Blog › October 2015

Is Vancouver Real Estate “Problematic”?


Locals give collective snort of derision as Crown corp describes market as “not problematic” – but it depends on your point of view

Vancouver Yaletown fall Marinaside Crescent.jpg

Earlier this week, the Canada Mortgage and Housing Corporation released, with customary pomp that included a nationwide media conference call, its latest quarterly Housing Now report.

For the uninitiated, these reports examine 15 key Canadian housing markets, including Vancouver and Victoria. They assess how much these metropolitan areas are demonstrating each of four factors that put them at risk of a housing bubble:

  • overheating of demand (demand significantly outpacing supply);

  • acceleration in the growth rate of house prices;

  • overvaluation in the level of house prices; and,

  • overbuilding of the housing market (supply significantly outpacing demand, which can reflect excess new construction and/or a decline in demand).

On balance, given all four factors, the CMHC said that there was “weak evidence of problematic conditions” in Vancouver’s housing market.

Reporters on the conference call scoffed audibly at this assertion. “Problematic” for whom, exactly?

After all, it is pretty clear that a an awful lot of people are finding our real estate market pretty problematic – primarily first-time buyers, low earners, disadvantaged locals and growing families. No surprises there. 

No, what the CMHC is basically saying is that the Vancouver market is not problematic for the CMHC. Not problematic for the government. They’ve taken a look at our city, its high house prices, its seemingly insatiable demand for real estate, its growing population and its economy, and figured that Vancouver will take care of itself. (Same goes for Victoria, by the way.)

On the flip side, the corporation is pretty worried about Toronto, Winnipeg, Saskatoon and Regina, all of which were found to be displaying “strong evidence of problematic conditions.” In other words, a poppable bubble is much more likely in these cities, even if average prices are lower than ours.

Of Toronto, the report said, “Inventories of both new and existing single-detached homes have been declining, which has contributed to rapid price growth in this segment. The continued rise in house prices has not been matched by growth in economic and demographic fundamentals, giving rise to strong evidence of overvaluation.”

A lot of people might argue that the same could be said of Vancouver. But the CMHC’s assessment of our city is that the “economic and demographic fundamentals” are growing in line with the prices we’re seeing. It does note for Vancouver that there is a slightly increased risk of overvaluation (from low to moderate) since the last quarter, as prices have increased further with no corresponding economic growth. But on the whole, the CMHC is saying, no need to worry.

Now that might seem pretty dismissive, at least to those out there who are struggling to get into or move up in our market. But rather than get mad at the CMHC for its “Ah, you guys are fine” attitude, those who are smart will sit up and listen.

After all, you have to hand it to the CMHC – its forecasts have rarely been out of line. Whether predicting house prices rises, home sales or housing starts, it is usually on the money. There are a lot of very smart researchers and economists putting together these reports.

So then, if the CMHC is right, what can people do with this information? If there really is no bubble, no overheating, no overbuilding, steadily rising home prices but no scary acceleration of the growth rate – what then?

Well, for those people who are already in the real estate market and comfortable with their homes, it’s great news. And come on folks, let’s not dismiss existing homeowners – they have needs too. We don’t want there to be a bubble in Vancouver real estate that pops. We are not hoping for a housing market crash here. To see billions of dollars of equity built up by hard-working local families wiped away would be utterly devastating. So if prices continue to rise, perhaps at a slowing pace (as the CMHC predicts), that’s got to be the best-case scenario.

No, we must not hope for lower average prices to be the answer for those people struggling to get their foot on the property ladder. For those people, innovative solutions and government-funded programs are required. If the new Liberal government delivers on its housing promises, that will help (more on that here). I also have some suggestions in a previous editorial that I won’t go into now.

The other thing that is needed is a reality check among locals. An adjustment of expectations. If the CMHC is right (and it usually is), this supposedly “crazy” market is not crazy at all. It’s the new normal. If you are a low, or even an average, earner who has no additional personal wealth, you will never be able to buy a single-family home in a desirable, central neighbourhood. There are many great options out there for you (truly, there are), but that is simply not one of them.

This city is changing. Change with it. Otherwise, you’ll be the one with the problem.

 

 



First Shaughnessy designated Heritage Conservation Area


Photograph by Vancouver Heritage Foundation

Vancouver City Council established the First Shaughnessy District as the city’s first-ever Heritage Conservation Area, an important move toward preserving and protecting valuable heritage homes in Vancouver.

Pre1940 character homes are protected from demolition

First Shaughnessy District is the area between West 16th and King Edward and Arbutus and Oak streets where many pre-1940 character homes are located.

Designating First Shaughnessy as a Heritage Conservation Area legally protects pre-1940 heritage properties in the area from demolition and provides more clarity around conservation.

“First Shaughnessy is one of our most historic neighbourhoods, and in a city as young as Vancouver it's important that we protect its unique heritage,” said Mayor Robertson. “By designating First Shaughnessy as Vancouver's first Heritage Conservation Area, we are taking a balanced approach that will prevent the demolition of these historic homes while providing new opportunities to add very modest density where appropriate.”

While demolition can be prevented, many benefits in the new zoning would be available to these properties.

The proposed new regulations support additional dwelling uses and units, such as secondary suites, coach houses, infill buildings, and multiple-conversion dwellings.

These changes can generate land value and would offset the impact of keeping the existing house.

Over half of First Shaughnessy properties were built before 1940

First Shaughnessy is a historic Vancouver neighbourhood which was developed in the early 1900s as a premier residential area.

The neighbourhood is highlighted by distinct homes in neo-Tudor, Federal Colonial, and Arts and Crafts styles, and features lush landscaping and mature trees.

There are 595 properties in First Shaughnessy, of which 315 were constructed before 1940. Eighty of the properties are currently listed on the Vancouver Heritage Register.

In response to a steadily increasing number of demolition permit requests for pre-1940 homes in the area in recent years, a temporary moratorium on demolitions was put in place in 2014, while a review of the First Shaughnessy District was underway and the Heritage Conservation Area plan was developed.

Heritage Conservation Areas help cities identify and manage heritage resources

Heritage Conservation Areas are used in municipalities across North America to identify, manage, and provide long-term protection to heritage resources. There are around 60 Heritage Conservation Areas in British Columbia, with nine of them in Victoria.

Heritage Action Plan

The Heritage Action Plan is a review of the policies and tools used to conserve and celebrate heritage resources. It was approved by Council in December 2013 to improve how the City supports heritage conservation in Vancouver. 

Actions implemented through the plan will result in an update of the City’s existing Heritage Conservation Program, which was originally established in 1986, Vancouver's centennial. 

Consultants, staff, and a public advisory committee are working on actions set out in the plan. You will also have numerous opportunities to provide your input.    

Key areas for action and implementation

The Heritage Action Plan has five key areas for action and implementation:

  1. Heritage Conservation Program review
  2. Heritage Register upgrade
  3. Character home zoning review
  4. Sustainability initiatives
  5. Awareness and advocacy initiatives

View the work program and public engagement schedule  (576 KB)



New Listing 208 - 3621 W 26th Avenue, Vancouver, BC


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Recently Sold Listing 506 - 139 W 22nd Street, North Vancouver, BC


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Leasehold: Own a Home, But Not the Land It's On


What if you could shave a hundred thousand or more off the typical asking price of the home you want? What if you could do this in a central neighbourhood, in a more spacious unit, perhaps one with a view?

It's possible. The only catch? You won't own the land your home is sitting on.

There are pockets of land throughout Metro Vancouver - many in prime locations - that have been rented out to developers for a set amount of time, usually between 50 and 99 years. The developers or "leasehold landlords" build on and make improvements to the land, then sell or rent out portions of the buildings.

This lease land is often city-owned, but the federal government, First Nations bands, Universities and even private individuals also own and rent out land. The types of developments vary, from condos to townhouses to detached houses and duplexes to mobile or even float homes. But all share one thing in common: unlike a traditional freehold unit, you own your share of the structure and any common property, but only rent the land beneath it.

Leasehold units are usually more attractively priced, more spacious, and in better neighbourhoods than their freehold counterparts. A quick search on REW.ca revealed these two 1-bedroom condos in the West End.

Freeehold condo in Vancouver's West EndLeasehold condo in Vancouver's West EndThat's a difference of $160,000 between two comparable 600 sq. ft. units, one freehold and one leasehold.

Basically you are buying a "right of exclusive possession" until the end of the lease period, or until you sell that right to another person.

Often, leases are prepaid by the developer and incorporated in the selling price. If the lease is not prepaid, you will have to fork over rent for the land on top of any strata fees, taxes, and mortgage payments you're already paying.

However, you're often buying into a better lifestyle (at the cost of a better investment). And in some areas, you are buying the right to live somewhere you otherwise couldn't, such as the UBC endowment land with its pristine forests and majestic ocean views.

What you won't get is a share of the rising land value. In fact, rising land values can cost you.

The lease agreement, called a "ground lease," sets out the terms and conditions upon which the developer has leased the property. If lease payments haven't been prepaid, the agreement will usually allow for annual lease payments to be raised periodically to reflect current land valuesometimes dramatically.

In 2006, some False Creek condo owners saw their annual lease payments skyrocket by up to 700% when the City adjusted for the then-current land value. Subject to arbitration, the lease payments were later lowered by several hundred dollars per month because the recent sale of the Olympic Village site had dramatically skewed the land value.

If the lease on your unit is soon coming to an end, you won't be able to say with any certainty whether it will be renewed, and if so, at what cost once rising land values have been factored in.

And if the lease is not renewed, most lease agreements give the landowner the right to buy out the buildings at fair market value, then do with the land what they wisheven if that means tearing down existing buildings, rezoning, or selling for redevelopment. You might have to move.

It's uncertainties like these that make some leasehold properties less than ideal investments. They don't increase in value as quickly as a freehold. They generally take longer to sell. And as the lease counts down to expiry, the property value can actually be negatively affected.

Banks don't like the uncertainty surrounding certain leaseholds either. That's why most lenders will ask for a hefty 25-30 per cent down payment. Lenders also use the expiry date of the lease as a guideline for loan amortization periods, lending only for five years fewer than the remaining lease. So if a lease expires in 20 years, for example, you would only be able to get a 15-year amortization period for that loan. Reverse mortgages for retirees can be next to impossible to get for most leasehold properties.

That depends. If lifestyle factors like being close to work or living in a beautiful area are most important, it could be the right choice for you. Look for long leases - 25 years or longer - and preferably for a length of time that far exceeds the time you plan to live there. Prepaid 99-year leases are the most secure, but they also cost almost as much as freehold.

And, most important, find a Real Estate Agent and mortgage broker who have experience in leasehold properties.

So where can you find leasehold gems? Start by doing an Advanced Search on REW.ca in your preferred neighbourhood with the keyword "leasehold." Here are a few areas to get you started:

- See more at: http://www.rew.ca/news/leasehold-own-a-home-but-not-the-land-it-s-on-1.1342076#sthash.M4nwNrO5.dpuf



New Listing 6250 Blenheim Street, Vancouver, BC


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Vancouver New Housing Prices Continue Steady Rise


Annual growth in city’s new housing price index slows after hot July but still climbs in August, according to national statistics agency

New homes townhouses

Vancouver Census Metropolitan Area (CMA) new home prices rose again in August, although at a slightly slower growth rate than last month, according to a Statistics Canada report released October 8.

The CMA’s new housing price index increased 1.4 per cent year over year in August, and across the whole of BC it increase 1.2 per cent.

Month over month, new home prices in both Vancouver and across the whole province rose 0.1 per cent in August compared with July’s figures, a slower monthly growth rate than seen in recent months.

Unlike in the resale housing market, Vancouver and BC’s annual price rises were similar to that of Canada as a whole, with new housing across the nation increasing its price index in August by 1.3 per cent year over year, and 0.3 per cent month over month.

New house price rises often do not reflect those seen in the resale market, as the price paid for a new home is only measured when the transaction is completed and registered with the Land Registry, rather than when the home is originally purchased off-plan. Because of long lead times on home construction, the new home prices registered today are those homes sold many months or even years ago – whereas MLS resale home prices are much more up to date.

Victoria CMA’s new home prices continued their slide in August, down 1.6 per cent compared with the same month last year and down 0.1 per cent compared with the previous month, after three months of no price change. Victoria was again one of just five CMAs to record an annual decrease in August, out of a total of 21 CMAs surveyed.

Hamilton, Ontario and the combined metropolitan region of Toronto and Oshawa recorded the joint largest annual price increase in August, with prices up 3.8  per cent over the same month last year. Vancouver’s annual price growth of 1.4 per cent was fifth highest nationally.

To see Statistics Canada's full report and interactive tables, click here.

 


New Listing 3210 W 48th Avenue, Vancouver, BC


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Condos Accelerating Growth in BC Home Building Investment


Multi-family building spend in the province catching up to detached home construction investment, reports statistics agency

Multifamily home construction

Investment in BC home building continued to climb – and increase its rate of growth – rising nearly 19 per cent year over year in July to $731 million, according to Statistics Canada data published September 22.

As has been the recent trend, apartment-condo construction led the investment growth in BC, rising 32.3 per cent compared with July 2014 to a total of $306 million – almost catching up with single-family home investment. 

The province’s detached home construction spend also increased, although at a slower growth rate, with the $331 million of investment an 11.9 per cent rise over the same month last year.

Townhome and row home construction investment in BC continued to rise steadily, increasing 14.4 per cent year over year to $64 million in July.

Bucking the recent trend, the only properties to see a reduction in construction investment in July were duplexes, spending on which fell 6.3 per cent year over year to $29 million.

The province’s total $731 million new home construction spend was again the third highest total in the country, after Ontario and Alberta. BC’s home investment growth rate was also Canada’s third highest, after spending surges in July in the Northwest Territories and Nova Scotia (up 65.9 and 27.8 per cent year over year respectively).

As with previous months, increases in new home spending nationwide were much more muted than those seen in BC. Investment in new home construction across Canada totalled $4.2 billion in July, up a meagre 0.5 per cent from the same month a year earlier.

As with BC, Statistics Canada reported that the increase came mostly from higher investment in apartment and condominium building construction, up 17.5 per cent to $1.4 billion, as well as higher spending on row house construction, up 6.3 per cent to $395 million.

Single-family home and duplex construction across Canada again both saw year-over-year declines in construction investment, falling 7.4 and 15.8 per cent respectively. However, detached homes saw the biggest total investment in July at $2.1 billion.

To see Statistics Canada’s interactive chart, click here

- See more at: http://www.rew.ca/news/condos-accelerating-growth-in-bc-home-building-investment-statcan-1.2065519#sthash.NID6jKhG.dpuf