Developer warns of slowing condo market
From the ‘sun predicted to set’ department of todays Province comes this article: BC developer warns of cooling condo market.
B.C.’s development industry must be nimble, disciplined and well-financed to survive the cooling of the provincial market, a veteran developer says.
The Lower Mainland has yet to experience the full impact of the U.S. housing slowdown and the troubles sweeping the Interior’s forest sector, Concert Properties president David Podmore said yesterday.
“I do think you’re going to see a continued slowing of our economy as . . . what’s happening in the Interior and the U.S. spill over,” Podmore told a conference on the future of B.C.’s housing industry.
“You’re going to have to really sharpen your skills to be successful and to compete effectively.”
Podmore said developers should stop relying on pre-sales, which he called a phenomenon of the past eight to 10 years.
The market is heading into a period where projects may take half-a-year to sell out, he said.
Disciplined developers will pull the plug on projects if it becomes clear they can’t succeed, he said.
There will be opportunities for well-financed developers to take over idled projects – but they must be fast on their feet, he said.
The ‘pulling of plugs’ has already started to happen on some projects like the Eden group Elyse. Those that don’t pull the plug when they can get it pulled for them and go into recievership Sophia, H+H, Gardencity, etc. There’s good news though, as the US housing slowdown continues it’s forecast that material prices will moderate.
May 31st, 2008 at 9:48 am
My income which is almost exactly the Canadian median, could support $200 a square foot.
It's already down to around $300 a square foot in parts of Southern California…
May 30th, 2008 at 8:01 am
patriotz,
I don't see downtown condos going down to 100x if mortgage rates stay around their current level. If they do I'll be buying up everything the bank will let me.
If rates make it up to 10% or more, its certainly possible.
May 30th, 2008 at 7:54 am
Alum,
I would pay $200K for a condo that I could rent out for $1,500. You must love subsidizing renters.
May 30th, 2008 at 7:08 am
Take responsibility for your own lives.
Along the same lines if you can't handle the comments around here then take some responsibility for your own life and find another blog.
May 30th, 2008 at 6:31 am
As for the Team 1040 talking up that Kelowna development. It’s called ADVERTISING.
The point is advertising can be done well or it can be done poorly. It just sounds sad and pathetic to use the 'act now before they're all gone' line of promotion for months on end. Clearly they aren't disappearing at a rapid rate.
Take responsibility for your own lives.
I absolutely agree with you here, that includes accepting the repercussions of your actions. If you decide a condo is worth $400k today, but in the future the only buyers around decide its only worth $200k, then DONT ASK FOR GOVERNMENT BAILOUTS.
May 30th, 2008 at 1:23 am
Anonymous Says: And here I am just about to sign up for a 40yr mortgage on a nice leaky condo near Victoria and Hastings. RE promoters are very such honest people.
Gawd, what a baby. Did a RE "promoter" cram a pen in your hand and force you to sign the purchase agreement?
As for the Team 1040 talking up that Kelowna development. It's called ADVERTISING.
Take responsibility for your own lives.
May 29th, 2008 at 9:48 pm
The Kings of Queen Street:
All these crazy programs on TV — they stick ideas in your head — and we thought, 'Hey, maybe we could flip a house.' – Richard Hou
Hey guys, didn't they tell you not to build the most expensive house on the block?
Here's what $1.5 mil gets you in Rosedale
May 29th, 2008 at 9:03 pm
the spectrum would probably be comparable to other towers downtown, minus the granite countertops. something like the beasley would have trouble maintaining an upscale image once the marketing campaign is toast. the image versus real product helps create the $300/sq foot discrepency i suppose. the spectrum would have better views and amenities, versus closer proximity to cafes for the beasley. not one of bob rennies better comments.
May 29th, 2008 at 8:27 pm
When Bob Rennie was talking about building "affordable" housing with Ikea-level finishes to keep costs low, I imagine a condo like Spectrum. The problem is, Spectrum is priced as if it's luxury. The general consensus is that the building sucks but I think people wouldn't mind if it was reasonably priced. So long as Spectrum one-bedrooms remain in the $350K+ range, the place will be a joke.
May 29th, 2008 at 8:23 pm
I would buy a condo at $400K if I can rent it for $1500/month
Anyone wonder why this market still has legs?
100x rent, big guy. You heard it from me first.
May 29th, 2008 at 8:12 pm
"There will be opportunities for well-financed developers to take over idled projects – but they must be fast on their feet, he said."
This guy is better at stroking himself than Rob.
I suppose the implication is that people should buy a condo from him.
I guess well financed developers don't use numbered shell companies, and don't build leaky condos.
May 29th, 2008 at 7:21 pm
I would buy a condo at $400K if I can rent it for $1500/month
$1500 monthly rent would suggest a value of 100x to 200x monthly rent using standard metrics.
1500×100 = $150,000 to $300,000, would you pay more than $300k ?
May 29th, 2008 at 6:57 pm
I would buy a condo at $400K if I can rent it for $1500/month
May 29th, 2008 at 6:25 pm
The other big factor is that Germans don't have a cultural bias towards ownership (only about 1/2 own) and renters enjoy strong legal protections. If you like renting, there's no point in paying more to be an "owner".
This is also true of Quebec, which doesn't have a bubble either.
May 29th, 2008 at 6:25 pm
I think is going to be $200/sq ft
May 29th, 2008 at 5:23 pm
I always find it odd when people talk of ‘bear’ and ‘bull’ as if its a permanent condition when its an opinion based on where a market is now and where its likely to head.
That is because real estate "investing" has become an ideology, i.e. a belief system with a fixed conclusion, "real estate always goes up", toward which all evidence must be twisted.
Since ideologues don't accept or understand rational thinking, they assume that their opponents must support the inverse ideology. Thus to them anyone who thinks that it's not a good idea to buy RE now is a "permabear". They cannot understand that whether or not something is a good investment depends on what you pay for it.
Greater fool "investing" has nothing to do with capitalism or even Marxism, which both recognize that the value of a capital asset depends on the income which it returns to its owner.
May 29th, 2008 at 12:28 pm
"REAL ESTATE DOLDRUMS Why the Global Housing Market Boom Bypassed Germany"
http://www.spiegel.de/international/business/0,15…
A RE article regarding a G8 nation at a completely different phase of the RE market cycle than what is normally discussed on our local blogs. A refreshing read.
Germany became quite credit-phobic following the great depression and the great wars. I found it difficult to use a credit card there until only the last decade it seems. Recent generations are more credit-friendly, but various side-effects of re-unification have shown the hazards of credit to them now as well. Germany has a declining population and a reputation of durable housing (compared to the Vancouver crap construction), which reduces demand and prevents attrition of housing supply. Additionally there's lots of permits and approvals to get when building there.
Anyhow, it's interesting see an analysis of a different western RE market.
Enjoy!
May 29th, 2008 at 11:48 am
Interesting link YTWNboomerang – I always find it odd when people talk of 'bear' and 'bull' as if its a permanent condition when its an opinion based on where a market is now and where its likely to head. This opinion can and should change based on where the market goes.
I've been bullish on Vancouver real estate before, but I'm currently bearish on it. I think in the short term (5 years or so) its in for a beating and is presently overvalued, that doesn't mean that I think all real estate is always a bad investment.
May 29th, 2008 at 10:49 am
No doubt I’d love to see it in the $200 range, but I just can’t see that happening.
Condos are going to go down to 100x rent, at least in the marginal areas. If 600 sq ft rents for $1000/month, that's a price of $100K or $167/sq ft.
And don't tell me that can't happen, houses went down to 100x in the 80's.
May 29th, 2008 at 9:50 am
Radio ads… oh Man, I sometimes listen to the Team 1040 and they have been pumping the ever loving crap out of a development in Kelowna for months. "Hurry now or you'll miss out!!" It loses its meaning when you keep hearing the same message over and over and over. Bottom line: affordability is the issue! People won't be able to afford to keep buying. The musical chairs game of property ladder will eventually dry up because of affordability. It's a market, this is how they work. Also, people using their equity in their homes to fund further is all swell and dandy as long as the price holds, soon as it drops, it gets ugly.
Remember people on this site, who will remain nameless, pumping gold saying it was headed to $1,500 – $2,000 per ounce… it lingered around $1,000 and is now under $900. I stopped a friend from buying in around the $1,000 mark telling him to be careful and do some proper due dilligence. It's not smart in any market to buy at historic highs… I mean this is common sense is it not!?!? Drives me nuts saying these things its news to some.
Lastly, under that article there are plenty of people defending our proud and honorable system that have inflated the prices to these levels. I just hope those same people stand behind the system when it turns and the late-to-the-party-goers end up with huge losses and are left crying for help from the gov't etc… to save their asses. Let's see if their tone changes.
May 29th, 2008 at 9:37 am
The renter buys…
http://www.nytimes.com/2008/05/28/business/28leon…
Of course that's only because of the massive price drops but interesting to note how most of us bears will eventually come bulls once the bottom is hit…
May 29th, 2008 at 8:32 am
Warren, I can't find any Spectrum on MLS or Craigslist for under $500.Most seem to still be around 600. Saying Spectrum is marginal is flattering them.
May 29th, 2008 at 8:07 am
I bought prime space in Yaletown in 1999 for $300/sf. I'd love things to come back to that level, but I'd buy in at $400/sf now.
Spectrum and some other marginal buildings in the area are already in the high 400s, I'd expect them to slip to 300 while prime units (L'Hermitage maybe) go for 375-400.
May 29th, 2008 at 7:24 am
oh, and its not neccesarily the realtor that tacks on the extra 50 or $100k on the most recent sale, its usually the seller trolling for the greatest fool of all.
May 29th, 2008 at 7:21 am
are people really that stupid? of course they are. unfortunately for them the future supply of greater fools eventually runs out of money.
May 29th, 2008 at 6:23 am
Radio at work is set on rock 101 and brother Jake & his gang are pumping up the Beasley & quattro like crazy. they talk about it at least every hour
May 29th, 2008 at 6:16 am
Jeff, I'm with you. No doubt I'd love to see it in the $200 range, but I just can't see that happening.
There will be a day again when I can buy a 2,000 sq. ft. suite in prime yaletown for under $800,000. $600,000 would be real nice.
May 29th, 2008 at 5:18 am
Glad to see a slow down coming. I've been watching the Vancouver market for a while and it seems the realtos like to tack on 50 to 100 grand to a previous sale price when adding a new listing. And people continue to buy? Look at some of the sales histories in the buildings downtown at Les Twarog's site
http://www.lestwarog.com/region-1.html
Are people really that stupid?
May 29th, 2008 at 3:32 am
Sooooo, BC is the only province with more people on EI than last year. Even recession-ravaged Ontario has 2.2% less than last year while BC is up 1.8%.
All of Canada is -4.3%.
And some try to talk down the economic affect of the devastation to forestry. I happened to be in Newfoundland when the cod fishery collapsed, and I saw a little of our future in BC.
http://tinyurl.com/4unr6a
May 29th, 2008 at 1:02 am
I was thinking more like $100-$200/sqft.
May 28th, 2008 at 10:05 pm
prices will correct to normal of about $350-400/ft
May 28th, 2008 at 9:21 pm
Most pre sale purchasers who bought in about the last year, should be hoping their developer pulls out. Getting the deposit back would save their rear ends. What really amazes me is the fact that some new projects are still trying for such ridiculous square foot costs. 999 Seymour /Beasley etc. all at 800+. Just crazy.
May 28th, 2008 at 5:41 pm
And here I am just about to sign up for a 40yr mortgage on a nice leaky condo near Victoria and Hastings.
RE promoters are very such honest people.
May 28th, 2008 at 4:46 pm
some of the comments on the Province article are hilarious!