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Trouble in New Yaletown

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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.”

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mark

Montreal is affordable for a reason.

This is basic supply and demand. Economics 101.

Vancouver real estate is more expensive because WAY more people want to live here and move from other parts of the Canada and the World.

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Raincouver

Maybe we will be like Phoenix where inventory goes off the charts. Will Vancouver become the Phoenix of Canada?

I used to think that, too. Someone pointed out that in Vancouver's case, inventory has already exceeded any ability to suck it up. The unaffordability wall has been hit hard – it is almost meaningless now what inventory is. We've already passed a realistic absorption rate.

That's probably true, the inventory numbers now will become irrelevant. It's a new fiscal game.

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crabman

Maybe we will be like Phoenix where inventory goes off the charts. Will Vancouver become the Phoenix of Canada?

We're 2 years behind Phoenix (they peaked in spring 2006). In October of 2006, their inventory was 41k. This works out to 1 listing per 112 residents. Our current inventory is 20.5k, or 1 listing for every 123 residents. We might already be the Phoenix of Canada.

The Phoenix inventory peaked at 50k, so if we hit 27.5k, we will be at the equivalent of Phoenix's highest level.

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Raincouver

…This will be the largest global decline in history. In a few years no one will even be talking about real estate prices, rather the focus will be on food and heat and how in the hell did this happen. After the shit has been scared out of everyone on the planet, most will be willing to accept whatever global government voodoo plan is being offered. Most likely one that benefits few and enslaves most. True. Seems most people can't connect the dots. This is a manufactured financial crisis – it was done, not by incompetence, but by design. I had my 'lightbulb' moment back in 2005, right around the time I found VHB and HBB. I saw the banksters deliberately driving the bus off a cliff … then, figured they could come back to the taxpayer and make them… Read more »

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Bubble Lad

No-lympics raises an interesting point: why does BC insist on making roads to nowhere (Whistler after the crash), transit that serves no function (the Sky train to…I forget), and ferries that end up mothballed. Is it a strange compulsion to build concrete metaphors for BC's "road to nowhere, get rich and get out" philosophy?

Just asking…

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jesse

"What this means is that in a place like Vancouver you can only get a reasonable price about 20% of the time. But wait for it, it will arrive again."

This is true historically however there is a decent chance of a protracted period of "reasonable" prices. The "I know lots of people who will buy when prices drop even 20%" — the so-called pent-up demand — argument really does ignore the investor component of the market who need properties to cash flow. These investors will inevitably set the price, much to the chagrin of the knife catchers.

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Gadwin

VHB wrote:

However, I wouldn’t completely dismiss the ultra-bear outcome for the following reason: SUPPLY. We now likely have about 3X as many downtown shoebox condos as we did in 2001, with very little population growth underlying it.

Supply, supply, supply. Too many shoebox condos out there. We are drowning in a glut of inventory. By next year, we will probably exceed 25K inventory for REBGV, and from there, who knows how high inventory will get.

Maybe we will be like Phoenix where inventory goes off the charts. Will Vancouver become the Phoenix of Canada?

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betamax

there are many people (at least in my acquaintance) who would consider that a drop of 20% would make Vancouver real estate a bargain

By the time it drops that far, and it will, most people will be scared sh*tless it will drop further, and many will be worried about keeping their jobs, let alone investing.

Look to the US for numerous examples of previously booming areas where prices have dropped 20% — no crowds are lining up to buy at 20%, though some have started to buy in where there are 50% drops — that's considered a bargain, though even that evaluation may change in time.

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patriotz

The mere presence of a rental market with landlords trying to make a profit, along with owners and landlords competing over the same housing stock, requires fundamentals to be the same for both.

In the long term, not the short term.

The more buyers you have in any market who are willing to pay more to buy than to rent, the more time you will spend in bubble territory and the bigger the bubbles will be.

But the bubbles will end, inevitably.

What this means is that in a place like Vancouver you can only get a reasonable price about 20% of the time. But wait for it, it will arrive again.

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betamax

But I really can’t see more than 50% in any scenario, as that would put prices well below the real pre-bubble levels.

The market isn't influenced by such arbitrary distinctions; it'll go as low as it goes. No one in 2001-2003 (or the late 1990's for that matter) was saying that housing was cheap at the time, so it could certainly fall to those levels — or lower, depending on the depth of the recession just beginning.

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jesse

"The real reason Montreal is reasonably priced is that they have a different culture of home ownership, it’s not seen as something people need to be happy."

Quoi? When it comes down to it buy vs rent is normally a personal choice and not really a financial one unless there is a bubble. The mere presence of a rental market with landlords trying to make a profit, along with owners and landlords competing over the same housing stock, requires fundamentals to be the same for both.

It's actually a difficult concept for those who prefer to own and are willing to pay a premium to do so.

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Montreal Matt

I just recently relocated to Montreal from Vancouver for work and was lucky (very lucky) to sell my studio apartment in east vancouver in June at a great profit.

After living here (Montreal) for a few months you come to appreciate the natural beauty and convenience that Vancouver has to offer over Montreal. I can't wait to move back to Vancouver in a few years.

Housing is a BIT cheaper here, but not that crazy. Rent can be very cheap if you look around. I'm not going to buy a place here, since I don't see myself sticking around for that long.

Hopefully Vancouver prices will be way low when I return after the olympics 🙂

As for Quattro, shame on the owners for buying in such a scummy neighborhood.

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crabman

Yeah, VHB, that supply is going to be crazy isn't it? Back when you were posting units planned or under construction, it was over 10,000 for DT, IIRC. Do you still keep track of that info?

Alex,

Agreed! I won't consider buying anything until prices are 35% off peak. When this happens, it should be clearer if we will see 50% declines or if 35% is good enough to jump back in. But I really can't see more than 50% in any scenario, as that would put prices well below the real pre-bubble levels.

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Drachen

Ok, I got it wrong, St John's is higher wages than here, Montreal is lower.

http://www40.statcan.ca/l01/cst01/famil107a.htm?s…

St John, Saguenay, Sherbrooke, Trois Rivieres, Montreal and Abbotsford are the only places below us of the 28 cities in Canada measured.

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alexcanuck

Be careful not to be too bearish, or you will miss out on the next buying opportunity.

Very good point! But carefully balance it with "Don't try to catch a falling knife"!

BTW, I don't think the bottom will be a brief window. Lots of time to watch the market and shop carefully. Remember, (if I'm right) we are entering a nasty, lingering global recession, and no-one will have the cash AND inclination to jump back in the deep end.

Those with cash don't jump, jumpers will have no cash, and easy credit won't be back for a long time.

If I'm wrong I won't be carefully shopping with cash, so my place that I won't be able to buy will be on the market for you. Nice place too!

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VHB

Crabman–I hear you and on the balance of probabilities I agree with you. However, I wouldn't completely dismiss the ultra-bear outcome for the following reason: SUPPLY. We now likely have about 3X as many downtown shoebox condos as we did in 2001, with very little population growth underlying it. Still, if one could rent a shoebox out for $1K a month, a guy could ake some cashflow if purchased at 100K.

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crabman

One more reason why Vancouver is more expensive than Montreal: the majority of expensive North American cities are on the coast.

BTW, why do so many people seem to think Yaletown condos will be worth less than 100k?

Even that crappy Robinson tower at Helmcken and Richards was more than 100k pre-bubble. In Jan 2001, a 611 sq ft unit in that building sold for $117,700.

Be careful not to be too bearish, or you will miss out on the next buying opportunity.

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vanguy

Trouble at an Onni property? That would surprise me…do keep us informed!

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NO -LYMPICS

Whistler gong broke?

Well, call in Ritchie Brothers, sell off the assets, and start dismantling that yuppie scum sh*thole. Maybe they can also stop that useless highway project and we can cut our losses as well. Sure would be funny if it was in receivership too during the 2010 Olympics.

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Keepin an Eye on the

"Whistler Mayor Ken Melamed expressed concern Monday about reports that the owners of the Whistler Blackcomb ski resort are fighting to keep resort operator Intrawest afloat by restructuring $1.68 billion in debt."

Dear Mr. Campbell:

Please raise my taxes, so that we can help these people out.

I am sure if you could convince Bill Good to run a special on his show, and highlight what an economic engine Whistler is; many other people like me will come forward and volunteer to have their taxes raised to avoid an embarrassment with the World Olympic Organizers.

http://www.canada.com/vancouversun/news/business/…

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anonymous

Shit, there's just too many people here for the amount of land, i hate driving around this town any time of day. I'm not suprised housing is expensive as it is, this city was designed for 300,000 people. As soon as the credit crunch is unfrozen the next boom starts here, sucks, we're going to see more crappy condo advertisements. Actually i have friends who moved to Montreal, they like the cost of living there!

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patriotz

The real reason Montreal is reasonably priced is that they have a different culture of home ownership, it’s not seen as something people need to be happy.

In other words, if people are not willing to pay more to buy than to rent, it will not cost more to buy than to rent.

So simple, yet so hard to understand for many.

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Patiently Waiting

Trouble at Victoria Hill?

http://vancouver.en.craigslist.ca/reo/887279753.h…

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patriotz

Taxes, are lower, but wages are much higher in Montreal,

Not according to Statscan – median family incomes in Montreal and Vancouver are about the same: both among the lowest of big Canadian cities.

Higher income taxes mean a lower rent/income, and higher property taxes mean a lower price/rent. Both legitimate reasons for prices in Vancouver to be higher than in Montreal – but nowhere near the difference we see today.

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Drachen

Scullboy

Salaries are much higher in Montreal than here. Vancouver is four or five from the bottom of Canadian cities for wages. Only Abbotsford, St John's and a couple others are below us.

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