Vancouver Condo Info

According to the Organization for Economic Cooperation and Development, Canada is in a recession and heading for a deficit. And who’s to blame? Ontario and BC.

Across Canada EI claims actually dropped month over month, except for in Ontario and BC where they surged 14% over the year in Ontario and 11.5% in BC. Ontario has the auto manufacturing sector to blame for the downturn, while here at home we’re seeing an alarming decline in forestry revenues not to mention the sharp downturn in the housing market where prospects are looking more grim with each passing month, particularly when it comes to downtown Vancouver condos.

Meanwhile in the financial sector Canadian banks have started asking Ottawa for a major cash injection to help stem a rising tide of bad loans.  BMO figures show bad loans have already exceeded the peak reached in 2001 after the dot com crash, and are well on their way to levels seen in the last recession almost 20 years ago.

The bright side? If you’re looking for temporary office space to sublease in Vancouver, it looks like you have lots of options right now.

From the Globe and Mail:

The commercial market for apartment buildings in British Columbia has “come to a near standstill,” according to a report issued Monday by real estate firm Avison Young (Canada) Inc.

“There is now a standoff between purchasers, who in the wake of the global credit meltdown have changed their pricing expectations, and vendors, who are looking for yesterday’s pricing in a much more challenging market,” Avison Young principal Rob Greer said in releasing the report.

The number of real estate transactions in British Columbia’s “multi-family market” has dropped to 76 so far this year, down from 153 in the corresponding period of 2007, according to a survey by Avison Young.

“The total value of multi-family investment transactions year-to-date … amounts to $270-million – approximately 52 per cent of the $519-million recorded in all of 2007,” Avison Young said.

Local private investors accounted for the majority of buyers and sellers in 2008.

Prices for apartment buildings are likely to fall even more next year, Mr. Greer said.

“Should financing troubles continue through 2009, we may see values move as much as 20 per cent as investors re-evaluate their required returns on investment,” Mr. Greer said.

Avison Young said in its report that the “once prevalent multiple-offer situations have shifted to ones of price reductions and lingering listings.

“Of the current 130 listings on the market, approximately one-quarter have received at least one price reduction in recent months. This does not include any recent sales that involved a price reduction to induce the sale,” according to the report.

I very seldom report on rumors, but this one from Jesse seems like the right balance of unbelievable and believable:

Here’s a sneak peak at a story you might be seeing in the next few weeks: a friend of mine who rents in Spectrum 4 told me one person rented close to 30 suites in the building and sublet them. He pocketed 2 months of sublet rent, not paying rent himself of course, before skipping town.

If the story is true, let’s hope the MSM picks it up. Sounds like a great leader. Remember: you heard it at VCI first.

It looks like Vancouver’s housing slump is starting to get attention from outside Canada. Several people pointed out this Bloomberg article about our declining real estate market.

West Vancouver builder Sean Hanley thought Canada’s real estate market would be immune to the housing recession that sent values tumbling in the U.S. Then the economy slowed and oil prices fell.

The price of a detached house in this upscale community fell 22 percent in October from a year earlier, helping to drag the average residential price in Canada down by 9.9 percent, the biggest decline in 26 years, according to the Real Estate Board of Greater Vancouver and the Canadian Real Estate Association. For Hanley, that’s meant nary a buyer for his five-bedroom home.

“It’s been a little bit surprising the consequences of the subprime crisis have been so far-reaching,” said Hanley, 48, who has cut his asking price to C$3.99 million ($3.26 million) and is now offering a C$100,000 bonus, on top of regular fees, to the agent who delivers a buyer.

This isn’t the first time we’ve seen offers of a bonus to the buyers agent instead of a price reduction, but I’m a bit suprised that it’s acceptable to openly pay the buyers agent to represent the sellers interest.  Is this even an effective technique?

Remember that rumour that the construction of the Olympic Village is running into credit difficulties and the various assurances that taxpayers wouldn’t be on the hook?

Well funny thing.. It turns out the city has authorized a (until now) secret $100 million rescue for the financial troubled Olympic Village.  Article in the Globe and Mail:

The new financial obligations are on top of a $190-million loan guarantee the city had to give Fortress Investment Group, which has provided a $683-million loan to Millennium to build the 1,100-unit village.

The village is destined to become a residential complex after the Olympics but most of the condominiums have yet to be sold. Meantime, the value of real estate in Vancouver has plunged in the past several months and is expected to continue to decline over the next couple of years.

This has raised questions about the future of the project and whether Millennium, which agreed to pay the city $193-million for the land on which the village is being built, can still make the venture financially viable.

The latest revelations come despite assurances over the last several weeks by civic officials that financing around the project was not a concern. Other civic officials stated publicly there had not been any changes in the agreement the city had with Millennium - even after council had secretly agreed to forward the company and/or its lender up to $100-million to keep the project afloat.

Now you’re all real estate speculators.  This deal is of course, not without a bit of controversy:

Details of the city’s involvement in bailing out the project’s cash-strapped developer have until now been kept secret. Councillors are under a publication ban and have been told they face serious repercussions if they discuss publicly the decisions taken at the in camera meeting.

Growing controversy around the project also appears to be behind the yet-to-be announced resignation of the city’s chief financial officer, Estelle Lo. Ms. Lo tendered her resignation recently after months of apparently expressing concerns the city might be assuming too much financial risk in an effort to meet its obligation to get the Olympic housing built on time, according to a source.

Now that we’re all investors in this project, I find myself getting excited about the future of Vancouver real estate. I’m sure eventually this deal will pay off big - In Montreal it only took 30 years to pay off their Olympic sized debt, and just look at some of the great post-Olympic buying opportunities in Sidney!

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.

Several people just posted this news - another lower mainland condo tower has run into money troubles.  The ‘Infinity at Central City’ is the largest residential complex in the history of Surrey.

With just one of the 35-storey towers completed and occupied, Infinity’s South Korean developers have been granted protection from their creditors. The Infinity is supposed to have five high-rise towers and 1400 units. Robert Millar, lawyer for Jung Developments and Hee Yong Yang says “Yang has been adversely impacted by these changes and world wide tightening in the credit and financial markets.” He says the project has had no cost overruns.

Two other towers are under construction and 560 pre-sale buyers have made deposits. But Millar says “Their deposits are safe and we are confident we will arrive at a new financial partnership.” He says less than $100 million is needed, but that’s almost a third of the total estimate of $350 million.

update: If you are an Infinity buyer and would like to talk to a reporter about this situation, Jeanette requests that you call the CTV news hotline at 604-609-5800.

Just so you know, Canada’s banks are in fine shape. Not the sort of ‘fine shape’ that US banks were in last year, but real, honest to goodness fine shape.  But just in case, Ottawa is considering options to aid Canadian banks if the current global economic crisis persists.

And news from around the globe hasn’t been real great lately.  A number of large US banks have failed, a record setting US bailout bill has been passed and the US government is now considering taking an ownership stake in banks (because what restores confidence more than government ownership?).

Meanwhile in the UK, they’ve already taken the step of partially nationalizing their banking system.  The fallout from the global credit boom is turning bust in a bad way, look at whats happening in Iceland for just one example.  The IMF has just announced the activation of an emergency funding scheme that was last used during the 1995 Asian economic crisis.

From previous discussion on this site I know that many of you are sitting on a cushion of cash, some above the $100k CDIC insured limit.  Are you worried about the health of the Canadian economy and our banking system? Do you understand the ins and outs of CDIC insurance?  Are you making any changes to your banking habits to prepare for possible problems?

Gah just posted this link, looks like Millennium Water might need a bail out:

As the credit crisis south of the border begins to creep north, concerns are mounting over the impact it may already be having on construction of the athletes’ village for the 2010 Winter Games.

Last week, members of Vancouver’s city council held an emergency, in-camera meeting to get an update on the project. Much of the discussion revolved around the city’s obligation in the event the developer, Millennium Development Corp., can’t meet demands from the bank because of massive cost overruns, according to sources briefed on the meeting.

The best part? Even if you haven’t been speculating on Vancouver condos, now you get a chance to take part in the collapse since it looks like the City is on the hook for cost over-runs on this particular project.  But don’t fret, the absolutely ‘worst case scenario’ at this point looks like a $100 million dollar bill for Vancouver tax payers.

On a Monday morning where the TSX started off the day with a fresh 1200 point plummet we’ve got more negativity about the local real estate market on the front page of the Vancouver Sun: I bought a house at exactly the wrong time.

And the chances of Vancouver prices actually dropping? Maybe two out of 10, I surmised. (Most of my friends, who at dinner parties often talked about how their soaring real estate was ensuring their retirement, thought I was slightly crazy to even think such a thing.)

As you might have guessed, my resolve had finally weakened. So, in the spring of 2007, I bought a piece of paradise. The odds seemed on my side, I decided. At first the prices seemed to keep soaring.

Soon I was telling people at dinner parties how much my house had gone up, too.

Now I’m back to where I started.

The real-estate-disaster bloggers actually were prescient. Wall Street is melting down because of the junk mortgages. Bay Street is in a tailspin. Now my almost daily question is what’s going to happen here?

Yep, the bloom has come off the rose when stories like this are on the front page.  Although we still have a huge problem with affordability, Vancouver house prices have dropped below where they were one year ago. sales have dropped right off and listings continue to grow as the global economic forecast gets dimmer and dimmer.  For many there’s still time to make out with a profit, but the competition is growing fiercer as we race for the bottom.

“I wouldn’t feel bad about buying,” said Jock, listening to me fret. “Nobody saw this coming. We’re in a hurricane, but in a hurricane you don’t know how bad it is until it’s over. And it’s not over.”

Nobody saw this coming and nobody could have predicted that the experts would say ‘nobody saw this coming’ right?  I bet you also couldn’t guess what Bob Rennie has to say about the whole Vancouver housing market crash:

Rennie also believes the fundamental reality is there’s no oversupply of housing and condos in the city of Vancouver, as there is in many U.S. cities now seeing the market tank. He also sees a strong demand for Vancouver’s high-end real estate by rich people from afar.

“I wouldn’t sell right now,” Rennie said. “In fact, I just bought a few more units myself.”

I’ll be back in a short while, I’m just going to go ask a car dealer if its a good time to buy an SUV.