Vancouver Condo Info

Alright, you made it to the end of the week.  Here’s our news round-up to kick off the discussion:

-Vancouver Condo Info Wiki!
-Falling BC house prices a reality check
-CBC map of halted Vancouver condo projects
-Vancouver: Cracks appearing in condo land
-Mish: An American view of the Vancouver Market
-BC retail sales continue downward trend
-Don’t worry, be happy!
-Positive news alleviates housing market fear
-Signs of a US housing market bottom?
-Fed rate cut may have little impact

So what are you seeing out there?  Post your news, anecdotes and links here and have an excellent weekend!

note: any conversation on Vancouver, real estate or economics is allowed, please keep it civilized. When posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link will automatically create a clickable hot-link. Thanks!

According to an article in today’s Sun the BC Real Estate Association is projecting a sales drop of 28% across the province this year, with a slight rebound in 2009 as consumers ‘recover confidence’.

Muir said home prices have been declining since their peak in the first quarter of 2008, but on balanced over the year, he expects the $453,000 average price to remain three per cent above the overall average home price of 2007.

Muir expects the average home price to decline nine per cent to $413,000 in 2009, but downward pressure on prices to ease by the second quarter of next year as homes become more affordable and inventories decline.

The BCREA’s prediction is the latest housing forecast to be released and is more optimistic about recovery than the forecast released last week by Central 1 Credit Union, which forecast prices to fall more steeply and sales recovering in 2010.

Meanwhile at an industry meeting in Ontario realtors got a pep talk about the current downturn as an oppourtunity to “raise the bar”.

Serious agents who stick out the downturn will have the opportunity to shine, they added, although their optimism appeared lost on some participants.

“They’re basically saying that next year is a writeoff,” one audience member said to colleagues at her table.

The downturn may have a silver lining, causing the industry to “raise the bar” on customer service, said panelist Michael Polzler, regional director at Re/Max.

“There are far too many agents out there who don’t specialize, who do just two or three deals a year. Would you use a part-time lawyer or a part-time dentist? We need to raise the bar,” Mr. Polzler said.

On a side note: I’ve started up an experimental Vancouver Condo Wiki If any of you feel the need to obsesively catalog predictions, track sub markets or share tips and links.  If this works out I’ll eventually add a link from the main page of this site. For now you can find it at http://vancouvercondo.info/wiki

The Globe and Mail is reporting today that Merrill Lynch & Co are growing more ‘alarmed’ that the Canadian housing market is tracking the US housing crash with a 2 year lag:

Falling prices, overbuilding and too much unsold inventory in Canada are creating a trend similar to that in the United States a couple of years ago, Merrill economists David Wolf and Carolyn Kwan said in a research note Tuesday.

“Though the consensus does seem to be gravitating towards our view of a sustained downturn in the Canadian housing market, we still do not sense any particular alarm in either the policy-making or forecasting community. We ourselves are getting more alarmed by the day,” Mr. Wolf and Ms. Kwan said in their report.

They aren’t the only economists to raise the warning about a two year lag, though many still emphasis the differences between the US and Canadian housing markets:

The same two-year lag idea was raised this summer by Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., who called the apparent trend “unnerving” in a report in July.

At the time, Mr. Porter said there were many reasons why the two markets were different, but said even a pale version of what had happened in the United States would be bad news for Canada.

House prices posted a record 16.6 per cent year-over-year decline in the United States in August, according to the benchmark S&P/Case-Shiller Home Price Index report, also released Tuesday. The index has now shown year-over-year declines for 20 months.

Taking into account the two-year lag, Merrill’s data suggests the ramp-up in construction of housing units in Canada may be even larger than it was in the United States.

The number of units under construction currently is just off the peak hit in May, which was the highest recorded in 36 years of available data and 97 per cent above the long-term average, the report said.

By contrast at its peak in 2006, U.S. housing construction was 54 per cent above the long-term average, it added.

Of course, just like in the US its a bit vague to speak of a national housing market - the averages are pulled up in a boom and down in a bust by a few select cities, in our case Vancouver and Toronto are showing some alarming supply issues:

As of August, there were more condos under construction in both Toronto and Vancouver separately than there were in all Canadian cities combined a decade ago, Mr. Wolf and Ms. Kwan said.

“And as in the U.S. two years ago, we are now seeing completed units pile up unsold in Canada, a clear sign of overbuilding and an ominous sign given the voluminous supply still in the pipeline,” they said.

Inventories of unsold new single-family homes in Canada rose by 56 per cent year over year as of last month, close to the maximum increase in July 1990, which marked the last housing market downturn, the report said.

At the peak in April 2006, inventories of unsold new single-family homes in the United States were up 26.5 per cent over a year earlier, the report said.

The two-year lag could be the result of Canada having more room to run up because its recovery started later than that of the United States. Strong commodity prices and looser lending standards initiated in 2006 may also have contributed to the lag, the report said.

Hat-tip to Dingus for this link.

The stock market, the Canadian dollar, commodities, the Vancouver real estate market and yes, this site.  Everything is crashing.  Sorry folks, I’m aware that this site has been unreliable lately.  The topics covered on this blog seem to be getting wider attention, the number of visitors keeps growing and the hamster that runs this server keeps falling off the wheel.

We appreciate your patience and hope for better uptime, thanks for sticking with us.

From an Article in the Vancouver Sun:

VANCOUVER - Dropping real-estate values are sending more British Columbians into financial crisis and causing a spike in personal bankruptcies, according to professional debt counsellors.

Federal Industry Ministry data show that B.C. consumer bankruptcy filings for August were up more than 10 per cent over the same period last year.

August also saw a 16.3-per-cent increase in proposal filings, an alternative to bankruptcy.

And that was an improvement over July, when B.C. consumer bankruptcy filings were up 14 per cent over the same period last year and proposal filings were up 20 per cent.

“It’s a big jump,” said B.C. Association of Insolvency and Restructuring Professionals director Lana Gilbertson. “We don’t know if it will continue upwards, but during the recessions of 1981 and 1990-91 there were rapid increases in insolvency rates.

“Our professional community is seeing more and more individuals who can’t sell their property for what they thought it was worth and who can’t refinance or borrow more money against their property. They’re stuck,” she said.

For several years, Canadians have suffered from high levels of household debt, low rates of personal savings and feelings of stress about their finances, said Gilbertson.

“But a strong real estate market  in B.C. kept many afloat as homeowners were able to use a growing equity in their property to offset their consumer debt,” she said.

Funny how the answer to consumer debt was house debt, even after we saw how well that worked out in the US.  Meanwhile at least one economist is saying get ready for deflation:

Japan was mired in a nearly decade-long bout of deflation, which is defined as a sustained fall in asset prices. Economic theory indicates the solution to falling demand for prices is stimulus - either from the central bank, or by the fiscal authority to increase demand and borrow at interest rates that are below those available to private entities.

Rosenberg was one of the few economists on Wall Street who rang alarm bells about the housing bubble, and warned that the fallout from the bust on credit markets and the underlying economy would be huge. He now forecasts the worst consumer-led U. S. recession since the 1970s.

Other economists have also warned of a deflationary-like scenario, not just in North America but also Britain.

It’s Friday!  Time for our end of the week news round up and open topic discussion for the weekend.  Here are a few things I’ve noticed lately:

-Global News Video: Vancouver house prices to drop 30% by 2011
-BC house prices to drop additional 18% in next two years
-501 Pacific: levy passed for $1.4 million exterior maintenance (PDF).
-Exx: Recent price-reduced sales compared to assessed value
-BC is ‘a terrible place to commute‘
-Loonie plummets to four year low
-Text of Premier Campbell’s statement on the economy
-VANOC prepares for economic uncertainty
-Olympic village in good financing says CEO
-Buy an embarrassing license plate, win hockey tickets!
-BOC: Canada on verge of recession
-US land slide to affect Canadian market
-Whitehouse warns GDP number ‘not good’
-Greenspan ’shocked’ by credit crunch
-US foreclosure activity up 71%

So what are you seeing out there?  Post your news, links and anecdotes here and have an excellent weekend!

note: any conversation on Vancouver, real estate or economics is allowed, please keep it civilized. When posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link will automatically create a clickable hot-link. Thanks!

The problem with having your recession at the same time as everyone else is that it can put a damper on the dream that a wealthy foreigner will swoop in and bid the price of your Whalley pre-sale back up.  According to this article, South Koreans are now purchasing 73% less overseas property than they were a year ago.

According to the Ministry of Strategy and Finance Wednesday, local residents purchased homes and other properties in foreign countries worth $25 million in September, down 73 percent from $92 million a year earlier. The number of transactions totaled 56, down from 288. The September figure was also lower than the $45 million of the previous month.

Overseas property buying in the third quarter totaled $141 million, down more than 50 percent from $312 million for the same period last year.

The ministry said the international financial market turmoil and the sluggish housing market at home and abroad continued to dampen local investor sentiment. The worsening credit shortage and the possibility of a global economic slowdown accelerated a drop in home prices around the world, discouraging Koreans from spending on homes and other properties in foreign countries.

I have a feeling that Korea is not the only country seeing a decline in overseas buying.  But don’t give up hope just yet, the Canadian dollar has dropped dramatically against the US dollar recently, so once they get their financial house in order I’m sure we’ll start seeing lots of American buyers in BC again.  Yessir, its only a matter of time.

A hat tip to Gadwin for the article link.

Thanks to Vansanity for this tip - apparently all excavation work has stopped on the Residences at Ritz-Carlton site on West Georgia street in downtown Vancouver.  Word is that everyone was told to stop work and leave the site on Friday Oct. 17th, leaving the excavation about 60% finished.  All signage advertising the Residences at Ritz-Carlton have been removed from the site scaffolding and all construction trailers have been removed.  I couldn’t find a text story link confirming this information, but I did find this CBC news video report on the situation.

According to that report the developer is saying that this is not due to any credit market problems (as we’ve seen in a number of other lower mainland condo developments).  The developer says that although sales have been slow, financing is in place and there are enough presales to move ahead with the construction.  The developer is saying that they are going to be doing some ‘modifications to the design’ and that there’s no point in having work going ahead, or having the presentation sales center open until those modifications are done.  At this point there’s no indication as to when work may continue, but we’ll keep an eye out for developments on this story.

Pani sent in this link to an International Money Fund research department write-up on falling house prices in advanced economies and their impact on the macroeconomy.  There are some interesting global stats on housing market cycles there:

Between 1970 and 2005, the average house price cycle in advanced countries lasted about ten years, with an expansion phase of six years during which real house prices increased by about 45 percent. During the subsequent four-year contraction phase, real house prices declined about 25 percent, with the range of declines across countries varying from about 10 percent in the United States to over 30 percent in Japan and several European countries.

Of course the question is how much is the current contraction phase like the average?  And housing cycle contractions don’t always occur during recessions or credit market contractions.

Evidence suggests, not surprisingly, that the macroeconomic consequences are more adverse if they occur against the context of a weakening economy and tight credit conditions, which is likely to be the situation facing many countries at present.

Over the period 1960 to the present, recessions in advanced countries that are associated with house price busts and credit crunches are slightly longer and deeper than other recessions. The duration of a recession is more than one quarter longer in the case of a housing bust, total output loss during the recession is somewhat higher, and the unemployment rate increases notably more and for longer in recessions with housing busts.

According to the IMF research, when a housing bust happens during a recession it can double unemployment rates compared to a housing bust that occurs without a recession.

It looks like all is not going according to plan in Surrey’s efforts to turn Whalley, a neighbourhood known for its crack dealers and methamphetamine users, into a new Yaletown.  There was the massive fire that destroyed phase 2 of the Quattro development and then there was last weeks story about money trouble at Infinity, the largest housing project ever built in Surrey.

Surrey Mayor Diane Watts and Quattro developments principle Charan Sethi held a meeting with buyers this weekend to update them on the current situation.  The uncertainly and delays in completing these large projects comes at a time when house and condo prices are declining adding more stress to buyers, some of whom are trying to get out of their presales contracts.

But Sethi disappointed buyers who hoped the development company would buy units back from investors who wanted out. He said that wasn’t an option.  And he was unable to provide buyers with a solid timeline on move-in dates.

“We are desperate. We are homeless,” said buyer Carol Lobo, in an emotional confrontation with Sethi. “When can we move in?”

“Trust me,” said a smiling Sethi. “Give us another 10 days and we’ll have a better idea.”  The answer wasn’t good enough for Lobo, who came to the meeting with her two-and-a-half-year-old daughter. “We don’t have anywhere to go.”

Lobo was looking for other answers as well. “What about damage from the water, will the condo be toxic? What about another fire, and security?”

Concerns about further delays or cancellation of these project is being dismissed by the developer and financial backers.

Greg Sprung, senior vice-president and regional general manager for Canadian Western Bank, reiterated the bank’s commitment to work with the developer. “We’ve been with the project from the beginning and we intend to stay with it until the end.”

However when The Vancouver Sun asked what might happen if future buyers lose confidence in the development, or in the face of continued declines in the real estate market, he was less reassuring.

“That’s something we would have to deal with at the time. We approve phase by phase. Projects do get put on hold due to market slowdowns. I don’t know anyone that would build something for which there is no demand.”