLS listings on a computer while enjoying an espresso. She and a residential mortgage broker will use the shop as their home base, making their services available to patrons who stop in to enjoy a coffee and talk about buying and selling properties.

Bob Ransford is a public affairs consultant with COUNTERPOINT Communications Inc. He is a former real estate developer who specializes in urban land use issues.

E-mail:[email protected]

© The Vancouver Sun 2007

 

Beatty Street addresses surge in value between pre-construction release and today

Chantal Eustace
Sun

If the walls of the bowman block could talk, they would have a century of stories to spill, with the latest chapter the conversion of the warehouse into 38 apartments, all but 13 held back from the market by the developer until the building was ready, or almost ready, for its second century.

Three years in the “writing,” the Bowman apartments are a statement about the power of contrast in residential interiors, energy-efficient windows, for example, against beams of wood blackened slightly during a fire 80 years ago.

This narrative in juxtaposition is only part of the ”story,” however. For the Bowman Block’s developer, Robert Fung, it is a means of expressing an intention, less to rehabilitate an Edwardian structure and more to elevate the building to the built-environment prominence it enjoyed in its first decades.

”One of our goals with heritage rehabilitation projects is to bring these important buildings back to prominence in today’s environment,” Fung says.

“We try and reinstate each of these buildings as a landmark, with the intent that they become recognized and iconic in the fabric of the city.”

The warehouses of downtown Vancouver have been undergoing conversion into homes for almost 25 years, with the first conversion in the city’s history occurring up the street.

The lessons learned in those 25 years, by the development fraternity and city hall and the market, mean conversions undertaken today inevitably generate better homes than the first-generation conversions, Fung says.

But are they profitable? “It makes sense,” he says. “It’s a successful project all around. We were able to achieve the quality of the project that we wanted and the suites that we wanted. . . . At the end of the day it made sense.”

Certainly his Bowman Block experiences have not soured him on rehabilitation. The Salient Group has two other conversions under way and six others ready to begin.

“I like creating spaces for people that are the future of our city. I like reclaiming buildings that are part of our history and can now be a really viable component for our future,” he says.

Rehabilitation requires imagination and determination, he acknowledges.

At the Bowman Block, a rooftop addition added new-construction apartments to the product mix and created a common-area patio with outdoor fireplace.

City Hall didn’t have any policy in place to address the expansion, says Fung. That’s par for the (conversion) course, he says. “Almost every project we’ve done is something we’ve had to work outside of the current policies.”

Construction can be tricky too, he says.”Existing buildings are always challenging because you can’t just work off a set of drawings. Existing conditions are always a little different,” Fung says. “Beams are twisted and things like that.”

Despite challenges and surprises, the work is rewarding, particularly when the transformation is well under way, he says.

Old buildings have “great character and distinguishability” that appeal to new-home buyers seeking a space that tells a story.

Fung points out that the building, constructed in 1906, once housed a rubber factory, various sewing establishments and a paint company.

Inserting homes into the warehouse just made sense, he says.

“You know, this building in all intensive purposes is a new building — it’s got new seismic, new structure and all the systems are new — but it has that historic character.”

It’s exciting, he says. “We haven’t taken away from what the city has grown on and we’ve enabled these buildings to grow for another 100 years.”

While he sold 25 of the apartments before and during construction, he held back 13 and will put them on sale next month.

Prices will start at $375,000 for one-storey apartments and $645,000 for 1 1/2-storey lofts, significantly more than the prices of the homes sold almost two years ago before reconstruction started.

“Our one-bedrooms were starting at the low-$300,000s and then the two-level lofts were in the $500,000s,” Fung says. ”Pre-construction prices are always discounted.”

But, Fung says, the market has changed in the last two years. Homes cost more to build, a consequence of labour and material shortages.

The project’s sales manager, Scott Pettipiece, says it made sense to keep seven of the 12 lofts from market until they were fully completed because they are so distinct.

“Until people could see them and touch them and feel them people couldn’t get their heads around them,” Pettipiece says.

The lofts feel bigger than their square footages thanks to large windows and an open concept kitchen, furnished with sleek stainless steel appliances, all fitted against one wall.

A Bosch gas cook top and LG titanium refrigerator gleam against composite stone counter tops. Extra deep drawers and an island on coasters help address storage in a flexible manner.

The show home, decorated by Stephen Sutch, owner of Koolhaus, highlights how creative artwork and colour work against the aged brick. A carved wood stag hangs on one wall while a pony-print chair grounds the living area.

Upstairs, a generous multi-purpose sleeping area looks out to the den and kitchen below, with the help of a clear glass divider. The master bathroom is warmed up with small, glass tiles and a frameless shower.

An exit on both floors of the lofts is handy for roommates or couples who plan on sharing the space without disturbing one another.

Custom millwork throughout the home — from the rotating TV storage unit to the backlit kitchen countertop cupboard — adds another layer of to ease of life for new residents, says Fung.

“They are very urban and designed with a high level of style,” Fung says. “We didn’t think people need to buy TVs for every room. It’s very functional. We tried to build components that people can really use.”

All residents can take the elevator directly to the top of the building to enjoy the patio and its fireplace.

The top four penthouses have rooftop decks as well and access to the common deck.

The views of the rooftops of the urban history below are stunning. No doubt, this old building is going to generate good stories as it grows up all over again.

ENDURING STATEMENT

Completed before the First World War, the east side of Beatty Street between Pender and Dunsmuir (right) is an enduring statement about Vancouver’s ascension to first-city status in post-colonial British Columbia and, implicitly, Victoria’s and New Westminster’s descent.

WAREHOUSES FOLLOWED RAILWAY

The warehouses followed the CPR from its first workyards in Yaletown. The tower is known today as the Sun tower, because this newspaper was published there for almost 30 years.

On completion in 1912, however, it was known as the World tower — and was briefly the tallest building in the British Empire.

“One of our goals with the heritage rehabilitation projects is to bring these important buildings back to prominence in today’s environment,” says developer Robert Fung (far right, on the mezzanine of his Bowman Block show home.)

OLD OUTSIDE, NEW IN

The Bowman Block interior designer is Alda Pereira of Vancouver, but the owner of the Koolhaus furniture and accessories store, Stephen Sutch, decorated Robert Fung’s second show home there.

SMALL, STYLISH

Pereira is a much commissioned (and much quoted) master of stylish small-quarters design.

The kitchen below is located in one of the penthouses and not the show home.

BOWMAN BLOCK

Location: 522 Beattie, Vancouver

Project size: 38 apartments

Residence size: 674 — 1,285 sq. ft.

Prices: one-storey apartments from $375,000; two-storey lofts from $645,000

Telephone: 604-689-5638

Web: bowmanlofts.com

Show-home hours: By appointment

Developer: The Salient Group

Architect: Gair Williamson

Architects

Interior designer: Alda Pereira

© The Vancouver Sun 2007

Total sales hit $37.8b

Ashley Ford
Province

Last year was a very good year — but not quite a vintage one — in the value of B.C. home sales.

The B.C. Real Estate Association said yesterday that 2006 sales on the Multiple Listing Service reached $37.8 billion, a seven-per-cent increase from 2005.

But actual residential real-estate sales fell nine per cent to 96,695 units from a record 106,290 sales in 2005.

“Despite strong job growth, low unemployment and rising wages, homes sales slowed in the province during the second half of 2006,” said Cameron Muir, the association’s chief economist.

“The housing market is adjusting to an affordability squeeze resulting from high home prices,” he said.

The average selling price of a B.C. home shot up by 18 per cent to $390,760 from $332,137 in 2005.

In spite of ramped-up prices, Muir sees this year remaining strong despite a slight cooling in sales. The association is projecting 93,600 MLS sales this year, a three-per-cent cut from last year.

“A robust provincial economy combined with forecasted interest rate stability will keep home sales above their long-term average,” he said.

Despite the high prices Muir suggests the market is becoming more balanced.

“Fewer first-time buyers and investors and a modest increase in the number of listings is trending the housing market toward balanced conditions,” he said.

Sales to active listings fell from 27 per cent in December 2005 to 17 per cent last December 2006, indicating a shift from a strong sellers’ market to the upper band of a balanced market.

“The erosion of affordability will slow this year. The average home price in B.C. is forecast to climb seven per cent to $419,000 in 2007,” he said.

© The Vancouver Province 2007

Strong economy, low interest rates, demand will keep driving up costs

Jim Jamieson
Province

The B.C. real-estate market is taking a breather, but the same fundamentals that stoked value in 2006 will continue to drive it this year, developers say.

Attendees at the Urban Development Institute’s 2007 forecast luncheon were told by several speakers yesterday that Western Canada’s economic strength, low interest rates and the ongoing discovery of B.C. by out-of-province and out-of-country buyers will continue to spark price appreciation across the board.

Peeter Wesik, chairman of developer WesGroup Income Properties, said he doesn’t see the market reacting with price increases of 10 to 20 per cent as was seen in 2006.

“What we saw in the last quarter of 2006 is the tail end of a phenomenon called over-listing,” Wesik told a group of fellow developers. “That’s when you see your neighbour’s house selling for more than you ever dreamed, so when it’s time to sell yours you decide yours is better, plus you put in a new hot water tank, so you ask 10 per cent more. But at some point the strategy fails and at the end of 2006 buyers sat on their hands and there was a slow value correction.”

Wesik said he sees the status quo continuing through the spring.

“I think a correction is very healthy,” he said. “I think we’ll be back to a normal market by the mid-point of this year. There will be price appreciation by the end of 2007.”

There is still demand in the market, he added, but it must be the right product and the right location.

Wesik said property in B.C. is under the microscope by out of province and foreign buyers like at no other time.

“Any property in B.C. that is easily accessible by car or plane from Alberta, especially anything on the water, will have someone from Alberta saying ‘how much?’ and then writing a cheque,” he said.

Wesik added that B.C. is attracting buyers of residential and recreational real estate based on international rather than local values.

“This is an important trend to understand in terms of the affordability of housing in the Lower Mainland,” he said. “Vancouver will always have the highest or among the highest real-estate value in Canada because of this.”

Wesik said affordability can be addressed by encouraging density next to public transit through mixed-use development.

“It won’t necessarily mean it will sell for less dollars, but it does mean you can live without a car,” he said. “We estimate the savings will allow the borrowing of an extra $100,000 on a mortgage.”

Wesik also predicted that commercial rents will continue to rise because the high cost of new construction will make adding new office supply difficult.

© The Vancouver Province 2007

 

USA Today

WASHINGTON (Reuters) — The pace of home construction climbed 4.5% in December, a second-straight monthly increase that ran contrary to analyst expectations, but for all of 2006 the rate of home building posted the biggest decline in 15 years, a government report Thursday showed.

The Commerce Department said housing starts closed out the year at an annual pace of 1.642 million units in December compared to 1.572 million units in November.

Economists had forecast December housing starts to fall to 1.560 million units from November’s originally reported pace of 1.588 million units.

Analysts cautioned that the December figure could be overstating the extent of the rebound since it was probably influenced by warmer-than-normal weather last month.

For all of 2006, housing starts totaled about 1.8 million, that was down 12.9% from the 2005 total, the biggest decline since 1991.

Building permits, which offer a clue to future construction plans, rose 5.5% to a 1.596 million unit pace.

Economists were expecting building permits would register a 1.500 million unit pace, close to the 1.513 million unit figure reported for November.

Permit applications for the year were down 14.9%, the biggest decline since 1990.