Vancouver Condo Info

After a number of the things that are meant to protect the Vancouver real estate market from ever going down turned out to be not so effective in some big US markets I’ve been a touch worried about our local market. What if it’s not different this time? What if rich foreigners, drug dealers and wealthy boomers were to one day just not show up to buy at ever increasing prices?

Well my worry is gone today after good news from the Globe and Mail: Wealthy athletes want your condo!

Ross Rebagliati may be known as the first snowboarder to win Olympic gold, but his real estate investments have put him at the top of his game.

Mr. Rebagliati made his first purchase at 20, when he bought a Whistler, B.C., home for $200,000, using racing prize money as a small down payment. He later sold the property for $385,000 and that’s when, he says, a “light bulb went off.” He realized that real estate could be more lucrative than the $50,000 a year he was making as a professional snowboarder.

Why do I know this is a good sign for our own local market? Because “as an athlete, failure is not an option.”

Anyone familiar with CB developments Riverbend pre-sale cancellation fiasco won’t be suprised by this news: the BC Financial Institutions Commission has ordered that extra warnings be placed on condominium pre-sale agreements to more fully disclose provisions in the contract relating to terminating, extending or assigning purchase agreements.

Buyers will be required to initial the cover page of disclosure statements to confirm the provisions were drawn to their attention.

Pertinent information must also appear in “conspicuous type” on the statement’s cover page.

The rules also provide for more disclosure of developers’ background, including:
– Their experience in the development industry.
– Whether they have been bankrupt in the past five years or been disciplined in the past 10 years for matters relating to real estate, mortgages of land, securities, theft or fraud.
– Whether any conflict of interest exists that could affect a buyer’s purchase decision.

Failure to comply with the disclosure requirements could result in the issuance of cease-marketing orders or “administrative penalties” of up to $50,000.

The article I mentioned on Tuesday is now up at the National Post - Brian Hutchinson takes a look at the total imbalance between local incomes and local housing prices and tries to figure out how it all works. Its nothing most of you haven’t already been over numerous times, but its interesting to see it examined a bit closer in the mainstream media.

Check it out.

Marco sent in the link to this story in the G&M about the US market where foreclosures have reached a record high for the third consecutive month (now at .65 percent of all mortgage holders) with signs that more are on the way:

The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 per cent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.

Doug Duncan, the MBA’s chief economist, said the worsening performance was driven by two factors — heavy job losses in the Midwest states of Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Airzona.

The interesting thing about those ‘previously booming markets’ is that as far as I know they weren’t hit by any economic shocks, they simply collapsed under their own weight and suddenly ran out of demand.

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.

During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.

Coincidentally this is also the third consecutive month that Vancouver has neared record sales volume.

Don’t let anyone tell you Vancouver isn’t special - According to this article in Forbes we’ve got the 6th most overpriced real estate in the world!

The rankings were compiled by calculating an effective annualized rate of return on a property based on annual cash flows derived from renting and adjusted for capital gains tax, transaction fees, operating costs and maintenance, appreciation and inflation. We then flipped the return rate to resemble the more familiar price-to-earnings (P/E) measure.
…

Representing North America in the world’s top 10 were Los Angeles (5th place at 26.88) and Vancouver (6th at 26.81).

Thats a .07 difference between us and LA, almost seems like a currency fluctation could switch up those places and give us the coveted title of MOST OVERPRICED real estate in North America!

And tell us Forbes, why does the relationship between rental yields and housing costs matter?

The relationship between rental yields and housing costs matters because a low rental yield is a good indication of a stretched market–one that has a bubble–since these markets are more likely to face downward price pressures or grow at a slower rate.

We’ve talked about this subject as recently as last weeks post on local stoned construction crews, but there’s an article on MSNBC about the problems caused by shoddy boom-time home construction in the US, with some blaming the high number of foreclosures partly on that issue:

“Everything you read says that the rise in foreclosure has to due with subprime lending,” says Nancy Seats, president of Homeowners Against Deficient Dwellings, a nonprofit consumer protection group for homeowners dealing with defective construction. “But [defective construction] absolutely has something to due with the rise in foreclosures. There were absolutely investors that pushed up the price of housing, but there is no question that there are home buyers that were taken in and scammed big-time.”

So will our experience with the Vancouver leaky condo debacle protect us from a similar problem or should we be taking an extra close look at construction quality during our own boom?

Things aren’t quite looking up state-side yet: Countrywide Financial is starting to layoff employees and Capitol One is closing its mortgage unit, but things are certainly different up here.

The Canadian Real Estate Association has just announced that its product will sell very well this year predicting record home sales for 2007.

Klump said the home-financing market in the U.S. and in Canada are completely different.

“(Canadians) have to pass tighter credit standards in order to get home-mortgage financing,” Klump said. “So, there’s no unwinding in Canada as there has been in the States.”

Its good to know that here in Canada we’ve got higher standards for our No-Doc zero-down Neg-am 40 year specu-vestor mortgages.

I just received this email from a ‘concerned reader’:

Whats with the huge number of stoned construction workers in Vancouver? I walk by ‘the Vine’ on Broadway every morning around 9:00am and there’s usually a group of guys in hard hats smoking weed on Vine street. When they’re being more discreet they stay in the alley or in parked cars, but EVERY morning you can smell the smoke along tenth avenue, and this is far from the only case. Along 8th I’ve seen (and smelled) construction workers, renovators and landscapers smoking up in the morning, and friends that live downtown have told me that Nelson park often has construction workers taking ’smoke breaks’.

I’m not opposed to anyones personal choice about leisure activities as long as it doesn’t affect me. I like to unwind with a beer after work and smoke occasionally, but I can’t imagine smoking up first thing in the morning and then trying to get work done. I don’t work in construction, but I’d think that being stoned around cranes, scaffolding and heavy equipment would be downright dangerous.

Never mind the theory that the dope trade contributes to irrational housing prices, whats it doing to construction quality?

WTF? We had great volume in July, lots of sales, but the benchmark house price didn’t go up at all. In fact at a benchmark price of $714,810 detached houses actually lost $905 in the month, hardly enough to get excited about, but shouldn’t prices be going up in a hot hot market?

Those at the lower end are still doing their part: Condos are up a healthy $4k from the previous month, while townhouses are up $5k, so what happened to the houses?

According to a story in the Vancouver Sun approximately 24% percent of new condo units are re-sold within 12 months (as of last april). That story puts the speculative rate peak in the early eighties at closer to 50%.. Funny how often I’m seeing comparisons these days that make our market look good compared to ‘the early eighties’.

Robyn Adamache, senior analyst with Canada Mortgage and Housing Corp. in Vancouver, said inventories of completed and unsold condominiums in Greater Vancouver remain very low — 160 in all of Greater Vancouver and only three in Abbotsford — as of July 1.

“We don’t see any evidence of oversupply so far,” Adamache said.

However, there were also some 14,779 condominium units under construction in Greater Vancouver, a near record. Another 665 are under construction in Abbotsford.

Adamache added that a clearer picture of how well housing supply is balanced with housing demand will emerge once more of those units are complete and owners either take possession of them or attempt to sell.

The article also says that sales are slowing and that Vancouver is no longer a “build it and they will come” market.