Boutique-style developer maintains hands-on control of every aspect

Ashley Ford
Sun

Vancouver‘s claim to having the most expensive housing in the land remains unassailable. An RBC Economics housing affordability index released yesterday simply confirmed what every house hunter in the province has known for years — affordability is getting worse.

But Vancouver developer George Kwong is proving there are niche markets where more reasonably-priced — but not cheap — housing can be developed. Kwong, who runs privately-owned Homeward Bound Development Inc., is successfully putting his reputation where his mouth is and offering homebuyers what he calls “west-side quality construction at east-side prices.”

He focuses on an area in the Grandview-Woodlands area near Commercial Drive, bringing townhouse and duplexes to market for an average $300 a square foot, compared with $450 a square foot-plus downtown.

For that, he offers buyers all the goodies and baubles commonplace in downtown and west-side developments. You get a 1,250-square-foot, two-bedroom-and-den unit with hardwood floors, granite countertops, fireplace, stainless steel appliances and hot water radiant heating.

Kwong starting dabbling in the development business in the 1980s and admits there have been ups and downs along the way. He went full-time in 2001 and currently has 18 townhouses under construction in the 1600-block of East Georgia. Buyers run the range from first-timers to empty-nesters downsizing.

Now, Kwong is launching his latest project, called Georgia Court — a five-unit character townhome project offering two- and three-bedroom homes from 1,346 to 1,718 square feet that start at $412,000, or $305 a square foot.

So how does he do it?

“We are an independent, boutique-style firm and maintain absolute hands-on control of every aspect, from land acquisition, construction, financing, architectural design and marketing,” he says.

It also helps that he knows the area like the back of his hand. “I’m a small guy, focusing exclusively on an area I know and grew up in.”

And it is not all bad news for Greater Vancouver homebuyers. RBC says that while B.C. is expensive, the pricing gap with the rest of Canada is considerably narrower when it comes to condos.

In Vancouver, condos are now the only option for many homebuyers, RBC said. The average condo costs “only $215,000 in the first quarter, only half the $427,000 price tag for the average bungalow,” RBC said.

“Higher house prices, slower income growth and increased utilities costs slightly eroded Canada‘s housing affordability despite lower borrowing costs in the first quarter of 2005,” RBC said.

But by historical standards, affordability is still good overall across Canada, thanks to low interest rates, RBC economist Allan Seychuk said.

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CALCULATING COSTS

How the RBC housing affordability index works:

– It is based on the costs of owning a home. For example, a reading of 50 per cent means that home-ownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

– A standard bungalow, seen as the standard starter home, is used as a measure.

– B.C.’s reading of 53.7 is up from 52.7 three months earlier.

– The Canadian average is 36.6 per cent.

© The Vancouver Province 2005

Experts say this is no bubble, but sustainable growth driven by market confidence

Derrick Penner
Sun

Lower Mainland real estate sales reached new highs in May with the Real Estate Board of Greater Vancouver recording its highest volume of Multiple Listing Service sales of any month, and the Fraser Valley Real Estate board experiencing its best May on record.

The Real Estate Board of Greater Vancouver saw 4,434 units sold during the month, a 13.2-per-cent increase over May of last year, the most ever sold in one month, driven by high demand for condominiums.

Realtors in the Fraser Valley sold 2,067 units, a seven-per-cent increase compared with 1,973 in May of 2004 and just above the region’s next best May in 1991, which saw 2,064 units trade hands.

The average price of a single-family home in the Fraser Valley was also up nine per cent to $389,288 from a year ago.

“What has happened in the housing market in Greater Vancouver is we’ve made a rapid transition from a market driven by pent-up demand and low mortgage rates to a market that is driven by a really strong-performing economy, which is driving job growth and wage growth,” Cameron Muir, senior market analyst for the Canada Mortgage and Housing Corp., said in a telephone interview.

Gone, said Muir, are the days when the market was dominated solely by buyers enticed by low mortgage rates in an economic environment that still lacked confidence.

Muir said that market is being replaced by a period of strong market fundamentals: Population growth due to high immigration and interprovincial migration, and increasing numbers of new, well-paying jobs in the economy.

“The reason why we don’t have a housing bubble is that we do have strong fundamentals underlying the market,” he added.

Georges Pahud, president of the Greater Vancouver Real Estate Board, said the sales numbers were only “marginally surprising, [because] you’re always surprised when there’s a record.” Otherwise, realtors knew they were dealing with a strong market with “more and more people coming to open houses.”

“Consumers are demonstrating confidence in the economy, and investing in real estate,” Pahud said.

He added that the high number of apartment sales indicates that “buyers looking for a certain lifestyle are still in the market.”

MLS data shows that 1,974 apartment units were sold during May, an 11.8-per-cent increase from May a year ago. Apartment prices, however, were up 13 per cent.

Townhouse sales increased 17.3 per cent to 684 units in May, with prices also up 8.9 per cent. Sales of detached homes, at 1,776 units, were up 13.3 per cent while prices were up 8.7 per cent on the board’s housing price index.

Jake Siemens, president of the Fraser Valley Real Estate Board, said the strong prices in the valley — increases of nine per cent on detached homes and 15 per cent for townhouses — were the most surprising developments in his markets.

Strong sales, however, were not unexpected.

“There [has been] a little bit of fluctuation on interest rates, for sure, but nothing to the point where people are concerned about it,” Siemens said. “People are feeling very confident with what’s happening in B.C., market-wise and job-wise.”

The Fraser Valley saw 1,184 single-family homes sold during May, up 15 per cent from May of 2004, with an average price nine-per-cent higher than a year ago, at $389,288.

Townhouse sales were 343, a shade below the 348 units moved a year ago, but the $250,447 average price was 15.4 per cent higher.

Fraser Valley apartment sales, of 303 units, were also almost unchanged from the 304 sold in May of 2004, though their $148,401 was 4.1 per cent higher.

Muir added, half jokingly, that a fair-weather factor might have been at work in May as well.

“The weather was so nice, it was good house-hunting weather,” he said.

Michael Kane
Sun

Housing affordability in British Columbia has reached its worst level since 1995 with no relief in sight, the Royal Bank says.

With prices rising faster than wages, it now takes 53.7 per cent of the median or mid-range pre-tax family income to service the costs of owning a detached bungalow. A standard two-storey home is even higher, taking a full 61.3 per cent of pre-tax family income.

At an average price of $403,000, such two-storey homes are out of reach of many British Columbians with incomes near the $45,000 median, according to the bank’s latest affordability study released Thursday.

“B.C.’s economy is booming and more and more people are being drawn to B.C.’s revival,” said RBC economist Allan Seychuk.

“We expect the province’s affordability to further deteriorate going forward as interest rates creep up and limited availability of land remains a problem.”

In Vancouver, where average prices have jumped by about $25,000 in the past six months, the cost of the average two-storey home has risen to $471,000 while bungalows are $427,000 and townhouses are $325,000.

That leaves condominiums as the only option for first-time buyers like Leanne Harry, 34, who will be slapping down her deposit today on a 536 sq. ft. one-bedroom condo under construction at East 11th and Kingsway.

Harry, who is single, is spending about $220,000 in a market where the average condo cost only $215,000 in the first quarter, despite a $75,000 price increase in the past three years. That’s less than half the cost of a detached home and only two-thirds the price of standard townhouse.

Excluding maintenance fees, the Royal says an average Vancouver condo absorbs just 29 per cent of median monthly income compared to 42.7 per cent for a standard townhouse, 56.2 per cent for a detached bungalow and 62.1 per cent for a standard two-storey house in the city.

Harry, who spent nearly five years saving her 10-per-cent down payment, says about half of her friends are in the housing market, and some will be moving into her new building.

“The other half just simply can’t afford it. I don’t even know if it is on their radar.”

Despite the country’s highest prices and worst affordability, there is no let-up in demand for homes in the Greater Vancouver region, thanks largely to continuing low mortgage rates, said Kevin Lutz, regional manager of the Royal’s mortgage specialists.

“The market this year is stronger than last year at this point in time,” he said. “The number of mortgages that we are doing has increased.”

Like last spring, the supply of homes is in decline, pushing up prices. In the first quarter, sales rose by 11.5 per cent while new listings went up by less than one per cent, pulling Vancouver sharply back into a seller’s market from balance last year.

The Royal’s study says B.C.’s elevated prices for bungalows and two-storey homes raise the Canadian averages enough that all remaining provinces have indexes below the national average.

Affordability for a detached bungalow in Canada’s other largest cities comes in at 42.8 per cent in Toronto, 34.8 per cent in Montreal, 32.5 per cent in Calgary, and 32.1 per cent in Ottawa.

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MEANWHILE, IT GETS HARDER TO AFFORD A HOME:

Vancouver‘s unaffordability is so severe that it has skewed national numbers, as prices in the city have jumped by about $25,000 during the past six months. Below is the median percentage of pre-tax income needed to buy a detached bungalow in each city:

Housing starts projected to be as high as 2004’s by home builders’ group

Michael Kane
Sun

Residential construction spending in British Columbia hit a record $2.6 billion during the first three months of this year, putting it on track to match last year’s total, the best in a decade.

Expenditures were up 7.2 per cent from the previous first-quarter record of $2.43 billion set last year, Statistics Canada reported Wednesday.

“We are going to have some monthly ups and downs in housing starts, but I think by the end of the year, we will find they are at least as high as last year’s level,” said Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association.

“The economists agree we have several more years of buoyant market in B.C., particularly in the Lower Mainland.”

Statistics Canada said historically low mortgage rates continue to boost affordability, along with higher disposable income and strong consumer confidence. Outlays are also being driven up by higher house prices and buoyancy in the renovations sector.

Across Canada residential construction spending totalled $15.3 billion in the first quarter, up 8.6 per cent from the same period in 2004.

Both the national and B.C. advances reflect gains in all three components of residential construction investment — new housing, renovations and acquisition costs which include taxes, land development costs, legal fees and mortgage insurance premiums.

The three components are at their highest level for any first quarter since record keeping began in 1961, the federal agency said. At the same time the 8.6-per-cent national growth rate actually reflects a minor slowdown because it was the lowest growth rate since the second quarter of 2000.

While spending continues to climb in B.C., a slowdown in the annual rate of growth is considered inevitable after last year’s breathtaking 33.4-per-cent jump from $1.8 billion in the first quarter of 2003.

“We are not calling for any significant increase over last year because it is going to be hard to beat but we think it will at least reach that level,” Simpson said. “It could go higher but we’ll see at the end of the year.”

He said there is “nothing but optimism” among his members who include suppliers and manufacturers, as well as builders and renovators.

“Low mortgage rates are keeping debt service costs manageable. That’s the bright light that’s keeping the market going in an era of very high housing prices.

“We don’t believe that we are even past the midway point of this growth cycle. The only impediment right now is rising costs for building materials and labour.”

Across the country, spending for new housing construction was $7.6 billion in the first quarter, up 6.6 per cent over the same period last year. Single-family homes were up 4.7 per cent to $4.7 billion, while spending on apartments and condominiums jumped 16.1 per cent to $1.8 billion.

Renovations accounted for 40 per cent of the total residential construction investment with spending up 10.8 per cent to $6.2 billion from $5.6 billion in the first quarter of 2004.

Acquisition costs — taxes and fees — rose 9.7 per cent to $1.4 billion.

© The Vancouver Sun 2005

About 27,500 new enterprises anticipated this year

Michael Kane
Sun

New business formation in British Columbia is growing as fast as the economy and on track to reach a record 27,500 this year.

Buoyant conditions are fostering the most startups in real estate, rental and leasing, retail trade, construction, and scientific and professional services, says the Credit Union Central of British Columbia.

They include businesses like West Vancouver‘s The Urban Tea Merchant, a unique “lifestyle” store featuring tea rituals from exotic countries. It opened last September at The Village at Park Royal and is doing “very well,” said Karinna James who owns the business with her husband, Tom, a corporate turnaround specialist. The store employs 10 workers, including five full-time.

Retail sales over-all are the best in more than a decade, rising month after month by anywhere from six to eight per cent compared to the same month last year, said Mark Startup, president and CEO of Retail BC.

The good news is fairly consistent across all business sectors, with the exception of agriculture, according to the Canadian Federation of Independent Business. Farming across Canada is beset by the BSE border closure and still recovering from avian flu.

Some 41 per cent of small businesses in B.C. intend to increase full-time employment over the next 12 months, said Laura Jones, Vancouver-based vice-president of the CFIB. The majority of the business group’s 10,000 members in B.C. employ fewer than 20 people.

“Optimism in B.C. continues to be exceptionally strong,” Jones said Tuesday. “This is consistent with what we have been hearing from our members for the past seven quarters in a row.”

British Columbia‘s expanding economy is evident in both the rising number of operating businesses and declining business bankruptcies, the credit union central states in its weekly economic update.

Incorporations are steadily trending higher and are on pace to jump between 7.0 per cent and 10 per cent this year to about 27,500, handily beating 1994’s record level.

Business failures are also likely to break 1994’s record low mark and come in at around 800, about 15-per-cent lower than last year.

The numbers are just another indication of a robust provincial economy set to grow by 3.8 per cent this year and 3.6 per cent in 2006, said Helmut Pastrick, chief economist of the credit union central.

“These are above-average growth rates and there’s a chance that we could see 4.0-per-cent-plus growth this year and even next year, quite frankly. It wouldn’t surprise me.”

Tourism has been one area of weakness in the economy but other sectors are doing well and that is expected to continue, said Jock Finlayson, executive vice-president of the Business Council of B.C.

“It’s onwards and upwards for the next year or so,” Finlayson said Tuesday.

Pastrick said the growth in incorporations augers well for both employment and self-employment. About 30-40 per cent of firms with no employees are incorporated.

By industry, he said net business growth in firms with no employees was highest in professional, scientific and technical services; construction; real estate; retail trade; and management of companies.

© The Vancouver Sun 2005