Vancouver raises False Creek lease rates 700%

Buying a condo on leased land in False Creek just became a whole lot more expensive. The city of Vancouver jacked up lease rates overnight with an average increase of SEVEN HUNDRED PERCENT! This story from 24hrs.

“Richard Cooper woke yesterday to find his payments had jumped from $102 monthly to $785.
“I got up this morning and there was a bulletin,” Cooper told 24 hours.

Condo owner George Stratis was among the hardest hit. He wasn’t aware of the increase until he was contacted by 24 hours yesterday. “You’ve got to be kidding me! That’s absurd,” Stratis said, when told his payments had jumped by $1,400 a month. “That’s larger than a mortgage.”

Stratis could now owe the city about $20,000 a year. That’s on top of his regular property taxes.”

One owner has seen their payments raise from $121.50 to $2,000 – An incredible SIXTEEN HUNDRED PERCENT increase! The city claims that these lease rates have been stuck at a low value for thirty years and that todays increase reflects the current value of the land. Leasehold value has been a contentious issue between residents of False Creek and the city of Vancouver for years. Some residents claim this former industrial land is contaminated and overvalued by as much as 40-50 per cent.

“They’re simply boldly making the statement saying this land is worth top dollar and we should be getting as much rent for it as if it were clean,” said Renger, a senior city planner in another jurisdiction. “That’s not what market land value is about.”

I have a feeling that even at the peak of a boom you’re going to see listings for leased land property in False Creek plummet in value as owners, particularly retirees try to get out of their lease-hold condos.

Update: there’s more info in the Georgia Straight – apparently these increases are on 118 units that decided not to prepay their lease in 2001. The only False Creek resident that was there during the October 3rd council vote in favour of increasing the lease rates was Merv Therriault:

“This has all been predictable,” Therriault told the Straight. “In 1998, we got a document through an FOI [request] that said a large increase in rent will present a political burden to council in 2006.”

Though the increase was forseen, apparently the size of the increase was not:

“COPE Coun. David Cadman told the Straight that no one could have predicted land values would rise so much, but it’s council’s job to uphold the lease agreements. Both Cadman and Therriault predict that when the leases expire in 2040, South False Creek will likely be sold and turned into a Yaletown-like development.”

I’m unclear on the legal status of units built of leased land. If the city decides to sell the land in 2040 when the leases expire do they need to buy the buildings from their current owners, or can they just tear them down with no compensation since the lease for the land is up?

The end of a sellers market.

A more detailed article today in the Vancouver sun about listings, sales and prices in Septembers real estate market in Vancouver. This article starts with the statement “The sellers’ market in Lower Mainland real estate is coming to a close.”

Cameron Muir of the CMHC makes the comment that “The asking price of many home sellers is getting to the point at which fewer and fewer buyers can pay”, but says that it this point (four months of sales decline) its not a signal of any kind of “significant market correction”.

However, Tsur Somerville, director of the centre for urban land economics and real estate at the University of B.C.’s Sauder School of Business, said the trend in sales is a sign the Lower Mainland market “is clearly putting the brakes on. But it’s too early to say how much.”

Somerville said real estate markets pass through a balanced period when they are rising from depression to overheated, and will also hit balance, or “equilibrium” on their way back.

“Since [the market] has been very overheated, it’s quite reasonable to go back to balance,” Somerville added. “The question is, are we going to stay there or keep going?”

Somerville wonders whether the psychology of buyers is shifting and more of them are focusing on negatives rather than positives, such as cost overruns for the 2010 Olympics. Somerville said buyers might also be looking at the poorly performing U.S. housing market and worrying how that might affect B.C. Whether it does or not is immaterial, he added, “because psychology matters.”

Anecdotaly, I’m finding that people around me no longer view real estate in the lower mainland as a ‘sure-bet’, In fact- I think I’ve heard expectations ranging from a dip to a crash from more than 10 different people in the last couple of weeks. Is this the end of the sellers market in Vancouver real estate? What will a transistion to a buyers market look like? Or will we find that sought for balance that saves us from a crash and enables more people to buy?

What are you hearing from people on the street?

September 2006: Listings up, sales down

September is the fourth month in a row that real estate listings have gone up while sales have gone down according to this brief story in the vancouver sun.

The number of sales in the greater vancouver area are down almost 25% from september one year ago, while the number of listings are up 11.4%. Fraser Valley saw similar numbers with a 23% drop in sales and a 19% increase in listings.

“Rick Valouche, Real Estate Board of Greater Vancouver president, said the figures show the region is “moving towards a balanced market.”

Does anybody know what a balanced market is? What years would the real estate market have been considered ‘balanced’ in Vancouver? What effect does ‘balance’ have on prices?

Rob Chipmans real estate numbers

I’ve only recently discovered Rob Chipmans real estate investment blog – it’s an interesting site which offers something that can be hard to find anywhere else: constantly updated current numbers of property listings and sales in the vancouver area. I don’t think that any one days numbers are useful by themselves to give insight into whats happening in the vancouver market, but as a rolling snapshot its a great resource.

Robs commentary is also very informative – He maintains a balanced perspective on the market and understands that there are oppourtunities to be found in both up and down markets. If you’re interested in the minutae of the vancouver real estate market and you like numbers its definately worth checking out his blog.

factoid: Spellchecker replaces ‘chipman’ with ‘chipmunk’.
conspiracy theory: Rob Chipman is related to VHB.

Should I buy a leaky condo?

Lately I’ve been recieving a lot of mail asking for advice on specific issues.. I’d like to take this time to proclaim my non-expert status. I have no way of foretelling the future, if I had that ability I’d be too busy swimming around in my money bin to post here.

The most recent question to come in is from someone considering the purchase of a previously leaky condo unit that has been repaired and has the standard warranty. Here’s the concern:

“The development is in Coquitlam and was repaired last year to a level that it has the 2-5-10 warranty. My concern is in the design of the building which doesn’t have overhangs in some areas and has a flat roof in some areas. Should I be concerned with this?”

Most conventional wisdom I’ve heard says to stay away from buildings like this, but I have a feeling that some of the people reading here might know more about this subject than I do, so therefore I submit this topic for discussion – Are flat roofs and lack of overhangs on a repaired leaky condo a dangerzone? Or are previously leaky condos a good way to get into an overpriced market?