With vacancy rates of 0.3 per cent, renters scramble to find homes

Nicole Tomlinson
Sun

An “extreme shortage” of studio and one-bedroom apartments in Vancouver is driving parents, students and pet owners out of the rental market and leading to lineups for the city’s few vacant suites.

The vacancy rate for bachelor suites has plummeted to 0.3 per cent, compared to the national average of four per cent for major Canadian cities, according to the most recent data from the Canada Mortgage and Housing Corporation.

Vacancy rates for studio and one-bedroom apartments have been below one per cent in Vancouver since 2006.

“The market is astoundingly tight; 30, 40, 50 people are lining up trying to get into one apartment,” said David Goodman, a Vancouver-based rental housing expert. “It’s reached extreme levels of shortages.”

The city’s rental shortage is now a chronic condition, according to Kennedy Stewart, a researcher at Simon Fraser University who is authoring a study of rental affordability in B.C. municipalities.

“It comes with urbanization,” he said.

“A chronically low vacancy rate is the sign of a city that has to adjust its expectations of lifestyle,” he said, adding that people who want to live in high-density areas of “a teenage city” like Vancouver may have to sacrifice living space, vehicles and even furry friends until the new buildings age and owners aren’t as concerned about maintaining their pristine condition.

“Older cities have a much more flexible housing stock … we still haven’t developed that yet,” Stewart said.

The situation for tenants is the worst it has been in almost a quarter of a decade, said Martha Lewis, executive director of the Tenant Resource and Advisory Centre.

“The last year and a half it’s gotten especially bad,” Lewis said, adding that more than half the homes in Vancouver are rental units.

Pet owners are in an especially tough spot.

Before 2006, there were no provincial regulations that addressed landlords, tenants and pets, but changes now allow property owners to “choose to not have pets” or charge a deposit, said Marg Gordon, CEO of the B.C. Apartment Owner’s Management Association.

“Before landlords were at the mercy of tenants; it’s now very clear that they can choose,” she said.

Naomi Man in’t Veld is one renter who’s feeling the squeeze. The 28-year-old professional, who is looking for a place for $1,200 or less a month, said owning two cats “feels like having the plague” because she’s been looked over by landlords who “loathe” the animals.

“You go to an open house and there are a dozen people standing outside all looking at each other; it feels like an audition.”

And Man in’t Veld isn’t alone; the “housing wanted” section of Vancouver‘s craigslist, a community website of classified ads, is littered with “housing wanted” posts from pet owners who are having trouble finding a home.

One of the ads is on behalf of Della Edmondson, 70, a shit tzu owner who is being forced out of her home because her son didn’t pay the rent, said Kimberly Graham, a community outreach coordinator at the Vancouver Aboriginal Transformative Justice Services Society.

Graham posted the craigslist ad on Edmondson’s behalf, noting the small dog is Edmondson’s “only companion.”

Aboriginals and other visible minorities are also being turned away from rental properties, even though discrimination based on race violates the the B.C. Human Rights Code, Graham said.

Alexis Twiddy, a 24-year-old graduate student, also said she’s lost the tight competition for several apartments in the University of B.C. area because she doesn’t have a full-time job.

“It appears that there’s a lot available, but there are about 10 times more people looking for a place,” said Twiddy, who’s looked at about 25 apartments since she moved here from Ontario about a month ago. She fears wearing out her welcome if she’s forced to stay with family and friends much longer.

Even parents are finding it hard to find places to rent. “People act as if children are a disease,” reads a craigslist post titled “WHY DOES NO ONE ALLOW KIDS !!!”

Janice Abbott, executive director of the Atira Women’s Resource Society, an organization that helps women and children who have been victims of violence in B.C., said finding housing for members has become “the single most difficult issue” the society faces.

“The women that we work with have an impossible time finding housing they can afford and that’s in reasonable shape,” she said, adding that most of the 7,000 victims the society deals with are single mothers.

Abbott, who is also the CEO of Atira Property Management, said the company has “never ever had a vacancy” in almost all 750 of its rental units for the last five years, the exception being one higher-end property in Vancouver.

The situation is only going to get worse if the real estate market continues to slow down and rental properties become even less appealing to own as property appreciation declines, Gordon said.

“Landlords are at the point where they can’t afford to be landlords anymore,” she said.

Murray Richardson owns three properties in Vancouver and says he’s losing money because rents aren’t going up as fast as his costs, adding “nobody wants to hang on to rentals.”

It will take nothing short of a legislative and logistic overhaul to fix the “rental crisis,” said Coun. Peter Ladner.

The mayoral candidate said federal laws implemented in the 1970s that stripped landlords of tax incentives other business owners enjoy was a “short-term stop-gap remedial measure” that’s been around too long and needs to be changed to make rental property management in cities like Vancouver appealing again.

© The Vancouver Sun 2008

Sellers face reality check with pressure of declining sales

Peter Simpson
Sun

And now the news. You likely saw this banner screaming from the front page of The Vancouver Sun on Sept. 4 — BUYERS SEE HOPE AS HOME PRICES DECLINE.

Home sales throughout Metro Vancouver did indeed decline during August. Actually, free-fall is a more appropriate assessment of the realtor report revealing that Multiple Listing Service sales dropped nearly 54 per cent from the same month last year, which, by the way, was an exceptional month.

The rise in home prices over the past four years has been nothing short of meteoric. Prices increased 13 per cent in 2005, a further 21 per cent in 2006, and another 11 per cent last year. Housing economists say this year’s increase will moderate to single-digit territory, although it is not unreasonable to expect the forecast to be downgraded a tad when the latest numbers are crunched.

Most economists agree this region still enjoys relatively low interest rates, stable job growth, consistent interprovincial and international in-migration and a better-than-many economy.

However, it seems confidence is a little shaky at the moment, as consumer sentiment is influenced negatively by less-than-stellar economic performances south of the border and east of the Rockies.

Housing starts from January to August are actually ahead of last year’s strong pace. If the increase holds for four more months, 2008 will be the best year for starts since 1993. That’s welcome news for at least two key contributors — our hard-working tradespeople and suppliers of building materials.

Since sales typically precede starts, particularly in the multi-family sector, the fly in the ointment might be a weakening of housing starts this fall precipitated by a slowdown in new-home sales.

So, what does this all mean for home-sellers and buyers?

For sellers, reality check; for buyers, opportunity.

After reading that Sept. 4 headline, a friend remarked he was concerned the value of his house might have dropped slightly last month. I shot him a pained look, then reminded him he purchased his house more than 10 years ago and that his equity has increased significantly since the middle 1990s.

Let’s face it: The downright giddy price escalations in the real-estate market have transformed entire communities into Millionaire Manors. Examples include the fine homes in Surrey‘s golf-side Morgan Creek and Port Moody’s mountainside Heritage Woods. Both communities have evolved beautifully.

A particular 2,200-square-foot oceanview home in White Rock sold in 2001 for $392,000. It was listed earlier this year, offering “fantastic value” at $1,084,900. The most recent advertisement has it “priced to sell” at $1,049,999. Do the math: Whatever the final selling price, it’s an extraordinary equity gain in over just seven years.

An acquaintance, holding fast to unreasonable expectations, and after accepting rah-rah encouragement from a wet-behind-the-ears realtor, listed his 1,450-square-foot detached home in an area of other modest homes for an unprecedented amount. Why? Because he believed he would get it.

Despite having been given a wall-to-wall makeover during the past year — most of it executed by moonlighting trades — the home attracted maybe three or four showings over a two-month period.

The price was lowered, then dropped again a month later. Finally, the home sold — at a price slightly below what it should have been listed for in the first place. All that angst could have been averted had the owner listed with a realtor boasting broad experience pricing homes to match the market.

Sellers who are just testing the waters, and under no pressure to move, might even delist their homes. Others will likely lower asking prices, bringing the somewhat skewed and attention-getting sales-to-listing ratio back into balance. And if the sellers are buying a home elsewhere in the Lower Mainland, that purchase price will also be influenced by current market conditions. Again, balance.

Buyers today can be excused if they are feeling a little confused. A real-estate organization releases the latest weakening sales statistics and the media are all over it like hair on a bear. One media outlet positions the story as a sky-is-falling debacle, while another focuses on the positive scenarios.

I suppose it all depends on whether one views the glass as half full or half empty. If you are looking for a home and are of the half-empty persuasion, choose a dark corner and assume the fetal position. If you are an optimistic half-full person, keep reading because opportunities abound in this market.

Yes, the pendulum is swinging towards a buyer’s market.

As I wrote in a spring column, the panic has been taken out of the purchase and, as Martha Stewart likes to say, that’s a good thing.

Buyers can now catch their breath and take sufficient time to choose a home that closely matches their needs without someone breathing down their neck, creating the potential for a bidding war.

My daughter was caught up in such a situation until clearer heads prevailed. She backed away from the lunacy of it all and eventually got the home she wanted, in her preferred location, at a good price.

Regarding new homes, I believe real-estate buzzwords “location, location, location” have been replaced by “builder reputation, value, location.”

It is important to deal with builders who have been through the peaks and valleys of market cycles, and have a history of delivering good value.

Buyer incentives are starting to surface, as builders try to get a leg up on the competition.

Nothing as dramatic as free swimming pools or Mercedes, like builders are offering in some dead-as-a-doornail American housing markets, but beneficial to buyers nonetheless — subsidized mortgage payments, upgrades, early-release pricing, 42-inch flat-screen TVs and other premiums.

First-time buyers continue to have a devil of a time. For many years — during both buoyant and flat housing markets — the overriding concern to first-timers centred around affordability issues, the fear of exclusion from the housing market.

(Thank goodness for understanding and generous parents.)

Planners, architects, designers and builders responded by offering more choice and size in condominiums.

About a dozen years ago, condos (townhomes, lowrise and highrise apartments) were only about 45 per cent of the market. Condos now comprise 80 per cent of newly built homes.

In San Francisco, a developer is marketing condos sized between 250 and 350 square feet — the size of seven ping-pong tables.

The San Francisco Chronicle reports the stylish and functional condos, which have nine-foot ceilings, large windows and balconies, “represent one means of providing more first-time home-buying opportunities in a city where most prices outstrip most incomes.”

The project’s marketing tagline reads, “It’s your small piece of the big city.”

This sensible tiny toehold into the housing market should be explored. Some have been built here already but, if memory serves, not as small. Living in a micro condo would certainly force the practice of living without clutter. Murphy beds and efficient, compact appliance packages are readily available. And cash-strapped first-time buyers could equip the entire condo with one trip to IKEA.

A final word of advice for homebuyers: Don’t treat a home as you would, say, an investment in pork-belly futures. A home, new or resale, is a proven, long-term, blue-chip investment solid enough to ride out the peaks and valleys of regional housing markets.

Peter Simpson is chief executive officer of the Greater Vancouver Home Builders’ Association.

E-mail [email protected].

INSTEAD OF A SWIMMING POOL, COOKIES

Some real estate agents in southern California are trying to create business by introducing brunches and lunches into their agent previews, the Los Angeles Times newspaper reports.

What we up here call an “agents’ open,” they down there call an “agents’ caravan.” Reports the Times:

Caravans of old offered little dishes of M&Ms or a pot of hours-standing coffee as reward for an agent’s trouble, but in the current molasses market, candy and caffeine just don’t lure the masses. And if the agents who sell in the area won’t come, who will bring the potential buyers?

No one is certain exactly when the food offerings went uptown, but the weekly caravan list circulated in Malibu now specifies what refreshments will be served at each house — information posted as prominently as the asking price and number of bedrooms.

In the MLS Open House Guide, a knife-and-fork icon alerts agents to lunch offers; a wine glass symbolizes just refreshments.

Alan Mark and Tony Mark of Prudential Malibu Realty recently provided omelettes — cooked to order by a private chef — to those agents who made the trek to their new listing.

With a salad and pastry bar on the side, agents could order their omelettes prepared with 20 different fresh fillings. Spinach with feta cheese, anyone? To quote from the Malibu Association of Realtors’ Caravan West weekly bulletin, ‘This is the beach house of your dreams! … And everybody’s favorite omelet bar!’ By all accounts, the $1,000 spread was well attended.

Addictively good delectables also play a role. “Monus’s Malibu Bonuses” — freshly baked chocolate chip cookies by Coldwell Banker Malibu East agent Susan Monus (above) — are a huge draw in the coastal community, according to area agents.

She makes the cookies from scratch and, because presentation matters when it comes to both real estate and baked goods, displays them in a fancy silver bowl. For agents on the run, Monus also offers them in personalized cookie tins with her logo — to go.

Without question, “more realtors seem to come to see your listings if food is served,” comments Wailani O’Herlihy, Sotheby’s International Realty, Malibu. More seasoned agents come to see new listings even if food is not served, however, “because they’re in the business of moving real estate.”

The bottom line for Lynn Yang of Prudential California Realty, who has a mountaintop gated estate in Malibu listed at $2.95 million, reads like this: “If you want them to come, feed them well.”

© The Vancouver Sun 2008

Despite what appears to be a healthy economy, consumer confidence is at its lowest point in five years

Scott Simpson
Sun

New homes sale listings in August suffered their second-largest monthly drop in 25 years on the Multiple Listing Service, the B.C. Real Estate Association said Friday.

Association chief economist Cameron Muir said the number of new MLS residential listings dropped 22 per cent from July on a seasonally adjusted basis as “home seller fatigue” sets in due to a sustained decline in buyer interest.

The total dollar volume of residential sales fell 49 per cent to $2.2 billion in August compared to August 2007.

Residential unit sales followed the same pattern. They were down 47 per cent to 5,175 units last month compared to 9,834 units in August 2007.

On a regional basis, the biggest drop was in Greater Vancouver where sales fell from 3,493 units to 1,611 — a 53.9-per-cent decline.

In an interview, Muir said B.C.’s economy appears to be in very good shape, but consumer confidence nonetheless is at its lowest point in five years.

“We are still seeing quite strong job growth. We are seeing unemployment around 4.3, 4.4 per cent. That’s near historic lows.

“All that stuff is positive. What’s not as positive is that households are not as confident as they were a year ago.

“That kind of erosion in consumer confidence was brought on not only by erosion of affordability in housing. When we see gas prices spike up as we saw not too long ago, that affects your budget right away and households start to reassess their risk,” Muir said.

Meanwhile in an economic research paper released earlier this week, BMO Capital Markets chief economist Sal Guatieri suggested the decline is not a short-term trend.

“Canada faces the prospect of lower house prices in the year ahead, similar to many other countries — the U.S., Britain, Ireland, Spain, France, and Australia,” Guatieri wrote.

“After six years of unsustainable growth, prices have run smack into the affordability wall. Demand is sagging, listings are at record highs and prospective first-time buyers are choosing to rent rather than own.”

Guatieri said the average house price in major Canadian markets rose 78 per cent from early 2002 to late 2007 — “more than twice as fast as income.”

He said that a nationwide decline in average prices is being “skewed by deep sales drops in high-priced regions like Vancouver” — but said that in spite of the disproportionately large drop here, a national “softening trend is undeniable.”

The last time that home prices were reasonable, relative to income, was mid-2006 and suggested prices would need to fall about nine per cent over two years “to restore a normal ratio to income,” he said.

© The Vancouver Sun 2008

 

High-end homes set records this year, but still experience some effects of the housing market slowdown

Derrick Penner
Sun

At first blush, the top end of British Columbia‘s real estate market seems to follow that old observation about the rich being different from the rest of us.

Agents recorded 30 sales of mansions over the $5-million mark during the first seven months of this year, according to research by Landcor Data Corp.

The January sale of 3330 Radcliffe Ave. in West Vancouver for $28.2 million set a record for the highest sale price in the province, and the April sale of 6715 Crabapple Dr. in Whistler at $17.5 million marked a new high for the resort community.

That’s not to say that high-end properties aren’t experiencing some of the slowdown that has hit the overall real estate market.

The number of ultra-high-end sales this year, according to the Landcor count, fell short of the 38 sales over $5 million recorded in the first seven months of 2007. And several of this year’s top property sales closed well below the original asking prices.

“There’s no doubt that there’s been a slowdown,” said Grant Connell, an agent with Sotheby’s International Realty Canada, who has Metro Vancouver’s highest-priced current listing, the Ray Loewen family’s Twin Cedars estate in Burnaby, with a $25-million price tag.

So far, however, Connell has seen it more as a hesitation on the part of buyers. Buyers may be lacking confidence about which direction the market will go, or are bargain-hunting as inventory builds in the middle segment of the upper end of the market.

“[Buyers] are there,” Connell said. “Since Labour Day, my phone has been ringing tons, and I’m showing more things,” including the Loewen property.

Connell has seen a bit of pressure on prices, but only in some segments, such as the $3.5-million to $5-million segment of West Vancouver, where a lot of houses have been built and there is lots of inventory.

“There is a sense [among buyers] that there is time enough … to get a deal,” he said. “And some people [are looking] for a deal based on what’s happening in the market and what they’re reading.”

Among top-end sales, 3479 Point Grey Rd., on Kitsilano’s tony waterfront, sold in June for $10.5 million, four per cent below its original asking price of just under $11 million.

In the leafy enclave of Shaughnessy, the home at 1688 37th Ave. sold at the end of August for almost $6.9 million, almost 11 per cent below its $7.7-million original asking price.

The listing price for Casa Mia, the stately 1930s-era Mediterranean-style villa at 1920 SW Marine Dr., has been reduced to $10.5 million from the $12 million it was listed for last fall.

However, Manyee Lui, Casa Mia’s listing agent and one of Vancouver‘s top high-end agents, said the price reduction wasn’t due to a lack of interest in the property.

“We have continued interest [in Casa Mia],” said Lui, with Macdonald Realty. “The price reduction is to encourage people to write offers. It’s not that we don’t have interest.”

Generally, Lui said that while top-end buyers might be showing a bit of hesitation, she has been busier this year with top-end sales than with mid-range sales.

“I don’t think [top-end buyers] are worried about market ups and downs,” she added. “In this price range, people are looking for something very special and unique. They’re not bound by the economy and all these kinds of things.”

The penthouse at 1000 Beach Ave., now on the market for $14.8 million, was listed last September for $18 million.

The current broker for the property, Malcolm Hasman of Angell & Hasman, another of Vancouver‘s most prominent realtors, said his top-end listings remain active.

Hasman noted he has three listings in the $6-million to $10-million range that are “continually being shown, even with the market slowing.”

“So, where the overall numbers in the mid-range of the market have slowed down, there still seems to be interest in high-end properties in Vancouver.”

High-end markets are hard to read, explains Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.

Somerville added that he hasn’t looked specifically at B.C., but typically top-end markets are what economists refer to as “thin markets,” with fewer properties and participants than the general market.

For condominiums, for example, there are many similar properties on the market and lots of information to guide buyers on what prices should be, Somerville said.

However, in the mansion market, where each house is unique and there aren’t as many offerings, there are fewer comparables.

“There is just not a lot of information about what a property is worth,” Somerville said. “So you tend to see more variation in the possible prices that a property can get.”

He added that “the negotiation between what a buyer is willing to pay and what a seller is willing to take is a very different dynamic, because there’s not a lot of information that says a property is worth [a particular amount].”

Even if there is a slowing in the overall B.C. market, just as price is less of an object for top-end buyers, top-end sellers don’t face the same pressures to sell at prices they don’t like.

“You’re not seeing enormous drops or anything,” Connell said of Vancouver.

He said sellers of unique homes, such as waterfront properties in West Vancouver, tend to hold out for the value they want to see. Owners put them on the market at high prices because they know there is very little waterfront left.

© The Vancouver Sun 2008

Eric Beauchesne
Province

OTTAWA — Canadian housing prices need to fall nearly 10 per cent further to bring them back into line with incomes, a bank economist warned yesterday.

And that assumes continued moderate growth in incomes, according to the Bank of Montreal’s Sal Guatieri, suggesting that should incomes falter, housing prices would have to fall even farther to bring them back into balance.

“After six years of unsustainable growth, prices have run smack into the affordability wall,” Guatieri said, reinforcing a similar warning issued in a study by the University of B.C. last week.

The study said prices in some major cities would have to plunge 25 per cent to bring them back into balance.

Guatieri noted that since 2002, house prices have increased twice as fast as incomes.

“Homeowners who purchased six years ago would still have hefty capital gains, but those who bought during the past two years would face temporary losses,” Guatieri noted.

The latest house-price warning came in the wake of a Statistics Canada report yesterday that new home prices edged up just 0.1 per cent in July to produce an annual gain of 2.7 per cent, the weakest gain in seven years.

© The Vancouver Province 2008

Greater Vancouver Real Estate Board’s tips for home buying

Sun

PROPERTY TRANSFER TAX

When a residence is purchased a Property Transfer Tax (PTT) is applied. The tax is calculated at one per cent on the first $200,000 and two per cent on the remainder. The First-Time Home Buyers’ Program offers an exemption to the PTT if the fair market value of the residence is $425,000 or less. In all regions there is also a proportional exemption for first-time buyers of homes with a fair market value up to $25,000 above the thresholds. This means in the Greater Vancouver area, homes valued up to $350,000 ($325,000 threshold + $25,000 proportional exemption) will be charged a pro-rated PTT. For more information please visit: www.rev.gov.bc.ca/rpt/ptt/ptt.htm

PREPAID PROPERTY TAXES OR UTILITY BILLS

You will have to reimburse the sellers for any prepaid property taxes or utilities.

Mortgage loan insurance and application fee – If you get a high-ratio mortgage (a mortgage where you pay less than a 20 per cent down payment) you will have to buy mortgage loan insurance from CMHC or a private company. If you qualify for a vie per cent down payment, CMHC charges an insurance fee that equals 3.25 per cent of the mortgage. If you put 10 or 15 per cent down, your insurance fees will decrease to two per cent and 1.75 per cent respectively. The insurance premium usually gets added to your mortgage.

You will also have to pay an application fee. CMHC’s standard fee is $235. CMHC also offers a basic service for a $75 fee but it must be accompanied by an appraisal.

DISBURSEMENTS TO LAND TITLES OFFICE

These fees are approximately $300. Your lawyer/notary will arrange this payment.

APPRAISAL

Before your lender approves your mortgage, you may be required to have an appraisal done. Sometimes your lender covers this cost otherwise you are responsible for covering this cost. The fee ranges from $150 to $350.

GST

If you buy a newly constructed home, you must pay the 5 per cent GST. However, if your house is less than $450,000 you may be eligible for a rebate. For more information, please visit www.cra-arc.gc.ca/tax/business/topics/gst/construction/menu-e.html

SURVEY FEE

Your lender may require an up-to-date survey of the property. If the seller did not provide you with one, you will have to pay to have one done. The fee ranges from $150 to $350.

HOME INSPECTION FEE

Most REALTORS® recommend that you get a home inspection by a certified home inspector. It will cost you from $150 to $350 for a smaller house. Large houses may cost more.

LEGAL FEES

Lawyers/Notaries fees for closing the sale range according to the complexity of the deal but they should range from $600 – $1500.

© The Vancouver Sun 2008