Joannah Connolly
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There were 8,989 residential sales in British Columbia recorded by the MLS® in June, up 24.9 per cent from June 2013, according to British Columbia Real Estate Association (BCREA) figures released July 16.

Total sales dollar volume was $5 billion, an increase of 30.5 per cent compared with a year ago.

The average MLS residential price in the province rose to $556,977, up 4.5 per cent from June 2013.

 “Home sales finished the second quarter on an upward trend,” said Cameron Muir, BCREA chief economist. “The increase in provincial housing demand was broad-based, with the largest year-over-year increases occurring in the Okanagan, the Kootenays and Chilliwack.”

Home sales increased 46 per cent in the South Okanagan and nearly 30 per cent in the Okanagan Mainline Real Estate Board area.

In the Kootenays, home sales rose 36 per cent year over year and in Chilliwack they increased 33 per cent.

“Market conditions also continued to improve, with the Okanagan and the Lower Mainland even flirting with sellers’ market conditions,” said Muir.

In the first half of the year, BC’s residential sales dollar volume was up nearly 26.8 per cent to $23.8 billion, compared with June 2013. Residential unit sales were up 18.5 per cent to 41,883 units, and the average residential price was up 7 per cent at $568,499.

© 2014 Real Estate Weekly

Susan M Boyce
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To buy or to rent? It’s one of the most hotly debated questions in any city – and nowhere more so than the Lower Mainland. Here, expensive housing means that buying is often a big trade-off between your money and your lifestyle.

While many believe that the benefits of owning your home far outweigh being beholden to a landlord, others argue that more money can be made over the long term by investing the savings made from renting.

So what are the pros and cons of renting versus buying – and which choice is ultimately going to offer the best long-term financial outcome for you?

Why Rent

1) Live where you want.

When you find a neighbourhood you love, you can probably afford to live there as a renter, even though buying there might be out of the question.

And if you’re new to town, renting is a terrific way to test-drive a neighbourhood. Decide you don’t like the local shops, length of the commute to work, traffic noise, or view? No sweat… at least, it’s no more sweat than packing your stuff and moving somewhere else.

2) Stay flexible.

Let’s face it, if your job or your round-the-world travel plans mean you’ll only be in town for a couple of months or even a year, it makes sense not to be tied into a mortgage. Renting is also far more cost-effective than living in hotel – even when you pay the extra for a fully furnished suite – plus you get the convenience of extra space.

3) Maintenance? Not your problem.

When you’re a tenant and something breaks, help should be no more than a phone call away, with no cost to you to fix it. Consider the expense associated with a leaky roof, water damage from a burst water pipe during a cold snap, or even replacing the shrubbery that expired in an heat wave while your were on vacation.

These are the kinds of sudden expenses home owners face and renters don’t. And owners also have to factor the ongoing costs of maintenance into their budget, on top of their mortgage payments. Those are all included in your rent.

4) Avoid the extra costs of buying.

Aside from maintenance costs, buying a home involves a host of extra expenses that add thousands of dollars onto the purchase. These include legal fees, property transfer tax, inspections, sometimes GST and more. Renters escape these up-front costs entirely

5) Know what you’ll pay.

And there’s the stability of knowing exactly what your monthly outlay will be. In BC, 2014 rent increases are limited to 2.2% by law. Mortgage rates aren’t. Although we’ve enjoyed historic low interest rates for a number of years, there’s nothing to protect home owners from a return to higher rates in the future – a particularly scary thought for anyone who’s paid only a minimal down payment.

6) Invest the difference.

Many owners are stretched and have no room for savings. Smart renters invest the money they save by renting, and make sure their RRSP and TFSA savings are at the maximum so they take full advantage of tax refunds and tax-free growth. It requires discipline and attention (and a trustworthy financial advisor), but the returns over the long term are very close for owning a home and investing in the stock market. John Andrew of the Queen’s University Real Estate Roundtable did a study that found TSX annual returns from 1981 to 2012 were 5.45 per cent, excluding dividends, compared to 6.43 per cent for Vancouver housing over the same 30 years. Another study, quoted by Rob Carrick in the Globe and Mail cited stock exchange gains of 8.5 per cent over thirty years.

Why Own

1) Enjoy the fact it’s all yours.

It’s a cultural thing with Canadians to want to buy a home – about 70 per cent of us do. Pride of ownership, the ability to decorate how you like (even if your favourite wall colour is purple), and the stability of knowing no landlord can force you to move are big motivators.

2) Put your money to work.

Typically the biggest motivator is dollars and cents. Renting means every penny of your monthly payment is spent – gone for good… period. On the other hand, a portion of each month’s mortgage payment goes to reducing your principal – it’s like putting cash into your own savings account rather than someone else’s.

And with time your home’s value will probably go up. Historically, housing values continue to rise steadily over time, thus creating a solid investment in your future. As they say in real estate, it’s not timing the market, it’s time spent in the market.

Then there’s the leverage factor. Let’s consider a hypothetical $400,000 apartment. A 20% down payment would mean an actual investment of $80,000. As your property value increases, however, you reap the benefit on the entire $400,000 – so an annual increase of just 2.5% in property value translates to $10,000 or a whopping 12.5% return on your initial investment. Of course, you could always settle for something closer to the current return of 3% or less on a term note.

Most insiders agree that today’s historic low mortgage rates show no sign of bumping up any time soon. And while a 25-year amortization on a mortgage may sound like a long time, it goes by fast and suddenly you’re mortgage free with only property tax and maintenance to pay. Rent, on the other hand, never ends – it only increases.

3) Benefit from competition for your dollar.

In today’s competitive market, developers are offering increasingly innovative incentives for buyers considering a brand-new home. No strata fees for a year or more, legal expenses, exotic vacations, upgrade packages, custom vintage wines, even cars have made appearances as no-cost buyer incentives.

4) Make tax-free profits.

Final thought to ponder. Although an RRSP should be part of every retirement plan, you will always need a roof over your head. You’re also forced to convert an RRSP at age 71 and begin withdrawing funds and paying tax on them. But only you choose when to sell your home. Best of all, when you do sell, that profit is tax free on your primary residence – and after all, who doesn’t like to get a tax-free windfall?

A Sample Calculation

Still not sure whether to buy or rent? These calculators can help you figure out what works financially for your situation:

Vancity Mortgage Calculators

Investor Education Fund Buy or Rent Calculator

Let’s do a sample calculation from the Investor Education Fund website, taking the example of a person trying to decide between purchasing a two-bedroom West End condo for $500,000 or renting a similar condo for $2,000 a month.

We plugged in the buying scenario of:

• $500,000 purchase price;
• a 20 per cent down payment;
• buying costs of $7,500 (waived Property Transfer Tax as the assumption is this would be a first-time buyer);
• a $400,000 25-year mortgage at 5 per cent (monthly payment would be $2,326, according to the Vancity calculator);
• strata fees of $5,000 a year;
• property taxes at $5,000 a year;
• home insurance at $1,200 a year; and
• various other standard parameters such as price growth and inflation.

Then we compared this with renting the same apartment:

• $2,000 a month rent;
• 2 per cent annual rent increase; and
• the renter investing all the savings (money not spent up front and on monthly fees such as strata fees and taxes, as well as the difference between rent and mortgage payments) into a 3 per cent return investment.

© 2014 Real Estate Weekly

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Joannah Connolly
Other

Home prices increased year over year across all Vancouver housing types in 2014’s second quarter, and will rise 7.1 per cent in the rest of the year, according to the Royal LePage House Price Survey and Market Survey Forecast released July 9.

The average price for single-family homes increased the most, with detached bungalows increasing 5.2 per cent year-over-year to $1,107,290 and standard two-storey homes increasing 4.6 per cent to $1,204,011. Condo prices remained largely flat, increasing by 0.3 per cent year-over-year to $491,984.

This compares with the national average price increase of between 3.9 and 5.2 per cent in the second quarter of 2014. According to Royal LePage, detached bungalows posted the highest year-over-year gains across Canada, rising 5.2 per cent to an average price of $406,454. Standard two-storey homes rose 5.1 per cent year-over-year to $440,972, while standard condos increased 3.9 per cent to $258,501.

“Prices in Vancouver are up overall because increased buying activity, due to continued low interest rates and a pent up demand leftover from a fairly slow start to 2014,” said Bill Binnie, broker and owner of Royal LePage North Shore.

“Sales are up this quarter due to more demand than we’ve seen in at least the past three years.”

Chris Simmons, broker and owner of Royal LePage Westside, said, “Detached homes have increased in price by about 4 to 5 per cent, largely due to a diminishing supply of homes because of land assemblies for new strata projects and sky train projects and a strong continuing demand.

“Condos are also up in price, appreciating approximately 1 per cent over last year. There is still strong demand for condos, but the supply is continuously growing, leading to a slower increase in price appreciation.”

Simmons said housing inventory in Vancouver is sitting below the 10-year average.

“While there has been a steady supply of new housing being built over the last few years, the supply of listings has not increased markedly,” he said.

Royal LePage forecasts that home prices in Vancouver will rise by approximately 7.1 per cent in the remainder of 2014.

“The real estate environment is very stable right now, so the future of house prices depends a lot on interest rates. If the rates remain the same as they are currently, we can expect to see slow but steady price appreciation for the rest of the year,” said Binnie.

© 2014 Real Estate Weekly

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Vancouver Cohousing is being built as privately owned, fully equipped homes, plus common areas, in one-, two- and three-storey buildings. The project spans three double-deep lots on 33rd Avenue between Victoria Drive and Knight Street. We plan to move in in the summer of 2015.

The homes will range from studios to one-, two-, three– and four-bedroom units – all with their own kitchens. The main common area will be a clubhouse with a community kitchen and dining room, activity rooms for children and teens, office areas, guest rooms, a yoga studio and a rooftop garden. As well, there will be ground-level gardens, workshops, courtyard and play area to encourage year-round social contact. All parking will be underground.

By working together, Vancouver Cohousing members will be able to share amenities common to a traditional home and reduce the size of their private dwelling.

The group building this project has come together to design housing that is family-supportive, senior-friendly and energy-efficient, and build 31 units.

Three units remain unsold: #115 is a 450 sq. ft. studio at $286,080, #206 is a 1,055 sq. ft. three-bedroom at $622,485, and #308 is a 1,146 sq. ft. three-bedroom at $682,393.

Copyright © 2014 · All Rights Reserved · VancouverCohousing.com

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Elizabeth Wilson
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In this pricey Vancouver real estate market, do you have to give up the lifestyle and neighbourhood you love to buy a home you can afford?

Not at all.

There’s a back door to the real estate market, and not many people use it. The plan is, you don’t buy your home. You rent in the place where you want to live, with the lifestyle you love. You buy investment properties in areas you can afford, and rent them out to other people.

That way, you’re building equity in a real estate market that you otherwise wouldn’t be able to afford to break into. And eventually, it means that you’ve raised enough equity to buy your own home, or you’ve paid off a mortgage and can live rent free, as your rental income from your investment property covers your own payments.

“If you’re doing it properly and you have an appropriate amount of capital, eventually you’ll be living rent free,” says Don R. Campbell.

He has built his own career on buying income properties, and his Real Estate Investment Network provides education and resources for other Canadians who want to do the same. REW.ca talked to him about how this strategy works.

REW.ca: How is buying investment property different from buying your own home?

Don Campbell: As far as investment, we have 12 questions we ask when we’re trying to identify a neighbourhood that has a good future for investment. None of those questions is “Would you want to live here?”

You’ve really got to remove the emotion. You have to think like a business owner. Starbucks figure out who their customers are and ask if there will be enough customers in a given area for them to charge $5.00 for a coffee. And if the customers aren’t there, they don’t build there.

That’s the same for us as property owners. We consider our tenants not as tenants but as customers. That way you think a little bit differently: “What do my customers want and are they willing to pay for it?”

You need positive cash flow, which is more income than all of your expenses including your mortgage.

REW.ca: So where are all the paying customers now?

Don Campbell: If I wanted to live downtown or in the West End with a view and that lifestyle, where would I put my capital? I would put my capital in Surrey, especially some of the older regions because this is going to be a 10-year hold or longer. I would seriously look at the Maple Ridge region. I would definitely look at the job growth that’s going on in Abbotsford.

And for sure  ̶  because it does not matter geographically, it’s where my money’s going to work hardest  ̶  I would look at Dawson Creek, Fort St. John and Edmonton.

REW.ca: Isn’t it conventional wisdom that you should buy rental properties close to where you live?

Don Campbell: One of the worst myths on the planet is that you should buy an investment property close to where you live!

It will drive you around the bend if you can see that property every day. They’re not going to look after it as well as you, no matter how well they look after it. So you’re driving by and thinking, “Why haven’t they cut the grass?”

That is a strategy that people who lose a lot of money in real estate investment follow.

You should be buying where your money is going to provide you the biggest yield. You don’t really care where the head office is of a stock you buy. Nor should you care where, geographically, the property is.

You need to look at the economics behind the property… where’s the job growth, where’s the population growth, where are the average incomes increasing, for instance. And then when you identify where people are moving, you really boil it down to where transit is. And where do the millennials want to live, and what kind of property do they want to live in and what kind of renos are they expecting?

Put your money there and let the market carry you.

We all have these preconceived ideas that get in the way of the average investor. I hear people in Vancouver say, “I would never invest in Edmonton because their winters are so long.”

Well that makes no sense. The jobs are growing faster than anywhere else in the country and people are moving there faster than anywhere in the country. These people aren’t going to live in tents. They’re going to rent from you. And Alberta has no rent controls, so when the market heats up the rents go up, when the market goes down, they don’t.

REW.ca: What housing types should investors be looking at?

Don Campbell: Two to three bedrooms is what I would buy.

Townhouses are fantastic. The millennial generation will be coming into the market in 2016, and townhouses have that sense of community that millennials really appreciate ─ that village feeling, especially if they’re close to shopping and transit.

Detached houses are worth it as an investment only if you can find them with cash flow. Secondary suites are really important.

Both of these have a little bit of dirt, and increasingly people are having pets. If you’re a landlord there’s nothing better than saying, “Yes, you can have pets.” You can charge a lot more rent by accepting pets.

Condos are going to be a bit of an issue in 10 to 15 years. We’re going to be mixing baby boomers with the millennials who are just coming in and buying two-bedroom units and having kids running up and down the hallway. And the boomers are going to want to make sure that the building is maintained, so condo fees are going to have a pressure of going up, which will be a financial problem for a lot of millennials who have bought a condo as their first home. Over the next 15 years, you are going to see a dramatic increase in conflict on condo boards.

REW.ca: What are the big “don’ts” for people interested in real estate investing?

Don Campbell:

• Don’t choose a region where something might happen. For instance,  I would avoid Northwest BC towns until the whole pipeline debate is finalized – that’s going to be a long process, and speculators have already driven those markets up.
• Don’t invest when interest rates are over 16 per cent… of course that’s not going to happen any time soon, but I use that number because I got started in 1985, just as they headed down from that level.
• Don’t invest in an area that’s becoming unaffordable. Your objective is to get in before that happens.
• Don’t buy just because it’s close or it’s cheap or the builder’s giving you a deal. Do your research.

REW.ca: What are the 12 questions you’ve talked about?

Don Campbell: These are the key starter questions that uncover the economic fundamentals of a place.

1. Is the area’s average income increasing faster than the provincial average?
2. Is the area’s population growing faster than the provincial average?
3. Is the area creating jobs faster than the provincial average?
4. Does the area have more than one major employer?
5. Is the area in the RBC Affordability Index Hot Zone (25% to 39%)?
6. Will the area benefit from an economic or real estate ripple effect?
7. Has the political leadership created an economic growth atmosphere?
8. Is the Economic Development Office progressive and helpful?
9. Is the area’s infrastructure being built to handle the expected growth?
10. Are there any major transportation improvements in the works?
11. Is the area attractive to the baby boomers’ lifestyle?
12. Is the area poised to attract and support millennial and Generation Y demands?

It takes a bit of education. You have to do a little bit of homework and pay attention to how the world works and how finance works and how real estate works, but I am consistently getting yields of 18 and 21% on property, and that’s after paying a property management company. All it is, is just being strategic and getting in front of where people are moving.

© 2014 Real Estate Weekly