Vancouver Condo Info

US incentive programs for home buyers have expired and it looks like the real estate industry hasn’t got enough momentum to lift the US economy. Even with rock-bottom interest rates the industry is slumping.

WASHINGTON – Homebuilders are sending a message: They won’t be able to contribute much to the economic recovery now that government home-buying incentives have vanished.

Home construction and applications for building permits sank in May, overshadowing favorable reports on manufacturing and wholesale inflation.

Fewer homes mean fewer jobs. Construction fuels a broad swath of industries across the economy. Yet double-digit unemployment is among the main reasons people have passed on buying new homes.

The solution is simple. Government must take on more debt and pour more stimulus dollars into the economy, then the problem will be solved and everyone can get back to living the good life.

Home sales in BC are down 11 percent in May 2010 compared to April, but prices are up and set to flatten according to the BC Real Estate Association.

The survey also concluded that, year-to-date, B.C. residential sales dollar volume increased 50 per cent to $17.5 billion, compared to the same period last year. Residential sales rose 31 per cent to 34,619 year-to-date, while the average price climbed 14 per cent to $505,468 over the same period.

The BCREA said in another recent survey that it expects sales to rise next year by about four per cent.

A separate survey by the Canadian Real Estate Association (CREA) recently forecast that prices would rise 2.3 per cent this year across the province before slipping back by 3.5 per cent in 2011.

Full article in the Vancouver Sun

One reason Canadian cities can never have a housing bubble like they had in the US is that our lenders are much more diligent and properly manage risk. At least that’s what I heard, so you can imagine my surprise when I read this article where two different Canadian banks gave mortgages to a grow op owner with no proof of income:

Alarm bells should have gone off the moment Hai Le walked into the Bank of Montreal and asked to refinance the mortgage on his million-dollar home in Vancouver’s up-and-coming Marpole area.

His alleged inability to provide proof he had the means to make the hefty monthly payments of about $4,000 should have been reason enough to crumple up and toss the application into the nearest trash can.

Le, a “sales manager,” was also asking the bank to mortgage the property for its full value, a strategy that authorities say marijuana growers often use to minimize their losses should and when they get busted.

Yet despite these blatant red flags, the bank approved Le’s application for a $976,000 mortgage on Oct. 22, 2008, some 15 months after he’d bought the house from a Viet Van Truong for $980,000.

Ten months after the purchase, in August 2009, Vancouver police raided Le’s West 63rd Avenue home and uncovered a massive grow-op. Two days later, Le sought and received a $70,000 mortgage from the Royal Bank of Canada.

The Forefeiture Office is now seeking to have the mortgage proceeds seized from the bank. Read the full mind-boggling article in the province. Thanks to Jimmy for the link!

Surprisingly affordable to lease retail space that is. Colliers has released their global survey of retail space lease rates and the most expensive places in Canada are in Toronto and Montreal at about $300 us per square foot.

Robson street in Vancouver came in 51st in the survey at a surprisingly affordable $196.08, which looks even cheaper when compared to what I like to refer to as our ’sister cities’ New York and Paris (which are cities just like Vancouver, but bigger with more money.) Both those cities topped $1,250 per square foot, but then they don’t have the HST.

The BC Real Estate Association has generously released to the public their market forecast for the near future so that all investors may partake of their wisdom. As they look ahead, they see a slowdown for 2010 before sales grow again in 2011. Even closer to home this is what they foresee for Vancouver:

For Metro Vancouver, sales are forecast to drop 7.9 per cent this year and rise 4.5 per cent in 2011 to 34,900 units. Prices are expected to increase 10.7 per cent this year in Greater Vancouver to $655,900 and 0.4 per cent in 2011 to $658,800.

For prices across BC the BCREA is predicting a rise of 6% this year and 1% next year. Evidently they use a different brand of Crystal Ball than the Canadian Real Estate Association:

..a survey by the Canadian Real Estate Association (CREA) released last week forecast that prices would rise 2.3 per cent this year to $476,900 before slipping back 3.5 per cent in 2011.

The CREA survey also predicted that sales across the province would decrease almost six per cent to 80,000 transactions this year.

Read the full article over at the Vancouver Sun.

Landcor data is out and in the first three months of 2010 both the number and value of BC real estate transactions dropped more than 25% from the previous quarter.

The results quantify the trend economists such as Cameron Muir, chief economist for the B.C. Real Estate Association, have observed occurring since January.

Landcor’s numbers “certainly support the data we’ve been looking at that shows that obviously the pace of sales have slowed since the last quarter of 2009,” Muir said in an interview.

Last year’s “fourth-quarter peak is unlikely to reoccur in 2010.”

Landcor president Rudy Nielsen said B.C. home sales typically slow at the beginning of the year, but the first-quarter of 2010 slowed more than usual compared with the last decade of results. This is in part, he believes, because of the Olympics.

Nielsen added that consumer uncertainty over a host of issues, ranging from the global economic situation to unknown effects of the harmonized sales tax, have consumers sitting on their wallets.

The agency, which insures almost $500-million of Canadian mortgages, said the average cost of a home by the end of 2011 should be $350,000. That would be a gain of 1.4 per cent over April’s record high of $344,968.

Forecasting higher prices next year puts the agency at odds with the Canadian Real Estate Association and Toronto-Dominion Bank, both of which are calling for prices to drop by 1.5 per cent and 2.7 per cent respectively in 2011.

Crashcow posted this comment over the weekend: a field report on the opening sale of the very lightly used Millennium Water Olympic Village condos:

Field Report of Millennium Water
May 15, 10

I woke up this morning with a massive hangover. Wow, what an 18K party that was! But with the weather so nice today, I decided to checkout my first open house in a long time to get a feel for what’s happening in the trenches. And not just any open house, an entire open village. Little did I know how much of a treat it would end up being.

On the way to Millennium Water, I passed by an abnormal quantity of For Sale signs. I kept asking myself how Rennie is going to pull off a 474 condo sale when inventory is exploding and sales are faltering. But soon after I walked into the gates of the Olympic Village, I knew I had stepped into a dream world of magic.

If Vancouver ever had a ground zero for Irrational Exuberance, Millennium Water is it. And if Bob Rennie is ever the King of anything, it’s hype. The man has carefully orchestrated a circus of clowns, bands, tents, treasure hunts and euphoria. When bands are cheering on lined up speculators and the King himself is handing everyone cookies, what is being witnessed is the last “hurrah” of a heavily inflated market.

I lined up to view a condo and couldn’t help but overhearing what the herd was chanting. One of my favourites was, “I don’t know if I like this area, but I love the wave pattern on the wall.”

I followed the crowd into a staged 1 bed, 2-den condo at slightly over 1,000 sq. feet. I overheard some lady asking an agent the price and he replied with a straight face:
“One-point-three-million.”

The lady’s jaw dropped, she shook her head, and moved on. I couldn’t contain myself and had to keep the conversation going.

- Me: “The miracles of record low interest rates. So that’s roughly $1,200 per sq. ft?”
- Agent: “Yes, but I’m also selling units down the street for $500 per sq. ft”
- Me: “So why, in your opinion, does this place come at a $700,000 premium?”
- Agent: “It’s an opportunity to be a part of this famous community and the proximity to the water.”
- Me: “Not only are you asking for an outrageous premium, you’re doing it at a time when there are over 18,000 units on the market, CHMC rules are tightening and mortgage rates are climbing.”
- Agent: “You should then really consider the units we have listed down the street.”

So I followed the yellow brick road down the street and into another Rennie building called “The Maynard’s Block.” And sure enough, studios were priced at half a million.

Buy now, or be priced out forever.

-Crashcow

TD Bank is the most recent pessimistic soothsayer when it comes to the Canadian housing market, with a prediction of falling house prices in 2011.

While income and employment seems to be recovering quickly from the recession, the number of listings to hit the market and the number of new housing starts has caught the bank by surprise. It had previously expected prices to gain 1.6 per cent in 2011 in inflation adjusted terms, the bank now is calling for a 2.7-per-cent drop.

Ontario and British Columbia are expected to bear the brunt of the decline, seeing their markets drop 3.4 per cent and 3 per cent respectively.

Ah! They’ve been paying attention to listings growth.  Don’t they know that just means more options for buyers and that makes it a great time to buy?

Paulb and paintedturtle pointed out this article in the Globe and Mail – Housing Affordability: the great quandry.  Why there’s time to wait for the right home at the right price.

The one city to worry about if you’re a homeowner is Vancouver, where normal mortgage rates would have resulted in the typical household spending 78 per cent of its income to carry a bungalow, just shy of the peak level.

History shows that it’s impossible to accurately predict short-term movements of house prices – markets regularly overshoot rational levels both on the way up and the way down. What we can say is that based on current affordability, if house prices do continue to escalate, at some point they’re almost certain to correct back down.

That means there’s no rush to buy and time to wait for the right home at the right price – and that for the next while at least home buyers should evaluate houses as places to live rather than on their potential for appreciation.

Ok. I see what’s going on here.  The Globe and Mail has worked themselves into a jealous rage because our properties are worth so much and are trying to talk down our market.  It won’t work guys.  We know better than that, we evaluate property purchases based on how much a month they cost with record low interest rates and pencil in 12% increase in prices each year.  Everybody knows prices never drop in Vancouver.

Here’s a handy financial planning tip: Quit your job and start flipping condos.

You can not go wrong with this simple plan my friend, just look at the facts:

1. BC Jobs don’t pay well.  look at this chart, just look at it.  Our incomes have gone up, but not by as much as in Alberta or Ontario, both of whom get paid much better than us.   At least our houses cost more.

2. Your job may leave you.  Quit it before it quits you.  In January 2009 the Metro Vancouver unemployment rate was 4.9%.  Now it’s 7.8%.  See which way that’s going?  hint: it’s the opposite of house prices.  Make your own secure future in the real estate biz today!

3. The Government wants you to.  If the government didn’t want you to be speculating on real estate they wouldn’t hold interest rates at .25% and insure your mortgage with just 5% down (which the bank will give back to you in cash!) would they? It’s a pretty clear message, the only real road to riches is REAL ESTATE baby!  We can all be Donald Trump!

4. Real Estate Never Goes Down.  This is self explanatory.  Prices have risen tremendously in Vancouver which clearly means it’s a hot sector whose track record is proven.  In March 2010 the REBGV benchmark house price dropped by $455 to only $800,341.  I smell a buying opportunity!

Does this sound exciting to you?  Then YOU are the kind of financial intellect I’d like to work with!

I’m willing to offer you a very special deal for a limited time only.  Send me $15,000 and I will send to you, absolutely free, a handsome inkjet print of these words on a 8.5 x 11 inch piece of paper suitable for framing.  This will empower you to REMEMBER and BELIEVE the words so that they may bring you happiness day after day, even in the event of a completely unforeseeable market collapse.

Now go quit your job and start flipping condos.