Tom Everitt
Sun

The lineup stretches around the block in anticipation of the latest installment from the notorious producer. People have been waiting weeks for the upcoming release date and overnight campers are not uncommon, a select few having been there for days.

The staff looks nervous as the crowd grows, the anticipation increases and patience wears thin amongst the masses. Finally, the line starts moving before utter chaos breaks out and it is readily apparent to all that this year’s summer blockbuster has arrived.

Suddenly, the unthinkable happens. It is sold out before you get to the front and your better half shrieks at you for not leaving the house earlier. The kids are screaming that you blew it and you go home empty handed, having learned a little too late that the only thing remaining was a one bedroom and closet with a ‘stunning’ view of the back alley for $750 a square foot and no parking or storage, of course.

Later, in a desperate attempt to keep your family together, you purchase an old charmer from a family who left in the middle of the night mumbling something about an ancient burial ground. Unfortunately, even though the home comes with great features like red liquid walls and a passageway to hell in the basement, the only voices that agree with your purchase are coming from the attic. Your family gives you a very enthusiastic two thumbs down and now the voices are telling you to leave. You’ve bombed.

This scene has been playing out in Vancouver this year, though obviously not in the theatres and, in case you haven’t guessed, we’re definitely not talking about the latest action adventure starring Tom Cruise and his alien cohorts. Also, the people waiting in line aren’t jostling about vying for a better seat to see if the chemistry between Brad Pitt and Angelina Jolie is real or not and they certainly aren’t dressed as Chewbacca in anticipation of the latest Star Wars sequel.

No, folks, this blockbuster that I speak of is the process of home buying in the new millennium and the only thing resembling an alien is perhaps the realtor (just kidding, I am one … a realtor that is). The producers I’m talking about are, of course, your local developers and homesellers and the line up is as real as $13 movie prices and $8 bags of popcorn.

Rather than a film, however, this line up is usually for condominiums, townhomes and, of course, the ever elusive “Character Home,” that rare beast that gets more people walking on its old red carpet than the Oscars. The tickets to this show, however, are almost as expensive as Johnny Depp’s fee for Charley and the Chocolate Factory, and that doesn’t even include upgrades like stainless appliances or Brazilian hardwood.

And as for the character homes they, like character actors, have a box office appeal that appears limitless and can bring in more people and more money than The Titanic. The only bonus? At least the refreshments at some open houses are free.

So, since the chaos lately is more realistic than Steven Speilberg’s current alien invasion or Wonka’s Oompa Loompas, I thought I’d jot down a few helpful tips on dealing with your sanity in this war of the real estate world.

Don’t be afraid of the Mercedes-driving, Rolex-wearing, Armani-suited men in front of each development or open house. Those are just the plumbers and carpenters.

Thinking real estate might be a poor investment? You might be right. Keep your money in Enron, Worldcom and other ‘sure bet’ stock tips from your friends.

Get new listings automatically e-mailed to you instantly from your realtor. That way, you’ll know instantly that they are already sold.

Write an offer and photocopy it five or 10 times. Since you’ll probably lose out in a half dozen multiple offer situations, you’re gonna’ need them (I did).

Never ask how much the previous owner paid for the property when they purchased it. It will only make you cry.

Attend open houses so that you can find the home of your dreams (you’ll also find the person that just bought it 10 minutes before you got there).

Don’t blame realtors. A lot of them didn’t purchase five years ago either.

Forget real estate and go back to RRSP’s. One of our $7,000 RRSPs has grown 82 whole dollars over the last four years.

Scared of the thought that a real estate ‘bubble’ exists? Lock in for 10 years at six per cent. The only “bubble”still around after that long will be Michael Bubble (oops, I guess that’s pronounced “Buble”).

Never, ever lose your sense of humour, especially in stressful times like the purchase of real estate. You’ll find your home eventually. It might be difficult, but you’ll find it.

© The Vancouver Sun 2005

Bruce Benham, Chief Operating Officer of RE/MAX International, Inc.
Other

We’re all aware of the dramatic headlines proclaiming the inevitable “housing bubble” that will reportedly cripple the real estate industry, and the entire U.S. economy, when it eventually bursts.

But you know better. And I hope your clients do too.

The alleged bubble, rooted in fears created during the dot-com aftermath of the early 2000s, is a media-manufactured myth. It’s based on the projected collapse of a national housing market that simply doesn’t exist.

It’s a misnomer

My position matches that of U.S. Treasury Secretary John Snow, who offered his in an interview on Bloomberg Radio April 26th.

“I don’t think the evidence suggests there is a national housing bubble at all,” Snow said. “Housing prices are high in some markets but those markets are supported by underlying demand and supply considerations. It’s really a misnomer, I think, to talk about bubbles in the sense that you get a stock market bubble or a bubble in the commodity markets.”

Part of the bubble premise is that prices have escalated to a point where homeownership is unreachable for most families. But that’s clearly not the case; people are buy­ing and selling homes at an unprecedented pace. According to the National Association of Realtors®, March 2005 generated the third-highest seasonally adjusted annual rate of existing home sales in history. The only two months topping March’s rate of 6.89 million homes were June 2004 (7.02 million) and November 2004 (6.98 million).

Home sales remain strong despite changes in price.

“We still have more buyers than sellers in most parts of the country,” David Lereah, NAR’s chief economist, said in late April. “There is a strong demand for housing from a growing population.”

Second home flurry

Demand is fueled by many factors, including a constant influx of immigrant fami­lies as well as affluent baby boomers purchasing second homes as they approach re­tirement. NAR’s 2005 “Profile of Second-Home Buyers” reported that second homes accounted for 38 per cent of the existing housing stock and 36 per cent of all homes purchased in 2004. What’s more, many in this massive group of 75 million people have the wealth – much of it generated through the ap­preciation of the long held homes in which they raised their families – to help their children enter the housing market.

These purchases are financed by mortgage rates that may seem high com­pared to a year ago, but remain extremely attractive by the standards of past decades. While bubble theorists point to the Federal Reserve’s 2004 benchmark rate increases as a sign of hard times to come, you’d sound fairly ridiculous explaining the dangers of a six per cent rate to a time-traveling homeowner from the early 1980s who paid 16 per cent on his or her mortgage. According to Freddie Mac chief economist, Frank Nothaft, only one in seven current mortgages carries a rate above seven per cent, so even if fairly significant hikes emerge down the road, the current lending climate continues to be a boon, and not a strain, for today’s homeowners.

It’s no secret that prices in many markets have grown quite high. And those markets may soften as local supply catches up with demand. But is that the same as a “housing bubble”? To me, the word “bubble” goes far beyond reality, evoking thoughts of the Nasdaq stock exchange losing 60 per cent of its value. Does anyone really think housing – in any market – is going to lose 60 per cent of its value?

`1

A local issue

The prices in one state, of course, are not tied to those in others. Real estate remains a local concern, with activity and price fluctuations driven much more by variances in demand than on what’s happening in a faraway state or a non-existent “national market.” It’s our job to educate clients that despite what they read and hear about skyrocketing prices in California or Florida, their situation ultimately boils down to the prices of homes bought and sold in their own neighbourhood.

The media focus on the ex­tremes. The bubbleologists’ favourite example is San Francisco, where the 2004 median price climbed above $629,000. But while many other cities have experienced similar multiyear climbs, the median price in most remains under $200,000.

Do higher-than-before values put homeowners in peril? If they’ve taken a prudent buy-and-hold approach and lived in their homes for any length of time, probably not. Even if their local market softens, most homeowners still benefit greatly from their decision to buy, despite any price-related anxiety they felt when they made their purchase.

Current conditions simply underscore the fact that buy­ing a home remains one of the smartest, surest things a family can do to enhance its present and secure its future.

And that, in the face of all the media’s bubble-based hand wringing, is what we can, and should, point out to our clients, colleagues and friends.

Reprinted by permission of the Publisher of The REAL ESTATE PROFESSIONAL, May/June 2005 edition. ©Copyright. All rights reserved.

REAL ESTATE: But price correction unlikely to cause much pain

ASHLEY FORD
Province

FONT face=Arial>

Vancouver and Victoria’s housing markets are at risk from a “bubble market” — but not much, says a new quarterly monitor examining the issue from TD Economics.
   Carl Gomez, the TD economist and author of the report, said the two cities have “the greatest risk in Canada of seeing a price correction at some point in the future.
   “But predicting exactly when such a possible correction will occur is difficult since potential speculative bubbles can persist much longer than fundamentals warrant.”
   And, even if a price correction comes, Gomez said it is extremely unlikely there will be a deterioration close to previous down cycles, such as 1981-1983, when some Vancouver home prices slumped by up to 50 per cent.
   He says any attempt at quantifying or timing a possible market correction in either city would be a “rather futile, if not dangerous, endeavour.”
   Gomez said what prices do over the next half decade should not be of great importance to potential homebuyers in Vancouver or Victoria who are buying for the long term, since real home prices have consistently grown over the longer haul despite short term hiccups.
   “If a potential homebuyer is financially comfortable enough to make their mortgage payments while enjoying their house, any potential fall in the market price of their home should have little to no impact on their standard of living.”
   But Gomez said speculative buying by both investors and homebuyers has been a factor in driving up home prices here.
He also said a booming economy, courtesy of high commodity prices and strong investment demand, can justify some of the price gains in both cities.
“In 2004, B.C. experienced a solid four-per-cent increase in personal disposable income,” he said.
The 2010 Winter Olympics could also justify some of the recent premium in prices.
Nationally, there are few signs of “bubble behaviour,” Gomez said.
“We can effectively rule out the existence of a nationwide housing bubble since national home prices do not appear to be irrationally overheating,” he said.

© The Vancouver Province 2005

Houses can be full of horror stories

Peter Wilson
Sun

CREDIT: Bill Keay, Vancouver Sun Schiffer talks things over with Scott Meixner, a first-time buyer.

The 5,000-square-foot Shaughnessy mansion had rats running everywhere.

“The place was just filled with them — the garage, the attic, the basement area” said Vancouver house inspector John Schiffer, who was looking the place over earlier this year for a prospective buyer. “I could see the rats walking down the wall when I opened the garage door.”

Bad news for the seller. If there’s one thing that puts people off buying a place, especially women, Schiffer said, it’s rodents.

“People get nervous and start walking around the room instead of sitting down,” said Schiffer, of Quality Home Inspections.

In today’s hot real estate market, Schiffer is one of more than 300 British Columbia home and property inspectors constantly on the go, usually working for prospective buyers who don’t want to face a horror story after purchasing a house.

A pre-purchase inspection, at an average cost of $350 in the Lower Mainland, can mean anything from simple peace of mind for a buyer — when no problems are found — to savings of as much as $25,000.

Vince Burnett of Superior Home Inspections — who writes some 500 reports a year — was examining a $900,000 house in Surrey recently when he found that concrete porches had been built so they sloped toward the house. Water was flowing into the walls.

“All the exterior framing on that side was just rotted right out,” said Burnett. “And there were ants living in there and they were just loving it.”

The likely repair bill? About $20,000, said Burnett.

In another Surrey house, with three suites, Burnett found that four stoves, two or three dryers and a suite with electrical heat were all being run from a 60-amp service.

“And there were four or five things double-plugged into the mains as well,” said Burnett. “It was just a dog’s breakfast.”

Burnett estimated a $4,000 to $5,000 repair bill.

In a house in East Vancouver, Rose Marie Moore found a huge infestation of carpenter ants.

“They were in the walls and all over the place,” said Moore, of RMC Insight Building Consultants Inc. “The house was very damp. Then you know a lot of damage has been done.”

A second East Vancouver house held a far more dangerous problem, Moore said.

“It had a front balcony off the second or third floor and the railing was so loose that if anybody had leaned on it they would have fallen off,” said Moore. “The door was open, so people could go on this deck easily. This was a major safety hazard.”

And, added Moore, increasingly inspectors are seeing homes that have been used for grow-ops or have mould problems.

In the Okanagan, there are different problems, such as termites and unstable soil, said Owen Dickie of Oyama-based HomePro Inspection, who writes some 300 reports a year.

“Simple things such as cutting down a tree can change the moisture content of the soil and affect the structure of the house,” Dickie said. “It’s not the roots that have done that, it’s just that the tree was absorbing moisture.”

A thorough house inspection, Moore said, can take an average of 3.5 to four hours, including client consultation time and an inspector can do two a day comfortably.

Houses can be full of horror stories

CREDIT: Bill Keay, Vancouver Sun He also looks for problems with exterior drainage.

In today’s market, some inspections are done during the open house, so a knowledgeable offer can be made quickly if a bidding war breaks out.

Dickie cautions that inspectors screen for the signs and symptoms of major problems and concerns. If they’ve been hidden, or disguised, home inspectors alone will not be able to find them.

“We often liken a home inspection to an examination by your family doctor — the inspection will reduce the possibility of problems, but sometimes only deeper, more invasive examination can eliminate them completely.”

Dickie said his company policy is to have clients accompany him on the inspection, so they know what they’re facing.

“They’re standing there and they’re looking straight at it,” he said.

Moore said buyers have four choices. They can swallow the extra expenses if they really want the house; try to negotiate a reduced price; ask the vendor to make the repairs; opt to look for another house.

In rarer cases, particularly when there’s a bidding war and the owner can stipulate no subjects in the offer, purchasers may hire an inspector after the fact.

And, of course, sellers often have inspections, so they know what they have to do, or how much to lower the asking price of the house.

As well as doing these types of reports, inspectors like Peter Link of Surrey-based Peter Link and Associates, will act as a consultant to home owners who want to know what is wrong with their house so they can fix it.

“Because we have disciplines right across the whole gamut, we’re the natural people to call in.”

As well, said Link, he could also supervise contractors doing repair work to make sure its done properly.

“I speak [the contractor’s] language, I know where he’s coming from and it’s a lot easier for me to deal with him than you,” said Link, who adds that consumers are not necessarily protected by the fact that a contractor takes out permits to do the job.

“The code requirements are a minimum standard. If you’re paying premium dollar, you deserve much more than minimum.”

Most of the horror stories Schiffer encounters are caused, he said, by amateurs doing their own work without permits.

“I’d say that a good 90 per cent of amateur renovation work is substandard and its a real problem, because most of it has been done without inspections.

“It starts off as a tiny little deck and then they decide, well, let’s put walls up, he said. “And then they put a roof on and, before you know it, it becomes part of the house. It’s totally enclosed and it’s structurally inadequate.

“Sometimes you have to tell people that it’s actually better to build this again from scratch.”

He added that people get a false sense of confidence from home improvement stores that claim they can provide you with all the information you need to do a renovation.

“They have the materials, but you still have to put it together and that’s a problem for a lot of people,” Schiffer said. “They like to do this stuff, but they really don’t understand it.”

CREDIT: Bill Keay, Vancouver Sun John Schiffer checks out a fence, which seems to need support.

Both Schiffer and Burnett agree that the most expensive repairs, by and large, have to be made in the case of poor electrical work, again usually done by amateurs.

“All they do is pull a few wires and hook up here and hook it up over there and if it works then you’ve done it right,” said Burnett. “They don’t even realize that the electrical box could get overheated if you have too much stuff in it.”

Schiffer said that if he discovers a safety hazard he not only has to tell his client, usually the buyer, but also the listing agent of the property as well, otherwise he could be liable if the house burns down.

Burnett said that redoing wiring — including removing drywall and then replacing it — can very quickly become a major expense.

Another problem, particularly in the Lower Mainland, is old knob and tube wiring, which insurance companies want replaced.

“And that can get really expensive,” said Schiffer. “Depending on the size of the house, I’ve seen it be anywhere from $5,000 to $25,000 to rewire.”

The worst room in the house is generally agreed to be the bathroom.

“In 80 per cent of the homes I inspect, I find moisture in the bathroom,” said Moore. “People don’t maintain a proper level of caulking, they don’t seal the grout in the shower stalls — and a crack in the grout or broken grout can let water seep in behind the tile and cause a lot of moisture damage.

Burnett said that he was in a Bridgeview home where a shower stall had leaked.

“The paint was bubbled on the outside of the house where the shower stall was and I was poking holes in it and the water was running out,” said Burnett. “And that whole wall was just completely rotted right out.”

Peeking into attics can be dangerous for home inspectors. They can encounter everything from wasps nests to bat and rodent droppings.

“On Bowen Island, I opened an attic access lid and it just rained droppings,” said Burnett. “I looked up and there must have been 30 bats, little tiny guys, right above my head and they’re hard to get rid of.”

Schiffer said clients are always worried that he will find structural problems in the house.

“In reality, that’s the least likely to cost them money,” he said. “Most problems are not structural problems. Most of the money is in all of the interior stuff — the plumbing wearing out, the electrical, worn floorings, outdated windows.

“People will ask me, ‘Are there any structural problems?’ and I’ll say ‘No, but there’s $150,000 worth of work to bring it back up.'”

The big misconception, added Schiffer, is that a new house is the best to buy because there are no problems.

“I do a lot of new places and there is always a page of deficiencies,” he said, adding that some contractors just build too quickly to do a proper job.

Schiffer said he has seen huge decks with joist hangers that should have had a dozen nails but had just two or three.

Recently, he saw a new, $2-million house where the work was so bad the client just walked away. The tubs in all the bathrooms, for example, would have leaked the second they were used.

CREDIT: Peter Battistoni, Vancouver Sun Vince Burnett, owner of Superior Home Inspections checks out a crawl space in a home in Fort Langley.

CREDIT: Bill Keay, Vancouver Sun Building inspector John Schiffer checks out the plumbing and mechanical system in a house on Steveston Highway in Richmond.

“Superficially, just taking a quick walk through the house, it looked fine. But when you spent more than five seconds looking at each item you’d realize how badly it was done.”

Such houses, he added, eventually sell to buyers who don’t bother to get an inspection done.

Schiffer said he enjoys sitting down with clients and helping them to figure out how they could get their prospective home back into shape.

“I know they like the house, so I try to find solutions to make it possible for them to buy the place. Usually, there’s simple solutions to a lot of problems.”

While clients have tough decisions to make, property inspectors in B.C. also have their own concerns. One of these is that there is no provincial standard as to who can and cannot call themselves an inspector.

There are, at present, two professional groups headquartered in B.C. with their own standards.

The Canadian Association of Home and Property Inspectors (BC), with some 200 members, uses the designation Registered Home Inspector (RHI). The BC Institute of Property Inspectors, with 90 members, uses the designations Certified Property Inspector (CPI) or Certified House Inspector (CHI).

Both groups have their own sets of exams and standards.

And both groups have asked the provincial government to set a universal standard because, at the moment, anyone who wants to can set up in business as a home or property inspector, no matter what their level of knowledge or professional experience.

Dickie, CAHPI (BC)’s treasurer said his organization gets many complaints about non-members.

“So many in fact, that we’ve asked the B.C. government to take action to bring standards to the BC home and property inspection industry.”

If CAHPI (B.C.) gets a complaint it can be reviewed by members and representatives of the general public who serve on its committee.

Dickie said his group has been meeting with the provincial government for the past four years, but hasn’t had a response that it thinks protects the consumer.

“They said that consumers were already adequately protected under the Consumer Protection Act,” said Dickie. “But that act only allows for means for recourse. It allows you to begin to sue your home inspector afterwards, as opposed to being somewhat preemptive and trying to ensure that people have the opportunity to have a qualified inspector.”

Dickie added that those people who bought a house and then have had trouble with their homes now have to go through a backlogged court system.

“And that’s not really much of a protection at all.”

The BCIPI — part of the 8,000-member Applied Science Technologists and Technicians of B.C. (ASTTBC) — is also concerned.

“ASTTBC has been advocating for many years that we find some way to confirm one standard and one regulatory approach in B.C., said John Leech, executive-director and registrar with ASTTBC. “Consumers in BC will be better served with one-stop shopping when it comes to finding a qualified inspector.

“The public is in jeopardy when purchasing a home if they do not engage the services of a registered professional house inspector to carry out an inspection,” Leech said.

© The Vancouver Sun 2005

Economist believes the risk of a bubble is ‘elevated’

Michael Kane
Sun

CREDIT: Peter Battistoni, Vancouver Sun Neil Singh, a 34-year-old computer artist in Yaletown, recently bought a $219,000 townhouse in Langley as an alternative to renting in Coquitlam. Carl Gomez of TD Economics bases his concerns about Vancouver and Victoria prices being pushed beyond justifiable levels on the growing gap between prices and rents.

British Columbia‘s hottest housing markets have been put on “bubble watch” by a national bank which says prices in Vancouver and Victoria are being pushed beyond justifiable levels.

Carl Gomez of TD Economics says Vancouver‘s unique geography and shortage of space for new construction cannot in themselves explain the rapidly growing gap between rents and prices. Instead, he blames real estate speculation by both investors and home buyers.

“I don’t want to say there is going to be some sort of massive correction and the market is going to crumble,” the Toronto-based economist said in an interview Wednesday. “What we are saying is that the risks of a bubble are elevated in Vancouver and Victoria, more so than the rest of the country.”

While analysts take issue with some of the measures used in the TD Economics Housing Bubble Watch unveiled Wednesday, they acknowledge that housing affordability is declining in B.C. and the market will correct sooner or later.

Economist Jock Finlayson doesn’t see any of the signs that have precipitated major price corrections in the past, but suggests the report is a useful “yellow warning light” that recent price increases cannot be sustained.

“We are in line for a levelling off in prices, and perhaps a slight dip,” said Finlayson, executive-vice president of the Business Council of B.C. “However, the fundamental economic picture is too favourable to lead one to expect a big correction, like a 20- to 25-per-cent drop in average resale housing prices.”

Helmut Pastrick, chief economist at the Credit Union Central of B.C., pointed out that the housing market is cyclical and we should expect a correction at some point.

“I don’t see negative economic factors coming into play any time soon,” Pastrick said. “I don’t see interest rates rising to sufficient levels to choke off this housing market. And nor do I have an economic recession in the works.”

Patti Croft, chief economist with Vancouver investment managers Phillips, Hager & North, suggests the launch of TD’s bubble watch may indicate a market top.

“Our indicators for Vancouver are suggesting that the market is indeed frothy. Real prices are at an all-time high, and affordability is beginning to show signs of strain.”

She said out-of-province buyers might sustain price levels, but she added that a yellow caution signal is flashing.

“We feel there is a broad-based bubble in the U.S. market. If it corrects, it could have second-round effects on Canada, their largest trading partner.”

Gomez, a former resident of Vancouver who last visited the city in June, prefaces the study by saying that it is impossible to identify a bubble before it bursts, since rational investors would refuse to hold any asset whose price was certain to fall.

His concerns about Vancouver and Victoria are based on the growing gap between prices and rents, and “a little bit of irrational exuberance” around consumer confidence and the strong provincial economy.

“I really think it depends on consumer psychology, which is helping to push prices forward,” he said. “If that psychology suddenly changed, it could trigger a big correction.”

While there are few signs of homes being flipped — bought and sold at a profit within six months — he said some buyers are motivated by the expectation that prices will continue to climb and the fear that if they don’t buy now, they will be locked out of the market.

“If you are buying right now, because you hope to trade up in five years, or because you feel if you don’t buy you are going to miss out, that’s a very scary prospect. Trying to stretch yourself just to afford to buy a home doesn’t make a whole lot of sense when it may be cheaper to rent.”

Pastrick said rent-to-price ratios have limited utility because home buyers are prepared to pay a premium for the non-economic benefits of ownership, and they are making a long-term investment which they have every reason to believe will pay dividends over time.

“I certainly wouldn’t see it as a bad sign that we have seen renters move into the ownership market, and rents have stayed flat as a result.”

HOME RUNS:

Home prices outpaced incomes in both B.C. and Alberta in 2004, but in B.C. home prices took a much bigger lead.

ALBERTA

Personal disposable income 6.2%

Average home prices 6.5%

BRITISH COLUMBIA

Personal disposable income 4.0%

Average home prices 11.6%

Source: Statistics Canada, Canadian Real Estate Association

© The Vancouver Sun 2005

Buyers willing to give up square footage for something in good shape

Jim Jamieson
Province

CREDIT: Jason Payne, The Province A typical first-time buyer, Eric Pan choose L’Hermitage based on its great location and the nearly nonexistent upkeep.

When Eric Pan signed on the dotted line to buy his first home a few months ago, the keys for him were location and upkeep.

The first had to be great and the second nearly nonexistent.

That’s why Pan, a commercial real-estate appraiser, chose to commit $285,000 to the purchase of a

689-square-foot, one-bedroom

condo at the L’Hermitage development at Robson and Richards in downtown Vancouver.

“I was looking for a new place, not something that needed work,” said Pan, 28, who’s scheduled to move into his new digs in early 2007.

“You buy here and it has really nice finishings, you don’t have to worry about that. And it’s close to work for me and steps away from Robson Street.

“I’d rather pay more on a square-foot basis in a smaller space to live in a central area than in the ‘burbs.”

Pan typifies first-time B.C. homebuyers who are entering the market in increasing numbers, thanks to low interest rates, low down payments and a strong provincial economy.

But these buyers are settling for a lot less house for the money than their counterparts got 10 years ago.

Buyers in some markets are paying twice as much as they would have for the same small home a decade ago, according to a survey released yesterday by Century 21 Canada.

“People today look around and say, ‘I want to enjoy my life, too,'” said Brian Lawby, president and CEO of Century 21 Canada.

“People live in a city and they want to enjoy it. They are willing to give up some square footage, but they want something that’s in good shape.”

But Lawby said economics are also a factor, as most first-timers simply can’t afford an older home because they can’t afford repairs or renovations.

The national survey showed that markets are toughest for first-time buyers in Canada‘s largest cities. Price-per-square-foot increases range from 61 per cent in Vancouver to 69 per cent in Montreal and 53 per cent in Toronto.

Perhaps the hottest first-time buyer market in Canada is Fort McMurray, Alta., where the booming oil-sands economy has pushed the price of a 1,200-square-foot townhouse to $285,000, or $237 per square foot.

That compares with 10 years ago when a slightly smaller townhouse cost $46,000, or $42 per square foot — an increase of 468 per cent over the decade.

Other key market trends spurring B.C. first-time buyers:

– The posted five-year mortgage interest rate is 5.7 per cent, compared with 9.16 per cent in 1995.

– The provincial housing market is hotter than 10 years ago. In 1995, there were reported sales of 58,082 units at an average price of $221,860. For the past year, unit sales were 96,385, at an average price of $289,107.

– The provincial average family income is about $61,700, compared with $59,440 in 1995.

COST INCREASES FACED BY THE FIRST-TIME HOMEBUYER

Downtown Vancouver Typical home Cost Increase
1995 625 sq/ft condo (West End) $150,000/$240 sq/ft
2005 650 sq/ft condo (Yaletown) $250,000/$384 sq/ft 61 per cent

Abbotsford Typical home Cost Increase
1995 1,100 sq/ft detached $160,000/$145 sq/ft
2005 1,000 sq/ft detached $250,000/$250 sq/ft 72 per cent

Kelowna Typical home Cost Increase
1995 2,000 sq/ft detached $150,000/$75 sq/ft
2005 1,400 sq/ft detached $220,000/$157 sq/ft 110 per cent

Vernon Typical home Cost Increase
1995 1,100 sq/ft townhouse $65,000/$59 sq/ft
2005 1,200 sq/ft detached $225,000/$188 sq/ft 217 per cent

© The Vancouver Province 2005

Michael Kane

Sun

CREDIT: Peter Battistoni, Vancouver Sun Marcus Turner and Amberly Morison moved into a 550-square-foot condo they were able to buy, in part, because of her trust fund.

Neil Singh commutes to a new townhouse in Langley rather than “live in a shoe box” close to his work in Vancouver‘s trendy Yaletown.

Other first-time buyers such as former X-Files actor Marcus Turner and partner Amberly Morison are willing to trade floor space to minimize travel and be close to the downtown scene.

Either way, entrants into this summer’s sizzling British Columbia housing market must pay significantly more — sometimes double — for the same or a smaller home than first-time buyers could afford a decade ago.

Yet they are paying a premium for newer homes because they want to focus their time on their careers and recreation projects instead of home improvement, said Don Lawby, president of Century 21.

Higher prices have spawned increasingly innovative purchasing strategies, including zero downpayments, interest-only mortgages and 107-per-cent financing that pays the entire purchase price and gives the buyer four per cent of the price to cover insurance costs and three per cent cash back to use as he or she wishes.

More buyers are also turning to the Bank of Mom and Dad, either to co-sign the mortgage or help with the down payment, mortgage brokers say, and buyers today are far more likely to be single and female than they were a decade or two ago.

Singh, 34, says his parents refinanced their own home to help him make a 25-per-cent downpayment on his $219,000, 1,161-square-foot townhome, which allowed him to negotiate a four-year mortgage at 4.35 per cent through Vancouver‘s Invis mortgage brokers.

Higher down payments usually mean lower interest rates.

“I would love to live downtown, I just can’t live in a shoebox,” said Singh, a video games artist with Yaletown’s Next Level Games.

Singh shares his downtown commute with partner Tracy Rocko, a 30-year-old administrative assistant with a travel agency. “We designed our purchase for a single person income for when we decide to start a family,” he said.

In contrast, Turner, 23, and Morison, 20, opted for a $180,000, 550-square-foot condo in a 20-year-old building downtown because they want to be close to their work at the Cactus Club on Robson Street and because he plans to go to law school at the University of B.C.

They were able to raise their downpayment from a trust fund set aside by Morison’s parents when she was younger, and from the remains of Turner’s earnings as a child actor, which included commercials and movie work as well as playing the younger Fox Mulder to David Duchovny’s character in the Vancouver-filmed X-Files television series.

Although the couple primarily work for tips, they were able to negotiate a $160,000 mortgage at 4.5 per cent for five years from Mortgage Intelligence, a subsidiary of General Motors Acceptance Corp., which also offers a proprietary 107-per-cent mortgage for buyers with no downpayment and interest-only mortgages for first-time buyers who are cash-strapped now but anticipate higher earnings in the years to come.

Markets are toughest in the larger cities, with price-per-square-foot increases since 1995 ranging from 53 per cent in Toronto to 61 per cent in Vancouver and more than 69 per cent in Montreal, according to the Century 21 national first-time home buyers survey released Tuesday.

But the largest percentage change in price per square foot is 467 per cent in Fort McMurray, Alberta, where oil patch workers are paying $285,000 for a 1,200-square-foot townhouse, compared to $46,000 for an 1,100-square-foot condo a decade ago.

Lawby said British Columbia‘s strong economy, continuing low interest rates and recently relaxed federal regulations allowing zero-down-payment financing have encouraged increasing numbers of first-time buyers.

However, because higher prices mean they can’t afford repairs or renovations, and because they are often working longer hours than 10 years ago and facing longer commutes, he said, they are more likely to stretch their borrowing to buy new condos or townhouses than buy older homes that need fixing up.

The preference for newer homes was confirmed by Chris Catliff, president and CEO of North Shore Credit Union, where innovative financing options include deep discount variable rate mortgages at 3.5 per cent that can’t go higher than 4.9 per cent whatever happens to interest rates, and mortgage approvals based on character rather than earnings records for individuals such as contractors or restaurant servers who have variable incomes.

Despite the growing size of mortgages, risk of default is no greater than it was 10 years ago because the standard ratio of monthly mortgage payment to a buyer’s monthly income is unchanged at 32 per cent, said Cameron Muir, senior market analyst with Canada Mortgage and Housing Corp. in Vancouver.

Housing compared:

Profile of the first-homebuyer’s situation in three major cities, 2005:

VANCOUVER

$ $250K

Ft.2 650

$/ft2 $385

1 Bdrms

– – –

TORONTO

$ $196K

Ft.2 700

$/ft2 $280

2 Bdrms

– – –

CALGARY

$ $180K

Ft.2 1,200

$/ft2 $150

2 Bdrms

Source: Century 21, Vancouver Sun

© The Vancouver Sun 2005

Cheryl Rossi
Other

Evergreen Building owner John Laxton wants to demolish the Arthur Erickson-designed West Pender building and put up condos. Photo-Dan Toulgoet

The owner of a downtown office building designed by Arthur Erickson wants to replace it with a 21-storey residential tower.

But city council has directed staff to discuss with John Laxton, the owner of the Evergreen Building at 1285 West Pender, a way of preserving it.

In October 2004, the development permit board rejected a four-storey addition designed by Erickson for Laxton as part of a conversion of the office space into 69 high-end condos. Gerry McGeough, senior heritage planner, said the plans were not considered in the context of the Evergreen as a heritage building.

“They just looked at it as reusing an existing building,” he said. Since then the Vancouver Heritage Commission, an advisory body to city staff, has raised the heritage value of the building with city council. McGeough said council has advised staff to explore options for preserving the building, which sits between Bute and Jervis, with the owner.

Land use incentives like transferable density, bonus density or, occasionally, tax relief are given by the city to owners to protect buildings. When a heritage designation was offered to Laxton last year in exchange for a transfer of density elsewhere, Laxton turned the offer down. Andrew Wade, project manager with Laxton’s Cathedral Development Group, said the process of swapping heritage designation for bonuses would have been too time-consuming.

Wade said Cathedral was prepared to go ahead with the four-storey addition, but as it got further into its analysis, it realized the costs were going to be high. The lack of parking for the future condo dwellers was one problem.

Wade said the Evergreen Building leaks, the floors slope and it requires seismic upgrading, all of which he said would be costly to fix. He noted office spaces are not leasing well in Vancouver and most of the building is vacant, although he admitted the building had been cleared out in anticipation of the four-storey addition being approved.

Michel Pelletier, owner of Beyond Fitness Coal Harbour Club, said his business has occupied the third floor of the building for two-and-a-half years and he has not noticed any structural problems.

David Thom, managing director of the IBI Group, an architect and engineering firm that leases the seventh floor, said if the Evergreen remains an office building seismic upgrading would not be required. He said it’s only required if the building is converted to residential use. Thom, an architect, does not want to see the building become rubble.

“It’s a unique Arthur Erickson design. It’s a terraced building, which means it has all those beautiful balconies covered in greenery. It was a green sustainable building long before anybody started talking about green sustainable buildings. It’s got opening windows. It was way ahead of its time when it was built and it’s really exceptional,” he said.

Thom said IBI has a five-year lease with a five-year renewal option and it has occupied the space for just over a year. He said last week he received a “nasty letter” from Evergreen Building Ltd. threatening to lock him out this Saturday. He received a court injunction on Tuesday preventing the lockout.

“There were no grounds given, they just said they were going to lock me out. They wanted me to vacate the premises by July 30, failing which they would lock me out,” he said. “I’m running a full-scale architectural practice. Vacating the premises on a week’s notice is ridiculous. Anyhow, the court agreed with me and granted me the injunction.”

Evergreen Building Ltd. could not be reached before press time for comment.

The city is currently collecting responses from residents and businesses in the area regarding the development application for the residential tower. The response deadline is today, but John Greer, a project facilitator with the city, said submissions will be accepted after this date.

The urban design panel reviews the plans Aug. 3 and the development permit board reviews the proposal Sept. 26.

Retail, housing, campus planned

Ashley Ford
Province

CREDIT: Gerry Kahrmann, The Province Geotechnical tests begin at the Woodward’s site yesterday in preparation for the $300-million-plus development.

It is the beginning of the beginning.

Preparatory work on the former Woodward’s department store site in the heart of the Downtown Eastside has begun, effectively closing the book on one of the longest-running property development debates in the city’s history.

Efforts to redevelop the store, closed by bankruptcy in 1993, have proven futile until now.

Geotechnical and environmental work began yesterday on the massive $300-million-plus retail/university/housing complex and will take months to complete.

Westbank Projects head Ian Gillespie said yesterday he hopes to start real construction early next year. Westbank and the Peterson Group are the main developers.

While final designs remain to be approved by the city, no one attending the groundbreaking ceremony has any doubt about the project’s future success.

Mayor hopeful Coun. Jim Green, involved with the property for more than a decade, declared it a “huge victory for East Hastings” and the beginning of a new life for the downtrodden area.

“The development of this historic site is for real this time,” said Mayor Larry Campbell. “Woodward’s is symbolic for the downtown and the city’s oldest neighbourhood. This marks the celebration of another life for Woodward’s.”

Although the project has not been named, it is difficult to see it being called anything other than Woodward’s. The “beacon W” rooftop sign will stay.

Gillespie said the project brings together a number of players, including Simon Fraser University, which will take up 118,000 square feet for its school of contemporary arts.

The first phase is due for completion in late 2008 or early 2009. There will be 440 units of market housing with another 200 non-market units, which the provincial government will fund.

The city will also take space in the complex, which will include a major retail presence — Save On Foods and London Drugs have been mentioned.

Bob Rennie of Rennie Marketing sees the project as a vital catalyst to the regeneration of the “seedy area, including the western end of Chinatown.

“I am putting my money where my mouth is and moving to Chinatown and this project is the start of a whole new regeneration for this area.”

Rennie has bought the Wing Sang building, the oldest in Chinatown, at 51 East Pender.

LENGTHY PROJECT

It’s been a long, winding road for the redevelopment of the Woodward’s site:

– In 1993, bankruptcy closed the flagship department store.

– In 1995, Farma Holdings buys the store for $5 million and the city buys the Woodward’s parkade for $11 million

– In 1997, various plans to redevelop the site for social and non-social housing collapse.

– In 2001, the NDP government buys the site for $22 million

– The city buys it from the province for $5.5 million.

– Last September, city council chooses Westbank/Peterson to redevelop the site.

© The Vancouver Province 2005