Jamie Henry
Other

It’s Official – No Housing Crisis in Canada
Finance Minister Joe Oliver says there is no impending housing or mortgage crisis in Canada. Speaking in an interview with CTV News, Oliver said the government has stepped in to cool the market a number of times and is watching the situation but doesn’t “think we’re confronting a crisis at this point.”

The Canadian government is watching the housing and mortgage market carefully, but does not see a crisis, Finance Minister Joe Oliver said on Thursday.

“We’re going to monitor the market, but we don’t think we’re confronting a crisis at this point,” he told CTV News.

He noted that the government had intervened a number of times to cool the market.

Oliver also said the federal budget was well on track to achieve a surplus of C$6 billion ($5.5 billion) in the fiscal year that begins next April, on top of a contingency reserve.

….But Academic Points To Lacklustre Market
Despite rising house prices, and a rise in month to month figures, house sales are still down year over year (April figures) and the gains are skewed by the red hot figures from the major markets. Real estate expert John Andrew from Queen’s University says the year over year drop in sales is “fairly significant” and that even after a long winter there hasn’t been the pick-up many were expecting.

Positivity Boosts Mortgage Companies
With more positive noises emerging regarding the likelihood (or not) of a housing bubble, it means good news for some of our biggest mortgage companies, as buyers err on the side of “no bubble.” Home Capital and Genworth have both seen activity rise and Home Capital, in particular, is seeing gains in the uninsured mortgage market from immigrants and others who don’t qualify for a standard product.

Real Estate Goes Global

James Surowiecki
Other

The most expensive housing market in North America is not where you’d think. It’s not New York City or Orange County, California, but Vancouver, British Columbia. Now, Vancouver is a beautiful city—a thriving deep-water port, a popular site for TV and movie shoots. By all accounts, it is a wonderful place to live. But nothing about its economy explains why – in a city where the median income is only around seventy grand – single-family houses now sell for close to a million dollars apiece and ordinary condos go for five or six hundred thousand dollars. “If you look at per-capita incomes, we look like Reno or Nashville,” Andy Yan, an urban planner at the Vancouver-based firm Bing Thom Architects, told me. “But our housing prices easily compete with San Francisco’s.”

When price-to-income or price-to-rent ratios get out of whack, it’s often a sign of a housing bubble. But the story in Vancouver is more interesting. Almost by chance, the city has found itself at the heart of one of the biggest trends of the past two decades – the rise of a truly global market in real estate.

We’re all familiar with the stories of Russian oligarchs buying up mansions in London, but this is a much broader phenomenon. A torrent of capital from wealthy people in emerging markets – from China, above all, but also from Latin America, Russia, and the Middle East – has flowed into the real-estate markets of big cities in other countries, driving up prices and causing a luxury-construction boom. A recent report by Sotheby’s International Realty Canada examined more than twelve hundred luxury-home sales in Vancouver in the first half of 2013 and found that foreign buyers accounted for nearly half of sales. In Miami, a huge influx of money from Latin America has enabled the city’s housing market to recover from the bursting of the housing bubble, and has set off a condo-construction spree. Australia has become a prime market for Chinese investors, who Credit Suisse estimates will buy forty-four billion dollars’ worth of real estate there in the next seven years.

What’s so special about the places that attract all this foreign money? The economists Joseph Gyourko, Christopher Mayer, and Todd Sinai have developed a theory about what they call “superstar cities.” Looking at data from 1950 to 2000, they found a small number of cities where housing prices rose steeply, and concluded that high earners tended to cluster together over time, with the result that rich cities tend to get richer.

Vancouver isn’t an obvious superstar. It’s not home to a major industry – as New York and London are to finance, or San Francisco to tech – and it doesn’t have the cultural cachet of Paris or Milan. Instead, Vancouver’s appeal consists of comfort and security, making it what Andy Yan calls a “hedge city.” “What hedge cities offer is social and political stability, and, in the case of Vancouver, it also offers long-term protection against climate change,” he said. “There are now rich people around the world who are looking for places where they can park some of their cash and feel safe about it.” A recent paper by two Oxford economists bears this out, showing a tight correlation between London house prices and turmoil in southern and Eastern Europe. The real-estate boom in Miami has been magnified by political unrest in Venezuela. And Vancouver, which has a large Chinese population, easy access to the Pacific Rim, and nice weather, has become a magnet for Chinese investors looking for insurance against uncertainty. A Conference Board of Canada report found that Vancouver’s real-estate market is tightly connected to what happens in the Chinese economy.

The globalization of real estate upends some of our basic assumptions about housing prices. We expect them to reflect local fundamentals – above all, how much people earn. In a truly global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there. So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them. Yan says, “If the choice is between losing ten to twenty per cent in Vancouver versus potentially losing a hundred per cent in Beijing or Tehran, then people are still going to be buying in Vancouver.”

The challenge for Vancouver and cities like it is that foreign investment isn’t an unalloyed good. It’s great for existing homeowners, who see the value of their homes rise, and for the city’s tax revenues. But it also makes owning a home impossible for much of the city’s population. And the tendency of foreign buyers not to inhabit investment properties raises the spectre of what Yan has called “zombie neighborhoods.” A recent study he did found that a quarter of the condos in a luxury neighborhood called Coal Harbour were vacant on census day.

One option would be to severely restrict foreign ownership, but that’s politically difficult, and not great for a city’s economy. It might make more sense if the Vancouvers of the world simply charged foreign buyers a premium for the privilege of owning there. “We’re one of the places where people seem to want to park their cash, and there aren’t that many of those places,” Yan says. “So let’s raise the parking fees.” As for the rest of us, we’d better get used to being tenants.

© 2013 Condé Nast.

Robert McLister
Other

For years we’ve been taught that shorter mortgage amortizations are better. Most people in the mortgage business don’t challenge this premise and certain lenders preach it as gospel.

Consider this recent statement by a bank spokesperson: “Choosing a shorter amortization is the most responsible approach to home financing. It’s something we have been encouraging our customers to consider for years, as it means becoming debt-free sooner.”

How wise is that advice? Do longer mortgage repayment periods truly cost you more, all things considered?

In some cases the answer is unequivocally no. Longer amortizations, which spread your payments over 30 or 35 years instead of the traditional 25, can cost you significantly more in mortgage interest. But consider these four scenarios where “longer” is actually better.

1.) You have other high interest debt
Extended amortizations – for example a 30-plus year repayment period – lower your mortgage payments, freeing up cash flow. That’s cash you can put to better uses.

Suppose you’re paying 3.5 per cent on a mortgage but have a car loan at 6 per cent or credit card debt at 18 per cent. Why on earth would you pay more than you had to on your mortgage?

2.) You have higher-yielding investments
Even if you’re debt free, a longer amortization can still make sense. The trick is, you must earn an after-tax return on your investments that’s higher than your mortgage rate.

For example, if you’ve got a 3.5 per cent mortgage but can earn 4.5 to 5 per cent on tax-sheltered investments (like those in a tax free savings account), a financially secure homeowner is often better off lengthening their amortization and directing the mortgage payment savings to those investments.

There’s a caveat of course. Investment returns are more risky than pre-paying a mortgage, which is essentially a guaranteed return. Therefore, you must be able to withstand – or wait out –potential investment losses. Assuming you don’t need to cash in the investments for 10 years or more, the odds are very good, historically speaking, that you’ll generate positive returns.

“I can live with [the assumption of] an expected 5 per cent nominal return on balanced investments over the long run,” says Moshe Milevsky, a finance professor at York University’s Schulich School of Business. He says that even the conservative Canada Pension Plan targets almost 4 per cent annual returns, after inflation.

3.) You expect low long-term mortgage rates
One of the most important concepts in finance is the “time value of money.” This is the idea that money in your hand today is worth more than the same amount of money in the future. That’s because you can invest money today to earn a return over time.

By definition, the time value of money holds that a 25-year amortized mortgage has the exact same present value (cost in today’s dollars) as one with a 35-year amortization, assuming equal interest rates.

Put another way, you’re no further ahead by choosing the shorter 25-year amortization, so long as:

a) You invest the payment savings of a longer amortization in something that earns you at least the same rate of return as the interest rate on the shorter amortized mortgage.

b) Your average mortgage rate in years 26 to 35 is roughly less than or equal to your average rate for the first 25 years. (Remember, with a 35-year amortization you’d still have 10 years of payments after year 25.)

4.) You think inflation will rise long-term
Time value of money also comes into play here. The higher the rate of inflation, the less your money is worth in the future.

“If you believe that inflation now is artificially low; if you believe that inflation can only go up, you want to borrow money for longer,” Mr. Milevsky says. “Inflation benefits the borrower.”

“If inflation spikes tomorrow you’re better off with a longer amortization,” he adds, because you’d be repaying your mortgage loan with “devalued dollars.”

Put another way, the smaller the difference between your mortgage rate and the rate of inflation, the less sense it makes to pay off your mortgage quicker (and the greater the benefit of a longer amortization).

A word of warning
A longer amortization means you pay less principal with every regular payment. In turn, you’ll have a bigger balance every time you renew the mortgage.

After 10 years, for example, a $200,000 mortgage at 3 per cent interest would leave you a:

• $137,235 balance if you chose a 25-year amortization
• $162,205 balance if you chose a 35-year amortization.

If today’s historically low rates rise by the time you renew, a longer amortization means you’ll pay more interest on a bigger balance. This is a key risk that your other investments would need to offset.

Where do you get a long amortization?
The standard amortization in Canada is 25 years. But if you have at least 20 per cent home equity, most lenders will offer you 30 years. A handful of lenders (e.g., Alterna Savings, B2B Bank, Coast Capital Savings, First Ontario, RMG Mortgages, Vancity) even have 35 year amortizations.

The free option
Shorter amortizations force homeowners to save more, which can aid the less disciplined among us.

But if you’re a well-qualified borrower, have a savings mentality and are eligible for a longer amortization, a 30– to 35-year amortization is one of the best free options you can get.

Remember that even with an extended amortization, you can easily make optional extra payments to replicate a shorter amortization. You can even automate those extra payments. Then, if an investment opportunity arises or you need extra cash for personal reasons, simply reduce your mortgage payments back to the minimum and divert the cash flow to a better use.

For the right borrower in the right circumstances, longer mortgage repayment periods can be a sound strategy.

“Borrowing money at cheap rates, to invest in long-term and more profitable projects makes perfect sense,” Mr. Milevsky says. “If it works for the biggest companies in the world, it can work for you…but beware of the risks.”

© Copyright 2014 The Globe and Mail Inc.

Trend continues with dropping sales despite rising prices in most Canadian markets

Other

OTTAWA – Canadian home sales were up from March but down from a year ago in April, signalling the lacklustre spring market will continue.

The Canadian Real Estate Association said home sales were up 2.7 percent from March to April, boosted by the Vancouver and Toronto markets, but sales through the Multiple Listings Service were down 0.3 percent compared with a year ago and 1 percent below the 10-year average.

“Greater Vancouver and Greater Toronto fuelled the anticipated spring pick up in national home sales in April, which masked softer activity in a number of smaller markets,” CREA president Beth Crosbie said.

But John Andrew, a real estate expert with Queen’s University, said the year-over-year drop in sales was surprising and “fairly significant,” especially when you consider that home prices continued to rise.

The CREA said the national average price for a home sold in April was $409,708, up 7.6 percent from a year ago, with prices up in 6 of the 10 provinces.

The aggregate composite MLS Home Price Index was up 5.02 percent.

“This kind of continues this trend that we’ve been seeing over the past year or so, where prices just continue to rise in most markets in Canada even though sales are actually dropping,” Andrew said.

A long winter that continued until April in most cities can be partly to blame for slow sales, he added, but notes they should have picked up as the weather warmed up in the first few weeks of May.

“We’re seeing a very lacklustre spring market,” he said. “Normally even if you didn’t see a lot of activity, you’d see those listings in April. [Their absence] is almost an early warning that sales are going to be low.”

The national sales-to-new listings ratio was 51.9 percent in April compared with 52 percent in March, suggesting the market was in balanced territory.

Earlier this week, Investors Group created stir in the spring mortgage market when it offered a 36-month closed, variable-rate mortgage at 1.99 per cent—a move observers say could prompt other lenders to lower their rates, and continue to push house prices up.

Concerns have been raised about the health of the Canadian housing market in recent months amid worries it could be overheated and headed for a fall.

However, Bank of Montreal senior economist Sal Guatieri said that “outside a few lingering hotspots, Canada’s housing market is stable, if not boring, which is good in the face of dire warnings about a crash.”

“Strong population growth and healthy economies are driving markets in Alberta, B.C., Saskatchewan, and Greater Toronto, while the opposite appears to be weighing on activity in Quebec and much of Atlantic Canada,” Guatieri said.

Copyright © 2000-2014 Epoch Times

JOEL SCHLESINGER
Other

Regina’s Hotel Saskatchewan may not have the chateau-style architecture of its sister hotels built across Canada by Canadian Pacific Railway in the late 19th and early 20th centuries, such as the Banff Springs Hotel and the Château Frontenac in Quebec City.

Yet the elegant, 10-storey iconic landmark on Victoria Avenue, completed in 1927, has remained like so many of Canada’s old CPR hotels – a premier destination.

It’s storied reputation played a central part in a Winnipeg-based real estate investment firm’s decision to purchase the 224-guestroom hotel last month for $32.8-million from the U.S.-based chain Radisson Hotels Corp.

“When anybody thinks of Regina and where to stay, it’s always Hotel Saskatchewan,” says Gino Romagnoli, executive vice-president of Temple Hotels Inc., which purchased the hotel. “The price was right. The market was good. All things considered, it was a great deal for us.”

A publicly traded company, Temple has been aggressively snapping up hotels across the country since purchasing its first asset in 2006, the 179-guestroom Temple Gardens Mineral Spa Resort in Moose Jaw, building a portfolio of 27 properties across Canada.

Yet Temple isn’t alone in its interest in Canadian hotels as a potentially profitable investment. Last year was the best year in half a decade for Canada’s hotel real estate sector, a recent report by Colliers International Hotels found.

Transactions in 2013 were double the average of about $1-billion annually for the previous five years with more than 115 hotels changing owners, worth $2.02-billion in total.

“We’re in a pretty strong up-cycle,” says Robin McLuskie, vice-president at Colliers International Hotels. “Last year was third-highest year on record.”

The highest activity on record was in 2006 and 2007 when the volume of deals was worth $2.91-billion and $4.5-billion, respectively.

Yet Ms. McLuskie says last year’s sales are a more promising indicator of the sector’s health than those in 2006 and 2007 when markets were peaking.

“Those two years had two major REITs that went public that dominated the market, so we see 2013 as a much more active year in comparison.”

Like 2006 and 2007, institutional buyers led the way in 2013, accounting for 42 per cent of the volume.

Yet Ms. McLuskie says a host of ideal conditions has attracted a greater diversity of buyers. “There is just a lot of money chasing deals.”

What’s drawing investors such as U.S.-based Starwood Capital Group, which purchased five Westin Hotels in Canada in a $765-million deal with Middle Eastern partners, are a combination of favourable borrowing conditions – low interest rates and creditors willing to lend – and growing revenue per available room (RevPAR).

The Colliers report found RevPAR – a measure of a hotel’s profitability – grew 3.8 per cent in 2013, higher than the 10-year average of 2.9 per cent.

Growth in the West was the strongest at 5.4 per cent, with eight markets experiencing double-digit growth led by northwest Calgary at 18.4 per cent growth over the previous year.

The upward trend is expected to continue in 2014 with RevPAR forecast to grow by 4.1 per cent, the report states.

A large draw for investors is the attractive yields. Capitalization rates for hotels involved in the transactions last year averaged about 8.4 per cent. Although rates have experienced compression since 2008-09 down from about 10 to 12 per cent, the yield is still higher than other commercial real estate sectors. A late 2013 report by Avison Young shows capitalization rates for other sectors at less than 6.5 per cent on average, and they’re compressing, too.

While capitalization rates have compressed in the hotel sector over the past few years, Mr. Romagnoli says Temple is still able to find high-yielding investments such as the Hotel Saskatchewan, which had an 11.5-per-cent capitalization rate at the time of purchase. Unlike most other provinces, no hotels changed hands in Saskatchewan in 2013, according to the Colliers report. Often overlooked by investors, Temple sees Saskatchewan as fertile ground for good deals.

“We typically go in with a 10-per-cent cap rate, so the Hotel Saskatchewan is definitely better than average,” Mr. Romagnoli says, adding Temple will invest about $6-million over three years to upgrade guestrooms, the dining room, lounge, meeting space and lobby.

“The Hotel Saskatchewan has good bones so it’s really cosmetic-type renovations.”

Mr. Romagnoli says assets requiring larger injections of capital are less attractive because additional costs eat into the investments’ higher yields, which compensate investors for the higher risks associated with this sector of real estate.

Yet the high yields relative to other sectors are traditionally a function of the risk involved in hotel ownership.

“Hotels are viewed as essentially having to find a new tenant 365 days a year as opposed to commercial property where you’ve got five- or 10-year leases,” he says, adding they are also more sensitive to the economy than other sectors because business travel and vacations are often the first casualties of a downturn.

Additional risks aside, real estate investors, who traditionally have not invested in hotels, now find the sector attractive, Ms. McLuskie says.

“Because the yields on other real estate classes are so low and competitive, they’re seeing opportunities in hotels, which have higher cap rates.”

Among them is Morguard Corp., a Toronto-based, diversified real estate firm, which purchased five hotels, all Marriott properties in the Greater Toronto Area, in 2013 for $70.5-million.

“Our attraction to hotels was price and value,” says Rai Sahi, chairman and chief executive officer of Morguard, adding hotels are a new asset class for the company.

“We have experience with furnished suites at several of our apartments in our residential portfolio and see this as a natural extension to create synergies.”

Until its purchase last year, Morguard owned one other hotel property purchased in 2012. Valued at roughly $100-million, its hotel portfolio makes up a small portion of its $15.1-billion in assets. Like other investors, Morguard will continue seeking opportunities in the sector, Mr. Sahi says.

Because of continuing interest, Colliers forecasts 2014 will be another strong year for hotels, estimating the volume of transactions between $1.25-billion and $1.75-billion. “It won’t be a frenzy – more of a balanced market where we expect to see good activity,” Ms. McLuskie says.

While increased interest will compress capitalization rates further, good for existing owners but not for buyers, Mr. Romagnoli says the sector is not yet as competitive as other real estate markets.

“We’re not encountering a heck of a lot of competition to be honest,” he says.

“It’s also why the cap rates are high – a factor of supply and demand – because if there was more competition for product, we’d see price compression.”

© Copyright 2014 The Globe and Mail Inc.

Susan M Boyce
Other

Highlights

• According to a survey of 3,007 people in the Rennie Marketing database, location, price, proximity to transit, and building amenities are the top four drivers in first time buyer’s purchase decision. Green construction continued to lag in final place even among buyers who don’t own a car. “First time buyers are not philanthropist out to save the planet the day they buy a home,” Rennie noted.
• The burgeoning 25 – 34 age group accounts for 72% of the first-time buyer market.
• Within Metro Vancouver, 43% of 25 – 34s  have their name on the title of the property they live in, although in Richmond that number skyrockets to a whopping 69%. In Toronto, only 34% own the home they live in.
• Energy centres like Metrotown, Richmond Centre, Marine Gateway, and the rebirth of Brentwood will continue strong because consumers increasingly want to be on transit or walk to everything.
• Downtown Vancouver remains the “ultimate energy centre.” Demand continues strong. Of 930 condos that completed in 2013, only 130 are left unsold. Projecting to 2016 and beyond, only 1,600 are completions anticipated, 600 are already sold and another 500 are located in hyper-luxury buildings.
• Vancouver’s 55 to 74-year-old demographic accounts for some $163 billion in homeownership (approximately 284,000 homes), $113.4 billion of it clear title. The over 75 market accounts for another $50 billion.
• In Metro Vancouver, one third of the housing stock now has more bedrooms than people living there — a number that’s risen 26% in the last decade. New housing stock has risen only 17% in the same period.
• A too-often-overlooked stat Rennie said dispels the myth we’re most expensive place on earth: 69% of all home sales are to people who already own, a number that’s remained constant for over 10 years. Space and luxury matters more to these buyers than the built form, and whether their existing home sells for $2.4 million or $1.9 million is of less concern than square footage, luxury, and ability to walk to coffee, groceries and amenities.

As in previous years, he also suggested removing the upper 20% when calculating average housing costs yields a more accurate snapshot of the Metro Vancouver market because it is more reflective of the buyer who relies on local income.

This adjustment sees the average cost of a single-family home drop from $998,000 to $670,000. With a 25% down payment, this price would require a combined household income of $60,000 to achieve a mortgage. In the condo market, the average price falls from $442,000 to $313,000. Again with a 25% down payment, achieving a mortgage would require only $30,000 of household income.

© 2014 Real Estate Weekly

Other

As news broke earlier this month of CMHC’s exit from the Insured Stated Income and Second Home Programs, it left many brokers scratching their heads with what to do with these clients.

 

Lucky for them, Lanyard’s Jumbo Residential

Loan Program hasn’t been affected by the announcement and we are actively seeking loan applications that would fall under those umbrellas. All of our deals are non-income qualified and we are happy to lend on Second Homes/Rentals. While our core business is still focused on $1,000,000+ deals, we are considering applications of $500,000+ while we evaluate the impact of CMHC’s change.

For the rest of May, all of our new Jumbo Residential Deals will be subject to a 2% – 3% Fee Split 50/50 between the Lender and Broker.

This is a limited time offer.

All Commercial Deals and Residential Deals which fall outside of our Jumbo Residential guidelines will still receive competitive rates and fees.

 

Our Jumbo Residential Loan Program is focused on first mortgages which fall under the following:

• 1st Mortgages only, up to 60% LTV
• $1,000,000 to $5,000,000
  (Deals of $500,000+ will be considered on a case by case basis)
• Urban centres in B.C., Alberta, Manitoba, Saskatchewan and Ontario
• Non-Income Qualified Deals
• Non-Residents/Foreign Investment Welcome
• Flexible Repayment Options
• Interest Reserves Available when servicing loan is difficult
• Non-Recourse Loans Available

Our commercial lending practice focuses on first mortgages which fall under the following:

• 1st Mortgage Financing – Asset Based Underwriting
• $1,000,000 to $15,000,000
• B.C., Alberta, Saskatchewan, Manitoba, and Ontario
• Interest Reserves Available for Non-Income Producing Assets
• Will Pay Out Bank Loans (ex: when the bank calls the mortgage because sales ratios have declined, or other breach of covenant)
• Great Bridge Financing While Assets Stabilize or are Rezoned
• Max LTV: Apartment 80%; Industrial 70%; Condo Inventory 65%; Prime Land 50%

Glen Korstrom
Other

Real estate demand from Generation Y, or those aged between 14 and 34 years old, is fuelled primarily by loans from parents and grandparents and will combine with other societal changes to alter what real estate is in demand, say real estate analysts.

Some key trends to watch include increased demand for larger units in the future because of a need for home-offices and demand for higher-end small units in the short term, Real Estate Investment Network president Don Campbell told Business in Vancouver May 16.

“I would never say that they’re spoiled but Generation Y’s quality bar is higher than the Baby Boomers’ one was,” he said. “They want quality – nicer countertops.”

The demand for quality from this younger generation is partly because they are likely to have lived with their parents for a longer time and are used to that comfort.

They also have slightly higher salaries and much higher net worth in standardized dollars than counterparts had 30 years ago, according to a BMO study released May 15.

Add to this Rennie Marketing Systems owner Bob Rennie’s assertion that those aged older than 55 years have $163.4 billion in mortgage-free properties in Metro Vancouver and it is clear that, as the older generation dies off, inheritances will make it viable for Generation Y to buy the larger homes they are likely to want.

Parents and grandparents already provide deposits for 40% of today’s first-time home buyers in Vancouver, according to a poll that Rennie’s company conducted.

“Generation Y will have more different jobs through their lives than we as Baby Boomers ever had,” Campbell said. “They will be in more independent contractor relationships than employer-employee. So, they will need home offices and that means larger homes.”

Another trend that Campbell has gleaned from his organization’s research is that there’s a trend among those in Generation Y to buy a home with a platonic friend.

“That leads us to not having small units because you need two bedrooms,” he said.

In Metro Vancouver, developers have so far been trying to one-up each other by building the most livable small condominiums imaginable.

Bosa Properties, for example, in November launched what it called the world’s first transformable homes built in a large-scale condominium development.

It called its 320-square-foot homes in Surrey’s Alumni project “transformable” because every square foot of space is designed to be as efficient as possible and the space can easily be transformed from one use to another.

One bedroom units have been such a common unit-type in the city of Vancouver that general manager of planning Brian Jackson told BIV that he is actively encouraging developers to build larger units. 

“Developers are going to want to pound out the one-bedroom units because right now, in this moment, they’re selling based on affordability,” Campbell said. “In the future, the demand is going to change to larger units as this giant Generation Y cohort moves through and starts to demand two-bedrooms and two-bedroom-plus-den homes.”

The takeaway lesson for investors who own and rent one-bedroom condominiums is to consider selling now to buy a larger unit.

“One-bedroom condominium prices in the future will not track the same as the rest of the market,” Campbell said. “If the rest of the market goes up, one-bedroom units probably will too but not as much as other homes.”

Copyright © Business In Vancouver

“Greater Vancouver’s over-55 demographic is sitting on $163.4 billion in clear title housing. What will be the impact of $163.4 billion in equity in the hands of an aging population in our marketplace?”

Mike Chisholm
Other

In a city expected to grow by almost 40,000 people in the next 15 years, the real estate marketing master behind many of the city’s iconic residential properties says it’s the city’s prosperous baby boomers who will have the greatest future impact on residential development.

“The pattern that we should all be watching is the movement of this wealth by the living which may be more important than the transfer of wealth by the dead,” said Bob Rennie, of Rennie Marketing Systems.

Rennie’s projections were part of a wide-ranging and statistic-heavy key-note address on Thursday to Vancouver’s Urban Development Institute, (UDI) the land development and planning organization representing real estate developers, planners, bankers and other professionals in British Columbia.

Rennie’s speech at the UDI’s annual meeting at the Hyatt Regency on Thursday drew a crowd of almost a thousand people, keen to learn Rennie’s usually ‘spot-on’ marketing insights and perceptions of what to look for in the real estate market, how to adapt to those changes, and how best to prosper. 

“Greater Vancouver is projected to grow to a population of over three million in the next 15 years,” Rennie told the sold-out crowd in the Hyatt’s largest ballroom. “We will also see Greater Vancouver’s population that is aged 75 years and older increase by 85 per cent in the next 15 years.They are downsizing, yes, but downsizing to space and luxury. It doesn’t matter what they sell their current homes for…as long as the developers in this room start designing and building homes that this demographic is looking for.”

In his 11^th year addressing the Urban Development Institute, Pacific, (UDI) Rennie relied on his long career in the greater Vancouver real estate market, his remarkably updated analysis of market patterns and his ‘in-house’ surveys of the buyers in that market to deliver a speech that drilled down into the regional home-buying demographic.

“Preparing for today really reinforced the need for current data,” Rennie told the crowd. “When I reference ‘the survey’ our findings are from two surveys tabulated 96 hours ago. This is about as current as we can get.”

Rennie’s projections stem from a deep well of data, compiled from almost 40-years of marketing and selling properties in the greater Vancouver region. The Olympic Village and historic Woodward’s re-development are just two of the high profile residential projects that Rennie Marketing Systems have sold in previous years. 

As Vancouver has developed from a sleepy, west coast logging and resource based town to a thriving Asia-Pacific metropolis, Bob Rennie has watched the progress closely and profited generously from the changing landscape. Taking the pulse of the real estate market and listening closely to those buying and selling properties has given Rennie a true insider look at how conditions are changing, and how developers and politicians should respond. At the UDI speech, his analysis again pointed to an untapped but emerging consumer market and how best to adapt to that buyer.

“Greater Vancouver’s over-55 demographic is sitting on $163.4 billion in clear title housing. What will be the impact of $163.4 billion in equity in the hands of an aging population in our marketplace?

In a city that is becoming increasingly unaffordable for young home buyers, the inevitable result is that the average age of Vancouver residents is slowly rising. Fewer children can afford to live near their parents or grandparents. Selling, or downsizing, among this growing demographic is opening up a whole new market for developers.

“The big shift is that these existing homeowners will be buying down, not up, over the next 15 years,” said Rennie. “With seniors, it will not be about the built form. It will be about walking for coffee, for groceries and to pharmacies.”

Rennie calls the growing number of large condo and apartment developments around the region “energy centers”.

“Richmond Center is an energy center. Metrotown is an energy center. It is a pretty simple formula. The consumer wants to be on transit and walk to everything. Marine Gateway created an energy center.”

Rennie says if developers want to capture the demographic that will be downsizing, then properties need to be built in these “energy centers” that cater to these aging and prosperous buyers. He says the “buy-down empty nesters” want large, high end three bedroom condos, with a family room and a large outdoor space.

“Build townhomes. They are probably the most undersupplied market,” said Rennie.

Rennie also tackled what he says is a “bumpy, sensitive” issue by examining in detail a recent newspaper story about 52,000 new, wealthy Chinese immigrants waiting to invest and potentially driving up housing prices. Rennie says after some fact checking the number is closer to 2,400 per year from China.

“Not quite as sensational as the headline,” said Rennie. “This story, and many like it, causes the stereotyping of our new citizens. I believe that we have to start admitting that we no longer live in Vancouver. We live on the planet.”

“For the past 39 years, I have observed three traits on immigration. One, it seems the money comes, and then the people do. Two, when money is allowed to flow, it flows. And when it’s not allowed to flow, it really flows. And three, as things slow down in China or anywhere that there is unrest, Vancouver becomes even more sought after, not for speculation, but for schools, clean air, water, diversity, freedom of speech and a very safe place to invest.”

All  reasons that Rennie says will continue to make Vancouver “the most vibrant and liveable city in the world.” And of course, a great place to buy a condo.

©Observer Media Group