Strata: Whose bills are you paying?
April 19th has come and gone bringing with it strong listings and weak sales. As of last night there are now at least 16,071 places available for sale in the REBGV area causing some to celebrate. Time will tell if the Vancouver market is fragile enough to see a price top coincide with these rule changes. Every market cycle needs a top and a bottom – those that buy at the top help to pay the bills of those that buy at the bottom.
Speaking of paying other peoples bills.. Strataman has an interesting post in the forum for anyone looking to buy into a strata property. Apparently many condos have common areas where the utilities are billed directly to the strata without any sub-metering. This can be a problem for residential condos with commercial properties attached that have heavy utility usage.
Once caught out the commercial strata will try to share the costs on a sq.ft division. Needless to say this is also a scam as restaurants, stores like Urban Fare, Costco use substantially more of “the common area” utilities per sq.ft, then a residential strata.Most combination strata s are weighted heavily in favor of the attached Commercial Strata. To actually solve this problem the residential strata has to manage all the utilities like they are a service provider. They have to pay for and install sub-meters where possible, pay for consultants such as myself to construct legally binding contracts,and generally fight fo recovering costs spent on SOMEBODY ELSE’S PROPERTY.
I have NEVER found a declaration in the strata titles that indicate the fact that services are supplying OTHER properties. The City of Vancouver refuses to discuss the issue.As all strata developments are signed off by the developers architects and engineers, no impartial inspection is ever done until exorbitant costs bring the strata to a consultants door. I have also never found a building inspector that does condo purchase inspections even slightly aware of this.Property managers are gradually becoming aware of this.
Tip: Buy only into single strata developments like one strata on ONE piece of land. Multiple RESIDENTIAL strata have the same problem. (Spectrum is three residential strata lots for instance).
Read the whole thread on this issue in the Forum, and if you’ve got questions or comments about strata living issues feel free to make your own thread in the new strata living forum. This is where Strataman will be posting his tips and commentary about strata and building maintenance issues in the future.
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April 21st, 2010 at 4:03 am
“Oh course, the most significant over-regulation (government interference) in the RE market is the CMHC and other government-sponsored mortgage insurance, without which the present absurd valuations would not be possible.”
Amen to that mate. Over regulation is the blight of Canada in my opinion.
Otherwise, you’re all right. Well, the whole taking the shoes off in the house pisses me off, and Hockey just ain’t as good as football or Rugby. But it could be worse, be thankful you’re not England.
April 21st, 2010 at 2:13 am
@elvince:
You’re not subsidizing the renter because he’s paying the market rent. Running a business that is losing money (and renting out RE is a business) because of bad investment decisions is not a subsidy to the customer(s).
You’re paying the previous owner more than the property is worth. He’s the one who’s getting the subsidy, not the tenant.
April 21st, 2010 at 2:02 am
@chip:
Oh I forgot to add.
Oh course, the most significant over-regulation (government interference) in the RE market is the CMHC and other government-sponsored mortgage insurance, without which the present absurd valuations would not be possible.
I and many others on this blog have repeatedly called on the government to stop guaranteeing mortgage lending and let the open market determine mortgage qualifications and rates.
What’s your position on this issue?
April 21st, 2010 at 1:56 am
@Absinthe:
The report on the options for the Olympic Village “affordable” housing is at: http://vancouver.ca/ctyclerk/c...../penv6.pdf
Yes, the land was already owned by the city. The value of the land contribution towards the social housing was put at $28 million, or $132/net square foot, in 2006.
The one bedrooms cost $345,000 to build on average, not including land. With an average size of 640 sqft, add $84,500 in land cost for a total cost of $429,500.
For all the social housing combined, the construction costs (excluding land) came to $398/gross sqft (including hallways, lobbies, services areas, etc.) and $519/net sqft.
Table 7 in the report indicates that the city would need to sell the units at $600/sqft just to break even on its costs. (The table shows a net profit of $28.5 million, but it doesn’t include the $28 million land value.)
April 21st, 2010 at 1:53 am
@chip:
As I and many others have repeatedly explained on this blog, it is rents, not sale prices, which indicate balance of actual supply and demand for land and housing.
Restrictive land use polices cannot result in inflated sale prices relative to rents. There is only one cause for inflated sale prices, and that is buyers willing and able to pay prices out of line with rental value.
Period.
April 21st, 2010 at 12:28 am
http://www.nytimes.com/2010/04.....dt.html?hp
Perhaps Vancouver will go down to 80 times monthly rent?
So downtown condo is worth $85k unless you want to pay more rent and thus make the property more valuable, isn’t that right kite?
April 20th, 2010 at 11:43 pm
From that Demographia study showing Vancouver as the least affordable market in the Anglo world:
“Among the major markets, Vancouver is the least affordable, with a Median Multiple of
9.3, followed by Sydney (9.1), Melbourne (8.0), Adelaide (7.4), London (7.1), New York (7.0) and San Francisco (7.0). As in the past, all of these markets were characterized by more prescriptive land use regulation (such as “compact city,” “urban consolidation,” “growth management” or “smart growth” policies), which materially increase the price of land, which makes housing unaffordable.”
Whereas:
“Overall, 19 major markets (more than 1,000,000 residents) in the United States were also affordable (Table ES-2). … all of these markets were characterized by “more responsive” land use regulation, as opposed to “more prescriptive” land use regulation (see Table 2 in Section 1).”
Over-regulation?! Uh oh, Patriotz is going to flip out.
April 20th, 2010 at 11:39 pm
Larry gets his first troll with a contrarian viewpoint
http://www.yattermatters.com/r...../#comments
April 20th, 2010 at 11:33 pm
@auditnerd: What’s the excuse up here? It’s different here?
April 20th, 2010 at 11:14 pm
If you believe mohican’s graphs we won’t be seeing significant benchmark price drops until mid-summer, assuming a repeat sales pattern of 2008 and continued fast listings growth. Patience. Enjoy the parties in the meantime!
April 20th, 2010 at 11:13 pm
Guys, tell your ladies to wait and not rush after the first 5% discount. They will thank you a year from now.
April 20th, 2010 at 11:05 pm
@painted turtle:
Turtle you missed this in the comments:
McLeans is to be commended for illustrating the absurd property prices in Vancouver – but regrettably, in quoting me got it wrong. These comments were made some three years ago and the situation is much worse now.
The 6th Annual Demographia International Housing Affordability released January this year found that Vancouver is the most severely unaffordable housing market of 272 major urban markets of the Anglo world (UK, USA, Can, Aust, Ire, NZ) at 9.3 times annual household incomes. Housing should not exceed 3.0 times household incomes.
Further information is available atwww.demographia.com and on the writers website atwww.PerformanceUrbanPlanning.org. Readers will note there is currently good political progress being made in New Zealand in dealing with these unnecessary structural and planning issues.
Hugh Pavletich
Co author – Demographia International Housing Affordability Survey
Performance Urban Planning http://www.PerformanceUrbanPlanning.org
Christchurch
New Zealand
April 20th, 2010 at 10:36 pm
@Superfly: Hi Superfly. My logic tells me to agree with you that more than a couple of percent a month would be rare. However, we are going through a period where interest rates DOUBLE at a point of MAXIMUM unaffordability following the end of the once in a lifetime Olympic Illusion. And let’s throw in a bursting of the chinese bubble at the same time just for fun.
I’m not sure we have anything really like this in our existing sample. So maybe it will be outside our previously seen experiences.
So, put me down as 1-2% per month for sure, but not shutting out the possibility of something more drastic.
April 20th, 2010 at 10:28 pm
Nero / me,
I’ll be happy if you are right, but looking at historical data, 4%/month drops are VERY rare. I always bet on the most probable outcome and it works well on aggregate.
Patriotz, what scenario do you see?
April 20th, 2010 at 10:20 pm
olympic village-i haven’t looked into it but if the city gets subsidized financing probably best to rent out the bulk of the units. poor ethics on renting it out to city employees but i suppose at least they represent a good tenant risk. i dont’ think they want the optics of selling at a loss. might as well rachet up the debt like all other levels of government and wait for some sort of inflationary event probably coming 2-10 years out.