To buy or not to buy.

The financial facelift in today’s Globe and Mail focuses on a vancouver couple that would really like to buy a house, but are priced out of the market. Or are they?

“George and Colleen have a sympathetic banker. He has offered to finance the purchase of a house with the understanding that there would be no payments until George has finished his training. That’s very accommodating, but five years of compound interest would be a huge sum to pay, the planner adds.”

Their situation is looked at by a financial planner from Kelowna, Derek Moran who points out that they could stretch to buy a condo, but doesn’t recommend it right now:

“George and Colleen could downsize their plans. A condo for $400,000 would be an alternative to a house. Some banks will lend up to the full value of a home. Without any down payment, a mortgage at 5.3 per cent with a 25-year amortization would cost $2,395 a month, not including property purchase tax, GST and mortgage insurance costs. It would be paid off by the time George is 57 and Colleen 59.

Is it worthwhile to take on a $400,000 debt to buy accommodations similar to those they already rent for $1,200 a month? In spite of the advantages of ownership, it makes sense to continue renting, Mr. Moran insists. Buying would cost twice as much each month in mortgage charges as current rent and would expose the couple to the risk of a housing collapse as well as property tax increases and rising interest rates.”

It’s interesting that they bring up the possibility of a housing collapse, and even put some potential numbers on that situation:

“If George and Colleen find that real estate prices soften, they could save as much as $100,000 on a $400,000 condo. With the financing costs added in, that saving would actually be $296,368 by the time the mortgage is paid off.”

Isn’t it amazing how $100,000 becomes almost $300,000?

We’re number 1! (in lack of affordability)

RBC just release a report on housing affordability in canada. There’s a story in the Globe and Mail:

“In the third quarter, “Alberta and British Columbia had the sharpest erosions in affordability, driven largely by double-digit annual price gains,” the Royal Bank division said Tuesday. “However, Alberta’s soaring price gains still leave the province below past affordability stress points.”

Housing in Calgary and Edmonton remains more affordable than in Toronto, Montreal and Vancouver, relative to incomes.

“Vancouver, however, is entering uncharted waters as it sets new records for poor housing affordability in two out of four classes, and the other two will likely do so later this year,” the report says.”

See? Vancouver is number one in lack of housing affordability with a record-setting level of unaffordability. I’m sure that comes as a big suprise to everyone here.

“The RBC Affordability Index measures the proportion of pre-tax household income needed to service the costs of owning a home.

The higher the index, the more costly it is to afford a home. For example, an Affordability Index of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

The most affordable housing class remains the standard condo, with an index of 27.5 per cent.

A standard townhouse is next at 31.4 per cent, followed by a detached bungalow at 39.4 per cent. A standard two-storey home is still the least affordable housing type in the country with an index reading of 44.8 per cent.”

So those numbers are for all of canada, what do the numbers look like for affordability in just the west, specifically in Vancouver? Ah, here we are:

“RBC Affordability Index for a detached bungalow for Canada’s largest cities is as follows: Vancouver 68.2 per cent, Toronto 43.9 per cent, Montreal 36 per cent, Calgary 34.6 per cent and Ottawa 30.3 per cent.”

68.2 percent of the average pre-tax income.. I wonder why they use pre-tax income? It’s not like you can write off your mortgage here like you can in the states.

Correction: Federal government WILL review leaky condo crisis

Seems to be lots of leaky condo news lately – the federal governments review of the lower mainlands leaky condo crisis is back on:

“Prime Minister Stephen Harper won’t break his election promise to review the federal government’s alleged culpability in the $1.5 billion leaky condo disaster, a federal official said Monday.

A spokeswoman for Human Resources Minister Diane Finley said a new option has emerged since the minister wrote to owners in July saying it would be inappropriate for the government to even consider initiating a review while the issue is before the courts.”

I wonder if they got many complaints after news broke that they were unable to carry through on their election promise to review the leaky condo situation here. Whatever happened I think that a lot of people in affected buildings around Vancouver will be pleased with this turn of events, particularly if it leads to some sort of future solution. For a ‘world-class’ city Vancouver has some pretty awful architecture and some suprisingly shoddy construction, lets hope this gets us moving in the right direction.

This renewed claim to look into the leaky condo crisis is pretty vague at this point, hopefully some more specific information will be forthcoming:

“We’re currently studying options as to how we can proceed without compromising current legal proceedings, as we have recently learned that there may exist review options that will not interfere in these proceedings,” Colleen Cameron, Finley’s director of communications, wrote in an e-mail to The Vancouver Sun today.

“Unfortunately, I can not provide detail about these options at this time-only assure you that we remain committed to a review.”

story in todays vancouver sun.

$29 million to build, $40 million to repair.

More depressing news on the local leaky condo front, this hot on the heels of the federal governments announcement that it is dropping its election promise to review culpability for the Lower mainlands leaky condo crisis:

“Owners in a leaky condominium project that cost $29 million to build in 1994 may now have to pony up a total of $40 million to keep the buildings standing.

The City of Vancouver ordered Gardenia Villa, at the corner of Nanaimo and East Broadway, to get an engineer’s report after an inspection showed various parts of the complex were at risk of failing structurally. The city also ordered immediate shoring to one of the buildings in the complex because of imminent danger.

Normally, it’s the strata council that decides to get an engineering report done and the city doesn’t get involved until there is an application for a building permit to do the work, Vancouver’s chief building official, Dave Jackson, said in an interview. But in this case, some of the owners complained to the city that maintenance wasn’t being done.

Following an inspection, the city was concerned that the building “might be damaged to the point where something might fall,” Jackson said. In its order, the city also referred to “water … leaking out of structures in several locations and … algae growing extensively on the building’s exterior stucco.”

If all repairs are done to this building it will end up costing an average of $160,000 per unit, an astounding figure considering that some of the units were originally purchased for much less than that amount.

“Options the owners will be considering today, according to a notice of the meeting, include doing nothing, proceeding with the repairs, suing the parties who designed and built Gardenia Villa, and dissolving the strata corporation and selling the land.

But legal action against the developer may prove difficult as Maple Resource Investments was dissolved in 2003 for not filing annual reports. And Jackson said doing nothing was also not an option. “Ultimately, we expect them to do the repairs and if they don’t, we would eventually order them to,” Jackson said.

Once the strata does the repairs, the city will require letters from structural engineers to ensure it has taken care of the safety issues related to the structure, Jackson said. The city will also need letters from envelope specialists that repairs meet minimum standards of the Vancouver building code.

Tony Gioventu, executive director of the Condominium Home Owners’ Association would not talk specifically about the Gardenia Villa project. However, he did say other projects with large assessments have been able to spread the repairs over a number of years, “which eases the financial burden on the owners.”

Full article in todays Vancouver Sun.

How much will the olympics cost BC?

Astute reader Suavek just sent in the link to this story – It seems that the 2010 winter olympics are going to cost just a teensy bit more than originaly estimated. It turns out the cost will be around $1,000,000,000 more than the BC government previously indicated. For the number illiterate thats ONE BILLION DOLLARS more.

The BC auditor general just released a report that the true total cost of hosting the olympics is estimated at $2.5 billion dollars, $1.5 billion of which will come from the province. By not counting the actual cost of building all of our projects for the olympics the BC government had previously insisted that the total cost to BC would be no more than $600 million.

B.C. Economic Development Minister Colin Hansen took issue with van Iersel’s findings, arguing that the Sea-to-Sky Highway would have been improved anyway, and should not be considered an Olympics-related cost.

”Sure there’s lots of things that the government is doing that we are wrapping an Olympic flag on,” he said. ”But those are programs that are not part and parcel of us living up to our obligations for the staging of the Olympics.”

The Auditors report says “given the province has the ultimate responsibility for the financial outcome of the Games, we feel there should be regular and complete reporting of the total Games costs to the taxpayers. To date, the province has only reported to taxpayers on the $600 million envelope it has established; however, there are many other Games related cost that are not being reported as such by the province.”

The 65-page report also highlights significant problems with the management and marketing of the Olympics, and warns that costs could go even higher. Van Iersel found, for instance, that the province lost $150 million in projected revenue from broadcasting and international sponsorships by failing to adopt a routine ”hedging strategy” that would have protected them against fluctuations in the dollar.

He found, too, that the government will have to wait six years longer than expected to launch a marketing campaign, because it didn’t realize the International Olympic Committee restricts such campaigns until the previous Olympics are over. B.C. had planned to start its campaign in 2003, but now will have to postpone it until after the 2008 Olympic Summer Games in Beijing. Van Iersel said the delay could hurt the provinces plan to reap $4 billion in economic spin-offs.

The auditor’s report also notes that the Vancouver Organizing Committee (VANOC) has transferred construction risks for many of the venues to other partners. But if rising costs make it impossible for those partners to finish the job, ”there is a risk the province will have to contribute more funding to VANOC to get the projects completed,” the report says.

The province has set aside $76 million for such unexpected costs, but the auditor general also questions whether that emergency fund will be enough.

I think we all know how the BC government can GUARANTEE that they’ll have plenty of money to cover any unforseen costs: Invest in real-estate!