Latest hot spot is area around Main and E. 24th Avenue

John Colebourn
Province

Realtor Darryl Sjerven knew the area around Main Street and East 24th Avenue in Vancouver was a hot housing market — but not red-hot.

After listing a home on East 24th Avenue for $749,000, Sjerven had 18 immediate offers. Most were well above the asking price.

The home finally sold for $284,000 above the asking price — leaving Sjerven with full confidence that the pocket around Main and 24th Avenue has become the latest trendy place to live.

Sjerven, a realtor with Re/Max Select Properties, listed another home across the street on East 24th. It sold for almost $250,000 above the asking price. Another home at Main and East 20th Avenue was listed for $959,000 and sold for $320,000 above the asking price in eight days.

While the housing market in other parts of Metro Vancouver is experiencing a boom after recent rough economic times, the Main Street area is getting a lot of attention for a number of new reasons.

“This is an area with awesome amenities,” said Sjerven, pointing to the sports facilities, schools, community centres, shops and restaurants all within walking distance.

The new Canada Line SkyTrain is just a few blocks away, and designated bike routes are near the area.

“Once you live in this area, you don’t leave,” said Sjerven.

Andrew Ramlo, a director with Urban Futures, a demographic and economic research think-tank, agreed the Main Street area is emerging as a prime location.

“There has been a lot of renewal along that stretch of Main Street,” he said of the trendy shops and restaurants.

By comparison, homes in the west side of Vancouver can easily run $1.5 million and up.

“In part it is demographics and it is part community amenities,” he said. “It is a very significant change for the area.”

Ramlo is hearing about bidding wars and notes it comes down to simple economics.

“There’s not a whole lot of listings out there and it is causing things like these bidding wars,” he said.

Helmut Pastrick, chief economist with Central 1 Credit Union, said mortgage rates are behind the busy housing market activity in the area.

“The mortgage rates are the main reason we are seeing this turnaround,” he said. “Low mortgage rates are a powerful sales stimulus and when combined with an improving economy, housing markets take off.

“The strong market momentum coming out of the recession will carry into 2010, driving unit sales and prices to new highs.”

After a 25-per-cent sales plunge in 2008, housing sales will rise 10 per cent in 2009 and with that momentum, climb 30 per cent higher in 2010, he predicts.

He expects sales for 2011 will fall back slightly from 2010’s record high.

The annual median sales price for a residential property in B.C. will increase to a record high of $391,000 in 2010 and $415,000 in 2011, Pastrick predicted.

© Copyright (c) The Province

City hall development incentives a way to avoid priority discussions

Bob Ransford
Sun

Does it make for good community-building to sell residential density in return for market rental housing? That’s a question being debated among politicians, planners, developers and neighbourhood activists as the City of Vancouver wrestles with finding the right tools to try to help fix the housing affordability problem and address the shortage of market rental apartments.

More than half the residences in Vancouver are rental homes, yet only about six per cent of new market residential development in Vancouver since 2004 has been for rental housing. This has resulted in a very tight market for rental housing.

The City of Vancouver recently decided to launch a new program to encourage the construction of more purpose-built rental housing. The Short Term Incentives for Rental Housing program — or STIR — is a time-limited program that responds to the market rental shortage by providing incentives to encourage the development of new market rental housing. The incentive package includes, among other things, an increase in density for development projects that provide market rental projects. Recently, the city has also offered bonus density for proposed new condominium developments in return for a portion of the project being market rental units.

Some are arguing that the city shouldn’t be selling density in return for market rental housing, but instead reserve this density trading system for more vital benefits for the community, such as parks, child-care facilities, recreational infrastructure, etc.

That’s an interesting debate. But there are a couple of questions when it comes to trading density and extracting value from development.

First, should building density be a commodity for sale in return for certain social benefits and community amenities?

Second, and a more important question, are these “extractions” traded in the development process for growth, and sometimes extra density, merely invisible taxes hidden in the high cost?

Vancouver has designed the system so that it uses the power of discretionary development regulation to negotiate with developers the payment of community amenity “contributions” and the provision of special benefits, such as market rental housing.

But that system may also be at the root of Vancouver’s high cost of housing. Someone ends up paying for these costs.

Many land economists will tell you the land owner pays by ending up receiving less for developable land since the cost to the developer will have increased. Others will suggest the costs get passed on to new homeowners. Not many believe the developer ends up paying, because most understand developers aren’t prepared to risk by investing in a project that doesn’t provide a return commensurate with the risk.

The fact is that all residents pay. The costs of financing public amenities and community contributions are borne by all in the cost of housing.

The supply of land is not infinite. If land owners end up paying, the cost of development land increases. If new homeowners end up paying, the free marketplace puts upward pressure on all housing prices and on the assessed value of everyone’s home.

These costs imposed by the discretionary land entitlement process are taxes — plain and simple.

It might be argued that if development didn’t help finance infrastructure and community benefits, we would end up paying for these requirements in our property taxes. That is a fair argument.

When we pay taxes and governments finance infrastructure, amenities and services from property taxes, everything is transparent and a public debate can occur — a debate about priorities.

When costs are merely covered by hidden taxes, like those charges hidden in the cost of new development, those questions are never asked.

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

© Copyright (c) The Vancouver Sun

Tax threshold is below average price of new home in many areas

DERRICK PENNER
Sun

The provincial government is throwing the homeconstruction sector a Harmonized Sales Tax break, raising the threshold for its maximum tax rebate and extending the deadline for when the HST will apply to new housing.

The provincial government announced on Thursday that the threshold for which the maximum HST rebate will apply will be raised to $525,000 from $400,000, and the harmonized tax will not be levied against pre-sale homes for which the buyer signed a purchase contract prior to Nov. 18.

Previously, the tax was to apply to new homes for which buyers took possession after July 1, 2010.

The announcement effectively neutralizes the HST on homes priced under $525,000, and increases the maximum rebate offered to homebuyers purchasing houses over the threshold to $26,250 — up from $20,000 under the old threshold.

In making the announcement, Finance Minister Colin Hansen said “ we heard the concerns from consumers and industry.”

“This increase will move the threshold to above the average new-home price in the province,” he added. It will be the highest such rebate in Canada .

However, the threshold is well below the average price of a new home in many communities around the Lower Mainland, which left many calling the rebate shift only a “ good first step.”

The average price of a new detached house in Metro Vancouver in 2009 is about $1.02 million, according to the calculation of Jennifer Podmore Russell, senior manager in the financialadvisory practice at the consultants Deloitte. In the Fraser Valley, the average new house is $598,000.

She added that the price of a new condominium in some communities is also above the new threshold, such as in the east side of Vancouver where the average price is now $557,000.

An average new townhouse on the west side of Vancouver is $763,000.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said the industry lobbied government to raise the threshold to $600,000, but appreciates that the government offered some leeway on the HST.

“We’ve got to give credit where credit is due,” Simpson said in a telephone interview from an industry conference in Halifax.

“ This is something where [government] was firmly entrenched and, at one point, weren’t going to move on at all.”

Raising the threshold to $525,000 was “a substantial step,” but he argued that “there are a lot more steps [to take] in this tax-mitigation journey.”

Neil Chrystal, president of the Urban Development Institute’s Pacific chapter, said the industry appreciates the raising of the threshold as it “makes a lot of sense and is the right thing to do.”

However, Chrystal said a lot of his members are disappointed that the grandfathering clause did not give developers more of a window to sell their current inventory HST-free.

Chrystal added that the industry is still hopeful that government will consider exempting new home sales from the provincial property-transfer tax as a measure that wouldn’t affect its implementation of the HST, but would mitigate its affect on higher-priced homes.

Sun

If you blinked, you might have missed the real estate slump that accompanied the recession of 2009. Home resale prices have recovered most, if not all, of what they lost in the aftermath of the credit crisis and financial meltdown. In fact, the average price in British Columbia was up more than 17 per cent in October to $493,328 from the same month a year ago, while residential sales totalled 8,624 — a 115-per-cent increase from a year earlier.

It was a similar story nationally last month, with average prices in major markets up 22 per cent and resale home sales up 41 per cent.

Reasons for the home-buying boom seem obvious: Low interest rates, mortgage flexibility, rising consumer confidence and pent-up demand. In B.C., which has the highest prices and biggest mortgages, buyers seem more confident than other Canadians that prices will continue to rise.

Even if they are right it would be prudent to remain cautious. The increase in home sales and prices is clearly outpacing the rate of economic recovery. Even the most bullish forecasts put growth of gross domestic product at no more than 3.5 per cent next year and the threat of a double-dip recession has not been ruled out.

Consider also that Canada’s population is growing slowly — by just 0.62 per cent in the first half of 2009 — and that a majority of Canadians already live in homes they own or are owned by household members. According to Statistics Canada, 68.4 per cent of Canadian households own their home, the highest rates since 1971. That means first-time buyers are coming from a dwindling pool of renters, about 31 per cent of households, and homeowners who are upgrading, downsizing or relocating. A high rate of home ownership in an aging, slow-growing population could sooner or later dampen demand.

Perhaps the most significant drivers in residential real estate are interest rates and mortgage terms. Gone are the days when borrowers required a down payment of 25 per cent, amortization of no longer than 25 years and the financial wherewithal to keep carrying costs below 30 per cent of gross income. Today, a buyer can opt for five per cent down (paying a hefty mortgage insurance premium for the privilege) and a 35-year amortization. Nearly half of those who took out mortgages this year chose amortization over 25 years. About one-quarter of households spend more than 30 per cent of their income on shelter. “They may do so by choice,” StatsCan offered by way of analysis, “or they may be at risk of experiencing problems related to housing affordability.”

Low interest rates have been a godsend for mortgage borrowers, and a curse for savers. A variable rate mortgage can be had for 2.25 per cent, and mortgage brokers, who arrange about a third of all new mortgages, claim they can beat that. A typical five-year fix rate is just below six per cent.

But interest rates can change in the blink of an eye. Fixed rates are based on bond yields and are vulnerable to volatility in financial markets. Variable rates reflect prime rates which are subject to the whims of the Bank of Canada. The central bank has pledged to keep its overnight rate at the current 0.25 per cent until July 2010, but an uptick in inflation could force its hand earlier.

Interest rates are expected to increase after that date, assuming the recovery gathers momentum and the consumer price index approaches the central bank’s target of two per cent. Highly-leveraged borrowers may find themselves with larger monthly payments than they can handle.

Home ownership accounts for nearly 40 per cent of Canadians’ wealth, up from just 16.3 per cent 20 years ago. Financial advisers warn that real estate valuations can go down, as well as up, and people should diversify their investment portfolios, especially in retirement when a house should represent no more than 25 per cent to 33 per cent of total wealth.

All that being said, home ownership can be satisfying and financially rewarding. But would-be buyers should enter the market with eyes wide open and view their purchase first as a place to live, and only second as a store of wealth.

© Copyright (c) The Vancouver Sun

Move comes after weeks of lobbying and protests

Derrick Penner
Sun

After weeks of hot political debate, public protest and industry lobbying, a crack appeared Thursday in the provincial government’s implementation of the hugely unpopular harmonized sales tax with a change in how it will apply to new housing.

“We heard the concerns from consumers and industry,” Finance Minister Colin Hansen said, announcing that the government will raise the threshold for its maximum HST rebate on new homes to $525,000 from $400,000, effectively increasing the rebate by 30 per cent.

For homes priced under $525,000, the rebate will ensure there is no additional tax burden from the HST. Purchasers of homes over the new threshold will pay the seven-per-cent HST and be eligible for a maximum rebate of $26,250.

The Liberal government also grandfathered implementation of the tax on new housing. If buyers signed purchase contracts for new homes, but do not take possession before the HST’s July 1, 2010, implementation, the HST will not apply.

The province still has to push through enabling legislation for the HST in the face of an NDP opposition calling for it to be scrapped and a public highly dissatisfied with the tax.

Business and housing industry groups welcomed the threshold increase, but with some qualifications.

John Winter, president of the B.C. Chamber of Commerce, characterized the change as “an encouraging demonstration that the provincial government is hearing industry’s concerns and acting on them.”

“I think the province deserves a pat on the back,” Neil Chrystal, president of the Urban Development Institute’s Pacific division, said in an interview. “Raising the threshold makes a lot of sense and was the right thing to do.”

The industry had lobbied intensely, arguing that the tax, combining the provincial sales tax with the federal goods and service tax, would crimp sales and throw an undue burden on new-home buyers, particularly in the Lower Mainland where the average prices for even more modest home types topped the previous $400,000 threshold.

“The [HST] was a big concern and it remains a big concern,” Chrystal said. “In 2009, we’ll probably see the second-lowest year for housing starts since 1962. Is this the time to be adding costs to the industry?”

Chrystal noted that the threshold won’t aid most buyers of single-family homes and luxury condominiums.

The change did little to diminish political opposition to the HST, with the NDP and grassroots opponents vowing to continue efforts to overturn the tax, which will add to the cost of many previously untaxed goods and services.

“This is cosmetic surgery on a bad tax,” Bruce Ralston, the NDP finance critic, said in an interview. “It’s certainly not what the industry asked for and I don’t think it’s going to do much.”

The MLA for Surrey-Whalley said the NDP maintains its position that “the solution is not to do these one-off deals. Our firm position is that this tax should be dropped.”

Bill Vander Zalm, former Social Credit premier and now an anti-HST crusader, said Hansen’s shift was a “good beginning,” but the grassroots movement he leads still plans to proceed with its campaign to launch a province-wide petition and force a referendum on the tax.

Hansen announced the HST change for housing two days after the Manitoba government said it would not implement sales-tax harmonization, which it estimated would load $400 million a year in additional costs onto consumers, because it would “be the wrong signal to send” during an economic downturn.

In Toronto, a raucous opposition protest Thursday over Ontario’s HST enabling legislation resulted in three Conservative MPPs being ejected from the legislature for pillorying Premier Dalton McGuinty and Finance Minister Dwight Duncan with unparliamentary language. Peter Shurman, one of the rebellious MPPs, said that “if that’s the only way you can get attention when you know that your constituents are demanding public hearings, then that’s what you do.”

© Copyright (c) The Vancouver Sun

Don Cayo
Sun

Unless you’re in the market for a new home, Thursday’s announcement of a bigger HST break on new homes might have you asking, “Why not something for me?”

If so, you’ve got company. There are lots of other losers. They include those whose issue is the cost of restaurant meals, bus tours, funerals, crash helmets, life jackets, first-aid kits, smoke detectors, energy-conservation equipment, non-prescription drugs, bikes, school supplies (but not books), home care for Granny, cable TV, haircuts and manicures, or any of the myriad other things that are exempt now from PST but will be hit soon by HST.

So why such a big perk to B.C.’s relative handful of home builders and buyers, and nothing extra for the masses who buy all that other stuff?

The charitable might argue it’s because housing is so important and so burdened by taxes — more than $75,000 on a $550,000 home — that an added straw from HST might break the camel’s back.

But the cynical would say it’s because the province was able to give housing a break through sleight-of-hand, and this would be harder to do with other commodities and services.

The problem is that Victoria is limited in the exemptions it can give by its agreement with Ottawa. Its seven-per-cent share of a new 12-per-cent HST must apply to at least 95 per cent of the existing GST base. And it has already exempted virtually all of the other five per cent through earlier announced breaks for gas and diesel fuel, books, children’s-sized clothing, car seats and booster seats, diapers and feminine hygiene products.

If you’re an astute reader, you’ll notice I didn’t mention that we won’t pay HST on residential heating costs.

That’s because this is structured as a rebate after the fact, not as a point-of-sale exemption. Therefore it doesn’t come under the five-per-cent cap.

This same trick is how the government is able to create what amounts to a very large exemption on new homes. They’ll simply structure it as a rebate and call it by that name.

When the HST policy was announced last summer, the break was to be five per cent of the first $400,000 a homeowner spends on the purchase, and now it’s the first $525,000. (My colleague Derrick Penner has spelled out in a separate story what this will mean to buyers and to builders.)

The rebate concept works well at this scale. It’s well worth a little paperwork to get a five-figure cheque.

It doesn’t lend itself nearly so well to the other about-to-be-clobbered goods and services on the list. For relatively low-cost purchases, a rebate scheme would almost certainly be costly and unwieldy.

Home heating rebates can be done through utility bills, which is cheap and easy. And it might be possible — if the government is willing to forgo the revenue — to make a rebate scheme work for once-in-a-lifetime large expenditures like funeral services.

But haircuts? Pencils and notebooks? I don’t think so.

Yet nor do I imagine we’ve heard the end of this. You can bet that lobby groups for every interest group will be re-energized when they see how government found such a creative way to bow to pressure from home builders.

© Copyright (c) The Vancouver Sun

Bump up to $525,000 HST threshold on new homes not enough, association says

Ian Austin and Suzanne Fournier
Province

The B.C. government added a new wrinkle to its HST sales pitch Thursday, hoping to bring the construction industry onside by promising to raise the threshold for the new-home-added tax from $400,000 to $525,000.

The 12-per-cent harmonized sales tax is set to kick in July 1, 2010, and B.C.’s recession-hit construction industry wanted homebuyers paying up to $600,000 not to have to pay more tax as homebuilders strive to stay afloat during a nasty business cycle.

“We’re willing to shake their hand for coming this far, but we’re not giving any high fives,” said Greater Vancouver Home Builders Association chief executive officer Peter Simpson, who will continue to lobby for more concessions.

Simpson said the $400,000 threshold was completely unrealistic: “Where could you buy a single-detached home anywhere in the Lower Mainland for that price? Even this new threshold will primarily help out the builders in Cloverdale and Abbotsford, and other suburbs.”

Finance Minister Colin Hansen — who has been on the defensive since the B.C. government flip-flopped on an earlier pledge not to bring in the HST — said he had listened to consumers and builders in bumping up the threshold.

“We heard the concerns from consumers and industry about how the HST might affect homebuyers, and this increase will move the threshold to above the average new-home price in the province,” said Hansen.

“At $26,250, this provides the highest maximum provincial rebate in Canada.

“A similar rebate will also support the construction or substantial renovation of affordable rental housing.”

The B.C. government will get a $1.6-billion gift from the federal government in exchange for adopting the federal-provincial harmonized sales tax.

But NDP finance critic Bruce Ralston said the move will do little to win over British Columbians who hate the HST.

“I think this is putting lipstick on a pig,” said Ralston. “They don’t want the homebuilders out there hammering away at them.

“Our position is clear — we’re opposed to it right across the board. We think it’s a rotten tax.”

The HST is set to go into effect July 1 in both B.C. and Ontario, where the new harmonized tax is also proving to be a hard sell.

In its attempt to sell the HST to a skeptical public, the Ontario government recently announced that the HST would no longer be applied to newspapers or meals under $4.

© Copyright (c) The Province