Peter Simpson
Sun

Kevin Lutz
Sun

Ozzie Jurock
Sun

Kelowna home costs rank 13th highest in six-country survey

Susan Lazaruk
Province

It’s official: Homes in Vancouver, Abbotsford, Victoria and Kelowna are “severely unaffordable” and among the top most expensive housing markets among six countries surveyed.

The high housing prices are not because they’re desirable places to live, but because urban planners and governments limit urban sprawl, according to the fourth annual report by a U.S. public policy firm called Demographia.

There’s “one clear conclusion: The affordability of housing is overwhelmingly a function of just one thing, the extent to which government place artificial restrictions on the supply of residential land,” Donald Brash, a former governor of the Reserve Bank of New Zealand, wrote in the 2008 report.

“The pathway to affordable housing is abundantly clear: Remove urban growth boundaries.”

In Metro Vancouver, that means the Agricultural Land Reserve. Developers say it’s time to reopen the debate on whether the ALR still makes sense, decades after it was brought in.

The Demographia report ranked affordability in Canada, the U.S., the U.K., Ireland, Australia and New Zealand based on how expensive housing is in relation to incomes, with a rating of three the cutoff for affordability.

Canada overall was rated at 3.1, which means it takes three years of median household income to buy a house at the median price, the midpoint between the highest and lowest.

Vancouver’s 8.4 rating means it would take 8.4 years of median income to buy a house at the median price.

That news comes on the heels of an RBC housing affordability forecast that found Vancouverites would need 70 per cent of their net income to buy a house.

The numbers are painfully real for Carl Larouche, 44, a Vancouver teacher who recently bought a one-bedroom apartment on Great Northern Way for $265,000 after discovering 400-square-foot bachelors were fetching $300,000 in the West End.

But Larouche, who is from Saguenay, Quebec, the second-cheapest place in Canada to live, where houses cost about $100,000, said, “I would never go back there. Those are the sacrifices you make to live in Vancouver. I would be happy in a tent here.”

Even though Vancouver’s rating is up from 7.7 last year, Vancouver moved down to 15th spot overall. And Victoria, with a rating of 7.3, inched up one spot to 22nd.

Kelowna was ranked for the first time this year and vaulted ahead of Vancouver into 13th spot worldwide, with a rating of 8.5. Abbotsford, at No. 59 worldwide, was also ranked for the first time. Both are less affordable than Toronto.

Report author Wendell Cox argued that scarcity drives up prices and limiting growth limits supply.

For instance, housing is affordable in the large, vibrant cities of Atlanta and Houston because city planners don’t inhibit growth.

In Vancouver, Philip Hochstein of the Independent Contractors and Businesses Association said it’s time to rethink the ALR, which makes up 20 per cent of Metro Vancouver’s so-called Green Zone. It includes parks and public spaces and accounts for 70 per cent of Metro Vancouver.

“It’s one of the things driving up the cost of housing,” he said.

“Supply is being restricted by the land use policy.”

The ALR has become a “sacred cow,” he said. “Meanwhile, my kids can’t afford to buy a house.”

Hochstein said 60,000 hectares set aside for agricultural use isn’t being used for agriculture. He said it may be unrealistic to anticipate that the Lower Mainland could be fed by food grown on that land, a goal when ALR was born.

“We shouldn’t be afraid to have the debate over whether it makes sense anymore,” he said.

But urban planner Bob Ransford said, “If we develop all of the Agricultural Land Reserve, what would we do then?”

He said Demographia is an advocate of urban sprawl.

The report doesn’t factor in other costs, he said, the largest of which is commuting, and intangibles, such as quality of life.

He also said Vancouver is more restricted by geographical factors than public policy. “They’ve got it quite backwards. By containing growth, we can lower house prices.”

© The Vancouver Province 2008

Noelle Knox
USA Today

The most striking trend in the San Bernardino real estate market is the surge in foreclosures. Lenders filed close to 24,000 notices of default last year, up nearly 150% from 2006, to alert delinquent borrowers that the foreclosure clock was ticking. And 7,727 homeowners lost their homes through foreclosure — roughly one in 20 sales and up nearly 720% from the previous year, according to DataQuick Information Systems.

“Foreclosures have been growing at a rapid pace for all of 2007, and we anticipate almost an avalanche in 2008,” says Rich Cosner, president of Prudential California Realty.

His agents are telling owners who need to sell within the next five years to put it on the market now because prices are projected to fall further. For buyers, though, interest rates are the lowest in years, and there’s a 15-month supply of homes to choose from.

Price declines are hitting every neighborhood, Cosner says, though the Rancho Cucamonga area, on the western edge of the county, is holding up best because it’s closer to the job markets of Los Angeles and Orange counties.

During the real estate bubble, this market was on fire, with prices of resale homes soaring more than 167% from 2000 to 2005, according to DataQuick. But affordability problems, overbuilding and the mortgage meltdown have forced the housing market into a full correction. “I’ve been in this business for 35 years,” Cosner says, “and I don’t believe I’ve seen a more difficult market for homeowners.”

He hopes the recent drop in interest rates, and the federal government’s economic stimulus plan, will help stabilize real estate in San Bernardino, but, “We are not anticipating any significant turnaround until mid-2009.”

Bank of Japan chief faces a country

WILLIAM PESEK
Sun

If you think Ben Bernanke has a lot on his plate, consider the dilemma facing Toshihiko Fukui. With markets plunging and the U. S. on the verge of recession, Federal Reserve chairman Bernanke’s role is straightforward: Cut interest rates and pledge to make as many moves as needed to restore calm to the global economy.

Not so for Bank of Japan governor Fukui, who is grappling with whether to lower rates — or raise them.

As financial contagion spreads from the U. S. around the world, one school of thought has it that Fukui should add more liquidity to Asia’s biggest economy. Japan’s growth, after all, was weak before economists began their U. S. recession vigil. And Japan still hasn’t defeated deflation.

Another school wonders if the BOJ should be raising its overnight lending rate from the current 0.5 per cent. Excess money from Japan has been fueling bubbles around the world for years, contributing to today’s market volatility. Nearrecord oil prices aren’t helping.

This week, Fukui and his colleagues took the path of least resistance, leaving rates alone. Yet sitting on the monetary fence may not be an option much longer.

Fukui may simply be in denial. His five- year term ends in March and he has failed in his two goals: ending deflation once and for all and normalizing interest rates.

Japanese rates have been near zero for a decade now, and Fukui was determined to return shortterm rates to economically rational levels. No central bank, never mind one overseeing a Group of Seven economy, should ever become such a pawn of politicians that it essentially eliminates borrowing costs.

While Fukui has raised rates twice, he must regret being so timid. Japan has been growing healthily since 2002 and the economy could have sustained a few more rate moves.

The European Central Bank doesn’t have the dual mandate that complicates decisions for its peers. It is only concerned with price levels, while Bernanke also needs to juggle employment data. Japan’s central bank, it’s often forgotten, is the least independent of the three.

Lawmakers are already calling for Fukui to act as the chance of the world’s two biggest economies falling into recession increases. Politicians are also fretting about the yen’s 4.6- per- cent surge versus the dollar this year as export growth slowed for a second month in December.

It’s worth asking how a central bank that offers free money could do more. Politicians have used the B O J a s a n a u t o m a t e d t e l l e r machine since the asset bubble of the 1980s burst. Now, constrained by the largest government debt among developed economies, politicians are again looking for a BOJ bailout.

The odds favor them getting their way. It’s legacy- protection time for Fukui, and the last thing the BOJ wants is to be blamed for tipping Japan back into recession. Politicians are already setting Fukui up as the fall guy as growth slows.

It almost doesn’t matter whether a slight rate cut would help Japan’s economy. It would be more of an exercise in confidence- boosting than anything. That’s part of Japan’s policy dilemma. Politicians, business people and consumers have become so reliant on zero interest rates that they almost can’t function without them.

Japan’s real- estate market is already showing signs of duress and office rental growth in Tokyo may slip below 10 per cent in 2008 for the first time in four years.

The Nikkei 225 Stock Average this week experienced its worst two- day drop in 17 years. Amid such wild swings in markets, pokerfaced Fukui can deny a rate cut is coming all he wants. Reality may soon have the BOJ playing a different game.

David Paul Morris
USA Today

WASHINGTON (AP) — Sales of new homes plunged a record 24.6% in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes.

The Commerce Department reported that sales of new homes dropped to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1% plunge in 1980. It was also the first time since 2002 that sales were under 1 million.

The government reported that the median price of a new home barely budged last year, edging up a slight 0.2% to $246,900, the poorest showing since prices fell 2.4% during the 1991 housing downturn.

The report reinforced the view that housing is currently undergoing its worst downturn in more than two decades, with the slump threatening to surpass in some ways the severe housing recession of the early 1980s.

The housing weakness has dragged down overall growth and sent shockwaves through the rest of the economy including the financial sector, which is dealing with billions of dollars in losses in subprime mortgages. Some analysts are worried that the fallout could become so severe it will drag the entire country into a recession.

The Federal Reserve unexpectedly cut a key interest rate by the largest amount in more than two decades last week following an emergency meeting, and it is expected the Fed will cut rates further at a regular rate-setting meeting this week.

The 26.4% drop in sales for 2007 represented weakness in every part of the country except the Northeast, where sales posted a small 1.6% advance. Sales recorded declines of 32.2% in the West, 26.7% in the Midwest and 26.3% in the South.

New-home sales fell 4.7% in December to its lowest rate in nearly 13 years while the median sales price dropped sharply.

New-home sales fell to an seasonally adjusted annual rate of 604,000 from a downwardly revised rate of 634,000 in November.

In December, the median sales price for a new home fell 10.9% to $219,200 from November.

Quality materials, easy-living design important

Pedro Arrais
Province

New buyers are looking for features that enhance their comfort, security and enjoyment, and that reflects in the high prices of today’s homes. Three experts — a home builder, a realtor and an interior designer — provide their take on the must-haves for today’s home buyers:

1. One-level living

“As boomers age, the demand is rising for no-step homes,” says Mike Baier of Limona Construction in Victoria. “Clients are now asking for a main-floor master bedroom, even in two-storey houses.” The bedrooms on the upper level, Baier says, are then reserved for use by children and guests.

2. Storage

As land prices rise, storage space is at a premium in most new construction.

In most instances, Baier says, a larger garage or a crawlspace is enough. But he says the solution many homeowners rely on are private storage facilities.

3. Spa-like features

After the kitchen, a spa-like bathroom tops the list as a nice-to-have feature in new homes. “Generally speaking, it is the woman that makes the final decision [choosing a home],” Baier says. “The spa bathroom, with its granite countertops and radiant, in-floor heating is extremely popular now.”

4. Green features

“We are at the level where people will ask about green houses,” Baier says.

“People are talking about it more, but the story changes when the buyer has to pay extra for it.” He says there is no question consumers will pick a green house, but only if the price is close to that of standard houses.

5. Community

Where the house is located now plays a larger part in the decision to purchase a house,” says Jack Barker, a real estate agent with ReMax Camosun in Victoria. “Buyers in their mid-50s and up place more value to a sense of comfort and safety in their surroundings.” They like houses that are close to amenities, that allow them to walk for exercise.

6. Laundry facilities

“The new focus is to locate laundry facilities close to the master bedroom,” Barker says, adding that where there is only one main laundry room, it is usually larger, with more storage capacity.

7. Lighting

The aging population also desire houses that have an abundance of windows.

“The demand is for as much natural light as possible as there is less call for intimate dining scenarios,” Barker says.

8. Designer colours

Homeowners are using paint as a way of pulling together a room, says interior designer Janie Apostolakos of Victoria‘s Sacara Designs.

9. Hardwood flooring

Wood floors are popping up everywhere, even in kitchens and bathrooms,

Apostolakos says. “Depending on their budget, people are using paint or flooring to change the mood of a room,” she says.

10. Entertainment or family rooms

With the decline in prices for plasma and other flat screen televisions, rooms that formerly housed large entertainment units are being converted to multi-function family rooms.

11. Quality cabinets

Still the centre of a modern home, demand for Shaker-style cabinets with simple clean lines in maple, cherry wood and walnut prevails. “There is something for every price point,” Apostolakos says. Granite and quartz countertops continue to be popular.

12. Stainless-steel appliances

The only clients who shy from stainless steel these days are those with children, Apostolakos says. “They don’t want to spend their whole day cleaning up fingerprints.”

© The Vancouver Province 2008

 

Tony Gioventu
Province

Dear Condo Smarts: We’ve been fighting with our strata council for the past two years about fixing the roofs on our buildings before it’s too late. Well, now it’s too late.

After the last rain storm, we noticed a huge water bulge in our ceiling paint that let go all over our dining room furniture, Persian carpets and family photo albums. The damage to our personal property is more than $10,000. We paid our own deductible of $1,000 and we’re now living under a tarp while the water and cold seep in to every crack.

Our once modest townhouse has become a disaster construction site and there is now extensive water damage to the sub roofing, attic insulation and our drywall and flooring. The strata insurance company have generously agreed to pay the initial claim for restoration but they are not paying for roof repairs and deferred maintenance.

pays when the loss is not our fault and how do we get our strata to move on roof replacement?

— Saturated in North Van

Dear Saturated: Deferred maintenance or replacement is, simply put, a bad decision. No one benefits. The costs are substantially higher — 30 to 50 per cent more when you finally get around to the repair and the collateral damage to owners’ personal property, disruption to their lives, loss of work and general discomfort and loss of property value can never be recovered. Deferred maintenance that results in insurance claims is also a nightmare for strata corporations because you may find your insurer may or may not cover your claims.

Tim Helson at Vancouver Island Insurance Centres advises that claims have to be generally sudden and accidental. Resultant damages may be claimed but the maintenance item may not. In many circumstances, insurance policies refer to claims relating to maintenance, mould resulting from maintenance, or damages resulting from deferred maintenance. Leaking roofs, plugged gutters, damaged balconies and failed window systems are common maintenance culprits that may not be insured.

Insurance is for those events you can’t plan on, whereas you can plan for a responsible maintenance program. If your strata is deferring maintenance, the owners might want to take control. Demand a special general meeting to address the repairs and formulate a repair and payment schedule. Your strata corporation may find themselves facing a lawsuit for damages to personal property or betterments if the strata has failed to meet its obligations.

You might want to consider the following: Spring seminars on strata living start this Wednesday evening at UBC Robson Square More information at choa.bc.ca

Tony Gioventu is the executive director of the Condominium Home Owners Association (CHOA). Contact CHOA at 604-584-2462 or toll-free at 1-877-353-2462, fax 604-515-9643 or e-mail [email protected].

© The Vancouver Province 2008