More funding ‘makes sense,’ housing minister says

Jonathan Fowlie
Sun

The provincial agency that hands out leaky-condo repair loans has applied to the government for money so it can continue to operate through the current slowdown.

On Tuesday, Minister of Housing and Social Development Rich Coleman said the Homeowner Protection Office (HPO) has applied for extra money, although he did not say how much.

“There is an annual lending rate that, when they achieve it, they have to apply to government for more money,” said Coleman, adding the request has not yet been approved, but suggesting it would still go ahead. “They’ve given us a funding request that makes some sense to me. We’ve put it forward to finance to deal with it.”

The HPO gets its funds through a $750 levy charged on all new residential construction units in B.C. Since being formed, it has approved more than $670 million in no-interest loans to help more than 16,000 households with repairs to leaky condos.

Coleman said that because of B.C.’s home-building slowdown the HPO’s income is “dwindling,” although did not give any further details.

The funding application comes after some owners of leaky condos said they were being shut out by the HPO, and had to resort to extraordinary means to finance expensive repairs.

On Tuesday, Coleman said he had heard recently about problems leaky condos owners are having getting loans, and said as a result he has now asked for a meeting with officials at the HPO.

“I’ve got them coming in later this week to see what they’re doing because obviously during the interregnum period we didn’t have any discussions about their situation during the period of time of the election,” he said. “The issue has been identified to me.”

© Copyright (c) The Vancouver Sun

Rebound expected to start by 2011: report

Derrick Penner
Sun

British Columbia’s commercial real estate markets started their downturn long before the current recession began and have likely passed through the worst of times, a new report from Central 1 Credit Union said Tuesday.

However, the recession, with its job losses and office closings, is continuing to push up vacancies and bring down office rents, which will lead to more contraction before things bounce back.

“The way it works, these market cycles in commercial real estate tend to lead and lag the real economy,” Central 1 economist Dave Hobden said in an interview.

Investors bought heavily into commercial properties starting in 2003 and 2004 in anticipation of the strong economic growth B.C. experienced in 2006 and 2007, the peak years for commercial property transactions (2006) and commercial property values (2007).

“So in a way, [commercial real estate] got oversold,” Hobden said. “Prices got to the point that they were reflecting that peak growth all the way through the future. Once we saw the economy was slowing, people had to start to adjust.”

The value of commercial buildings (Central 1’s research did not evaluate commercially zoned bare land), increased so much, Hobden said, that it became difficult to make a case for buying it as an investment with prospects for increasing rental income and capital gains.

Central 1 found the number of commercial real estate sales dropped a cumulative 34 per cent over 2007 and 2008, and Hobden expects a further 17-per-cent decline over this year and 2010 before sales start showing an increase in 2011.

Hobden also expects commercial-building values to drop 20 per cent in 2009 and 15 per cent in 2010 before rebounding by five per cent in 2011.

Central 1 is also predicting availability of financing in the commercial real estate market will return to historical levels by the end of 2009, with recovery over the next couple of years.

“Now, we’re into [a] recession,” Hobden said.

“We see the outcome of all that anticipation, the rising vacancy rates and decreasing rents.”

Indicators of that element of the downturn were also out this week.

Commercial realtor CB Richard Ellis reported that the Metro Vancouver office vacancy rate, in the second quarter of 2009, climbed for the third straight quarter, hitting 7.8 per cent, up from 6.2 per cent in the first quarter.

CB Richard Ellis senior analyst Nicholas Westlake said that’s “an indication that businesses are still either downsizing or vacating the market.”

“Overall market conditions continue to be impacted by the economic downturn this quarter,” Westlake said in a news release, “primarily in the Burnaby and Richmond markets.”

Suburban Burnaby and Richmond have historically drawn high-tech businesses, Westlake said, and the high-tech sector has seen substantial downsizing in recent months.

The vacancy rate in Burnaby hit 10.4 per cent in the second quarter, CB Richard Ellis found, and Westlake expects it to edge up in that market as new buildings now under construction are completed in late 2009 and early 2010.

However, Westlake believes downtown Vancouver‘s vacancy rate will remain stable as “the lack of new supply in the downtown core will limit the overall vacancy risks which are now evident in Calgary and Toronto.”

© Copyright (c) The Vancouver Sun

Sun

Vancouver realtor Sebastian Albrecht, who set a record of completing 13 consecutive Grouse Grind climbs in a single day Monday, is asking fellow realtors and Grouse Grinders to help him reach his goal of raising $10,000 for the Royal LePage Shelter Foundation.

The foundation is devoted to protecting women and children from domestic abuse.

A donation can be made at: www.sebastianalbrecht.com/grousegrind.

© Copyright (c) The Vancouver Sun

Vancouverites find fulfilment in home ownership

Paul Luke
Province

Vancouverites are head-over-heels for homes.

Lower Mainland residents believe more fervently in the idea of home ownership than do people in four other Canadian centres, a survey released yesterday said.

Vancouver-area residents scored highest in six categories gauging Canadians’ attachment to owning a home, according to the survey by Genworth Financial Canada.

Genworth surveyed 2,521 potential homebuyers, current homeowners and renters in Vancouver, Calgary, Toronto, Ottawa and Montreal.

Eighty-eight per cent of Vancouver residents say owning a home makes them feel more personally fulfilled, compared with the national average of 80 per cent.

And 87 per cent of Vancouver respondents feel home ownership offers a greater sense of well-being and security, compared with 84 per cent nationally, the survey found.

The survey suggests that people’s dreams of home ownership are matched by the fulfilment they experience when they do own, said Michael Haan, a social policy professor at the University of Alberta.

“While there’s a greater sense of financial security in owning, the survey also is very clear that most people believe the value of owning goes far beyond the financial worth of a home,” Haan said.

“There is a greater sense of emotional well-being, even though most homeowners recognize that more work is required versus renting.” In other findings: – Eighty-nine per cent of Vancouverites feel the value of owning a home goes beyond its mere financial worth, compared with 84 per cent nationally; – Ninety per cent of Vancouverites and Calgarians say they feel more financially secure owning their own home than they do renting, compared with a national average of 88 per cent; – Eighty-eight per cent of Vancouverites would rather own than rent, even though home ownership may mean more work and effort, compared with a national average of 85 per cent; – Eighty-seven per cent of Vancouverites consider a house or condo they own more of a home than a house or apartment they rent, compared with 80 per cent nationally.

© Copyright (c) The Province

USA Today

WASHINGTON (Reuters) — Sales of previously owned homes in the United States rose at a slower-than-expected pace in May, an industry survey showed Tuesday, pointing to a sluggish recovery from the severe economic recession.

The National Association of Realtors said sales rose 2.4% to an annual rate of 4.77 million units from a downwardly revised 4.66 million pace in April. That compared to market forecasts for a 4.81 million-unit pace. However, sales increased for a second straight month in May.

A separate survey from the Federal Reserve Bank of Richmond showed a reading of manufacturing sentiment in the U.S. mid-Atlantic states rose to 6 in June from 4 in May and minus 9 in April. However, manufacturers’ outlook for the next six months softened somewhat, signaling conditions remain fragile.

“The housing number suggests that things are bottoming, but that’s a far cry from improving. I think the markets are focused on how fast the recovery is going to be, and I think it won’t be as fast as people are thinking,” said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates.

The Realtors report showed sales remained down 3.6% compared to May last year. The group’s chief economist, Lawrence Yun, said sales in some areas appeared to be losing momentum and blamed the slower rise in May sales to poor home value appraisals, which he said were stalling transactions.

“Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting loans,” he said.

“There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”

Restoring stability to the housing market is seen critical to pulling the economy out of an 18-month-old recession, the longest since the Great Depression of the 1930s.

Collapsing home values and tighter access to credit are forcing U.S. households to become more frugal, a trend that could make the widely anticipated economic recovery in the second half of 2009 feeble and lacking on the jobs front.

Data on new and existing home sales have backed suggestions that the three-year housing slump is nearing a bottom, but a surge in mortgage rates and persistently high unemployment threaten this budding optimism.

Home loan rates have jumped in tandem with government yields amid speculation that massive capital injections to boost the economy by both the Federal Reserve and the government could stoke inflation pressures in the long term.

Yun said sales could actually rise in the coming months as buyers rushed to lock in mortgage rates, but cautioned that higher borrowing costs could hurt the nascent recovery.

The median national home price fell 16.8%, the third largest drop on record, from the same period a year ago to $173,000. Distressed properties made up 33% of sales, down from the 45 to 50% seen in recent months.

The Realtors report showed sales of single-family homes rose 1.9% last month to an annual rate of 4.25 million, while multifamily units — the hardest-hit sector — surged 6.1% to a 520,000-unit annual pace.

The supply of unsold homes fell 3.5% to 3.80 million. At the current sales pace, it would take 9.6 months to clear that supply, down from 10.1 months in April.

Copyright 2009 Reuters Limited

Octogenarian owner fearful $300,000 loan may not go through

Kent Spencer
Province

Bulging walls, rot in closets and tilting posts — Mary Kagami has seen it all during 17 years of condo ownership.

The elderly Vancouverite is praying the B.C. Housing Ministry has funds available for her pre-approved $300,000 loan in spite of a sudden cash shortage.

“This has been extremely stressful,” said Kagami, a frail octogenarian who speaks three languages.

“It just knocked me out. What a way to end my days. It’s been a nightmare,” she said yesterday on a tour of her rundown unit in the 2300-block Laurel Street.

“It started leaking the day after I bought it in 1992. All my life savings went into it. I should have walked away.”

The building was one of thousands built under faulty designs; rain protection was inadequate, so water leaked through exterior surfaces to the interior.

Water marks can be seen on the ceiling; there is a hole in the kitchen wall where rotten wood falls away.

“No wonder it’s falling apart,” she said.

Engineers say Kagami’s share of the fix in the seven-unit building would cost $300,000 — more than the $281,000 that B.C. Assessment says the property is worth.

Kagami, who lives on an old-age pension, said she is unable to “cough up” the money.

The next bit is problematic. She has a 2007 loan “approval” signed by the manager of the province’s Home Protection Office.

HPO has given out $670 million worth of interest-free loans to leaky-condo owners, but the province now says funds are short.

HPO’s revenues are generated from $750 levies charged on all new units built in B.C. Construction has slowed during the recession and fewer fees have been received.

“Lending depends on the availability of funds,” said a spokesman for Housing Minister Rich Coleman.

Kagami said she hopes “they don’t cancel the loan.”

HPO can’t loan the money until owners of the other units agree on how and when to fix the leaks. Their agreement and a construction contract are necessary for HPO to deliver on its promises.

Meanwhile, leaky-condo advocates believe the problem will affect hundreds of owners.

“People are being turned down for loans. They are despairing,” said condo advocate John Grasty, who founded an owners group with Dr. James Balderson, and who has been advising Kagami.

“Doctors tell me there will be increased mental-health caseloads. There will be bankruptcies as well,” he said. “Experts say this problem will continue for another 10 years. There needs to be justice.”

Coleman was unavailable for comment.

© Copyright (c) The Province

 

Revenue unlikely to challenge if done properly

Jonathan Chevreau
Sun

Unlike Americans, who enjoy a sweetheart deal with the tax authorities in that their mortgage interest can be deducted from their income taxes, Canadians have to go through hoops in order to accomplish the same thing.

The so-called Smith Manoeuvre, popularized first in British Columbia by Fraser Smith in a book of the same name, has spread across the country.

[Subsequent editions were titled Is Your Mortgage Tax Deductible?] While not radically new conceptually, Smith developed and packaged a variation on the standard tax-permissible strategy of selling off non-registered securities; using the proceeds to pay off the mortgage; then reborrowing to repurchase the securities, thereby creating legally sanctioned tax-deductible debt.

Now one of the few major competitors to Smith — the TDMP or Tax Deductible Mortgage Plan — has been named one of Canada’s fastest-growing companies by Profit magazine.

TDMP ranked 88th on the 21st annual Profit 100 ranking.

TDMP CEO and founder Sandy Aitken said in an interview that his strategy is “similar, but different” than the one developed by Smith, with whom he once worked.

The new wrinkle Aitken introduced is a $39 per month fee charged to homeowners, a fee which is itself taxdeductible.

For this, TDMP takes on all the back-office work and saves the homeowner the bother of having to move the money around every month in order to make their mortgage payments and purchase securities. The fee is considered a carrying charge for administration of income from investments.

TDMP has been around for three years and is being used in all provinces except Quebec. Aitken says Smith and TDMP are the two main players with a national presence, although there are increasing numbers of independent financial advisors and mortgage brokers building regional books of business that revolve around a similar strategy.

“It’s becoming a more popular strategy for a certain class of homeowner: this is for the top 25%, homeowners with 50% loan to value, good credit and good income and jobs.” Last year, TDMP generated $2.2- million in revenue. Aitken says 12,000 homeowners have taken TDMP’s series of public seminars on the strategy since the company was founded.

“We’ve taken over $1-billion of mortgage applications since we started.” Sales are particularly strong in Vancouver, Calgary and Toronto.

Unlike Smith, who got plenty of media attention from his self-published book, Aitken has found himself too busy to write a book about his variation on the scheme, although “I’ve been mulling it over.” As I’ve written a few times since Smith came on the scene, Canada Revenue Agency has little reason to challenge these strategies if they’re properly implemented. Aitken says the Lipson decision that came down in January of this year was a “big win,” since the courts were unanimous in their support for the right of homeowners to “realign their balance sheets.” Generally, if they wish to behave tax efficiently, people should borrow money to invest and spend their own money — not the other way round, Aitken says.

While these strategies do involve a degree of leverage, homeowners should realize the very act of buying a home with a mortgage is itself an act of leverage, Aitken says. In effect, paying the monthly mortgage is a forced monthly savings program. Only in the past few years has it really been possible to service a mortgage and get a tax advantage along the way, he says.

Smith’s technique basically involves combining a mortgage with a line of credit from another institution, then writing cheques which go back and forth between the banks. Now there are multi-component readvanceable secured lines of credit which are technically not mortgages, Aitken said.

Three such products are the First- Line Matrix Mortgage, Scotia STEP and National Bank All-in-One. Manulife has a similar product, but Aitken prefers to use products that are available to mortgage brokers with whom his firm provides tax advice. “The big difference is between a bank branch and a mortgage broker. A bank branch won’t provide tax advice to homeowners.

That’s what we do differently.” The technical term for the TDMP approach is “cash damming,” which involves a streamlined cash flow management system and a trained network of financial advisors, mortgage brokers and accountants.

Homeowners wondering if the product may be suitable can take the TDMP Test at www.tdmp.com.

© Copyright (c) The Vancouver Sun

 

It’s not a magic wand, but it is key to making property stand out from the competition

Lena Sin
Province

During the housing boom, home staging was all about vaulting your property into the stratosphere above the asking price.

Today, it’s about getting your house sold. Period.

Matthew Finlason, of the HGTV series The Stagers, has witnessed the housing arc of the past two years and says home staging is perhaps even more relevant in today’s turbulent market.

“Whereas the objective in the previous market was how much over asking, now it’s just about selling,” says Finlason, who recently won a Leo award for best TV host.

Finlason, who works for home staging company Dekora in Vancouver, says in the first episode of The Stagers, which aired last summer, one house sold for $100,000 over asking.

But by the end of the first season, some homes did not even sell, an indication of how quickly the market had changed.

Today, many of his clients are in the stressful position of having to sell quickly and view staging as the key to getting their property stand out from the competition.

“Staging is about first impressions. It’s about putting your best foot forward,” says Finlason.

“The moment you list your home for sale, it becomes a product and like any product, it needs to compete.”

Lindsay Do, who runs Staging Etc. in Vancouver with her partner Alice Tam, says staging helps buyers make decisions more quickly because they’re shown how a home would meet their needs.

“It’s like having a person there showing you the function of the house . Rather than saying you can fit a queen-sized bed in here, you show them,” says Do.

“In today’s real estate market, buyers with purchasing power want more for their buck, so showcasing the potential lifestyle of a home is equally important as the actual architectural features and design, especially on the pricier homes.”

Staging companies assist with everything from carpet cleaning to painting to bringing in new furniture.

The cost of staging varies widely, depending on the size of the home, how much furniture is in the existing space and the client’s budget. Some companies, such as Staging Etc., provide free initial consultations while others charge a fee. Staging costs range from $1,000 up to tens of thousands.

But in these lean times, even staging companies are getting creative to keep their clients’ costs down. Finlason, for example, might rearrange the existing furniture rather than renting new pieces or will ask clients to do some DIY.

Do says she might purchase furniture for clients so they can keep it for their next move or re-sell it at a later date.

However, Finlason is clear that homeowners should not see staging as the “magic wand” that will sell any property.

“Price will sell your home,” he says.

Rather, sellers should see staging as a piece of the overall marketing strategy. To prep for a sale, start with a detached view. De-clutter your home and keep personal items stored away.

“The biggest mistake sellers make is under-estimating the value of the emotional connection a potential buyer will have with a home in the first 10 seconds of walking through the door,” says Do.

“When staging a home, our motto is ‘Every impression counts.'”

– —

Six Staging Tips

– Neutralize your colour palette — not just with paint, but accessories, too. Avoid beiges, yellows and loud colours. Instead, try neutral linen with a warm grey or brown undertone.

– Make your own art. Take a digital photo of the beach, trees or plants in black and white and pop it into a black frame, suggests Matthew Finlason. Or cut out pages from a picture book and pop them into a vintage gold frame.

– Master bedrooms are very important. You might try to get an upholstered fabric panel to use as a headboard. “That’s as simple as going to Home Depot and getting an MDF board, some fabric and a staple gun,” says Finlason.

– De-clutter. If you haven’t used it in a year, you can’t make money with it or it’s not a family heirloom — throw it out or give it away.

– Once you’ve removed all your dated, worn items from your home, beg, borrow or steal that nice rug or beautiful armchair from your family and friends. “Think of it as community staging,” says Finlason.

– Make sure your home smells clean, with no pet or other odours, says Lindsay Do.

– Season two of the The Stagers is currently being aired on the Home and Garden Network. For more tips, visit www.hgtv.com/the-stagers/show/index.html and www.stagingetc.com

© Copyright (c) The Province

Documents show council fighting a losing battle with project overruns

Damian Inwood
Province

The wheels started coming off the $1-billion Olympic Village project in May 2007 — long before $100 million in cost overruns became public.

And five secret “in-camera” documents released by the City of Vancouver show how staff and council fought a losing battle to stop the project spiralling out of control.

The documents include an Oct. 14 report, stamped “confidential,” that went missing from council chambers and was leaked to the media.

That leak resulted in a six-month police investigation that was inconclusive and in which several councillors refused to take lie-detector tests.

The documents show that: – At a May 11, 2007, meeting, then-city manager Judy Rogers asked council to approve “interim financing” of $100 million in a bid to keep lenders Quest from pulling the pin on financing for the project.

– On May 17, 2007, council approved the deal unanimously.

– At a June 26, 2007, meeting council was asked to sign a new deal between developer Millennium and a new lender, Fortress Credit Corp., for a loan of $683 million to keep the project on track and make an additional loan guarantee of $200 million. Council approved the move, with councillors David Cadman, Heather Deal, Raymond Louie and Tim Stevenson opposing the deal.

– On Dec. 5, 2007, council was asked to pay an extra $63 million to fund 250 units of affordable housing, on top of the $32 million it had earlier approved. It also approved another $1.5 million for a total of $30.5 million for a community centre.

– On Oct. 14, 2008, council was asked to make up to $100 million in “cash-balancing payments” from the Property Endowment Fund to cover cost overruns, which had taken the project from $950 million to as much as $1.05 billion. It was approved unanimously.

At a council meeting on Thursday, council approved a further $22 million to cover further cost overruns on the affordable housing units ($15 million), the community centre ($5.5 million) and the project office ($1.3 million). The motion was carried unanimously.

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