Housing market, construction among key forces cited

Michael Kane
Sun

Helmut Pastrick, chief economist, Credit Union Central B.C. Photograph by : Glenn Baglo, Vancouver Sun

Are there blue skies ahead for British Columbia’s economy, or is the sky falling? Choose your analyst and take your pick.

A sharp slowdown in housing starts and a dramatic decline in employment growth will slow provincial growth from 3.0 per cent this year to 2.8 per cent in 2007, BMO Nesbitt Burns suggested Thursday.

But just hours later, RBC Financial Group countered with a forecast calling for strong growth in the province of 4.2 per cent this year, and 3.9 per cent in 2007.

The primary cloud on B.C.’s horizon for RBC is the risk of overheating an already booming economy in the run-up to the 2010 Olympics.

Local analysts lean in RBC’s direction, and none interviewed Thursday would endorse the 30-per-cent decline in housing starts anticipated by Arlene Kish in the quarterly BMO Provincial Monitor.

Kish said higher borrowing costs and slowing demand will reduce housing starts from 33,000 this year to little more than 23,000 in 2007.

“We don’t think the very high levels of activity can be sustained,” she said in an interview.

At the Vancouver office of Canada Mortgage and Housing Corp., senior market analyst Cameron Muir said declining affordability and supply constraints will reduce housing starts next year, but only to 31,300, not dramatically off last year’s peak of 34,667.

And Helmut Pastrick, chief economist at the Credit Union Central of B.C., predicts starts will increase this year and next, to meet demand and because the construction industry is investing more than $100 million this year to increase output.

“The supply of construction labour, while tight, is also expanding and the demand for more new housing is high,” Pastrick said. “People are moving here, prices are high, market conditions are expected to remain generally tight. And so long as the demand side holds up, we should see more starts, not less.”

Jock Finlayson, executive vice-president of the Business Council of B.C., doesn’t anticipate a steep drop-off in housing starts or employment growth. He expects 2.5-per-cent job growth this year and 2.0 per cent or higher next year, compared to Kish’s forecast of 2.4 per cent this year and 1.4 per cent in 2007.

Kish acknowledges B.C.’s strong non-residential construction sector, including the 2010 Olympics, and the vibrant mining sector, but she says skilled labour shortages are becoming an issue.

In his report, RBC chief economist Craig Wright notes that both the housing and non-residential markets are booming, building permits are climbing, and there has been a rise in public and private infrastructure spending on major projects.

“B.C.’s growth remains solid with strong fundamentals and a favourable fiscal situation,” he said in a release. “However, the need for prudent fiscal management is vital, given the risks leading up to Vancouver 2010 that could overheat an already booming economy.”

Wright’s worries are labour shortages, the risk of a U.S. slowdown for lumber producers, a further rise in the Canadian dollar, lower natural gas prices, and higher 2010 venue prices due to the heated construction environment.

Kish expects B.C.’s forest industry to face weaker demand as housing activity slows on both sides of the border, and suggests its woes will be compounded by a loonie topping out at 90 cents US this year, before receding in 2007 as the Bank of Canada stops tightening interest rates and commodity prices ease.

However, forests analyst Craig Campbell at PricewaterhouseCoopers in Vancouver said both currency concerns and talk of a U.S. housing bubble have been overstated.

“I have heard about the housing bubble for three years now and the fundamentals are just not saying there is going to be any retraction in building activity in the U.S.,” Campbell said in an interview.

“Housing starts will remain strong for the forseeable future, subject to some major shifts in the economy, and these things aren’t going to happen. We have already seen the Canadian dollar go sky-high and housing starts are still strong and Canada still has one-third of the U.S. lumber market. We’ve survived the oil shock, and the outlook for B.C. lumber is solid.”

© The Vancouver Sun 2006

Former realtor recommends sellers enlist an independent appraiser to price their homes

Derrick Pen
Sun

Former Victoria realtor David Newsome is convinced homeowners risk losing money when they sell their homes if they leave pricing up to realtors rather than having an independent appraisal done.

Newsome says that during his five years in the business, he frequently saw bank-ordered appraisals on the buyers’ side show higher values than the agreed selling prices. Good for the buyer, but not so for the seller.

“Sellers are losing lots of money on the value of their homes,” which can take years to recover, Newsome said. “If a house sells for more than the asking price, the asking price was wrong.”

Not getting an appraisal done before hiring a realtor, Newsome said, is one of a handful of key mistakes he believes many people make when selling their home.

Newsome had his own home-inspection business for nine years before becoming a realtor with a view to helping sellers dodge these mistakes.

Now retired, Newsome has pulled together his advice for avoiding pitfalls in a system he has published on the website Sellingyourhome.ca.

Other mistakes, Newsome said, include not sorting out mortgage options before selling, not advertising enough, and being too eager to reduce an asking price if a home doesn’t sell quickly.

However, Newsome said the appraisal is key to pricing a home. Banks order appraisals before approving financing, and Newsome believes the market would also accept appraisals as a pricing measure.

He said he used the method himself when he worked as a realtor.

Dan Jones, president-elect of the Appraisal Institute of Canada in B.C., agreed that it is a good idea for sellers to have their properties assessed.

Appraisers, Jones said, are independent from the real estate transaction, and often look at properties in greater detail than realtors when it comes to considering the “contributory value” a homeowner’s renovations give to the property.

Jones said in his own business, financial institutions call for an appraisal in about 65 per cent to 70 per cent of real estate transactions, prior to approving mortgages. Homeowners selling their homes probably account for 20 per cent of appraisals.

“We’re an unbiased independent body that can assess the true value and worth of real estate,” Jones said.

However, Jones added that the challenge now, particularly in Greater Vancouver, is setting values in a market when there are more buyers than listings.

“People say, ‘I’m going to live there for 25 years, so if I pay five per cent more than list, does that really matter to me’,” Jones said. “Especially if the real estate market keeps going up.”

Dave Barclay, president of the B.C. Real Estate Association, said he’s seen cases where sellers have had appraisals done that showed lower values than realtor’s assessments, and were below a home’s actual selling price.

“If a market’s going up, quite often [appraisals] are running behind,” Barclay said. “If the market’s going down, it’s the opposite.”

Barclay added that realtors have a legal duty to their clients, and would be considered negligent if they didn’t consider the same factors that appraisers do when deriving a home’s selling price.

He said realtors also try to gauge where the market is headed by looking at prices of competing listing, and prices of comparable listings that haven’t sold.

“I think [an appraisal] is an opinion of value,” Barclay said, which sellers should take with a grain of salt.

“It’s really important for a seller to make sure they spend a fair bit of time … going through the information provided by the realtor, or the appraiser, and being comfortable with [the price].”

© The Vancouver Sun 2006

The average selling price in Greater Vancouver was $490,004 in February

Derrick Penner
Sun

Vancouver and Calgary lead gains in housing prices across Canada during the past year, the Canadian Real Estate Association reported Thursday.

The association, using Multiple Listing Service data, said the average resale house price in Greater Vancouver hit $490,004 in February, up 26.5 per cent since February of 2005.

In Calgary’s energy-sector-fuelled market, resale prices were up 26.2 per cent to $304,560. Toronto’s average price was higher than Calgary at $353,928, but that represented only a 5.9-per-cent gain from a year earlier.

Cameron Muir, a market analyst for Canada Mortgage and Housing Corp., said prices are being carried upward by a combination of strong demand in B.C.’s hot economy. He added that prices are heading toward a ceiling.

“Affordability, or lack of affordability, is going to begin to impact housing demand as we go forward,” Muir said. “Prices can only go so high before consumers simply can’t qualify to buy a home.”

Muir added that by the end of the year, the combination of rising prices and slightly higher mortgage interest rates will combine to crimp housing demand.

However, Muir said “there is no crash in sight, [but] we expect prices will start to level off in 2007.”

Muir added that the current market has been fuelled by high levels of consumer confidence and demand driven by economic growth.

“We’re also seeing wages increase at levels we haven’t seen in many years,” he said.

Gregory Klump, the Canadian Real Estate Association’s chief economist, said a shortage of homes and strong demand have resulted in the price increases.

Oil-rich Alberta currently has the hottest economy in the country, with unemployment at 3.1 per cent as of February, compared with the countrywide rate of 6.4 per cent.

Kevin Clark, president of the Calgary Real Estate Board, said city inventories have been limited for months, resulting in bidding wars in some cases.

Clark added that price escalation is making it harder “now more than ever” for new home buyers to crack into the market, which is forcing some house hunters to explore new options, such as combining forces with other buyers to share properties.

Clark said rising prices may force buyers to lower their expectations, said Clark.

Clark also warned home buyers not to let the market pressure them into buying a house too quickly.

“I think that there’s a heightened risk of being caught up in the marketplace and making a poor decision.”

© The Vancouver Sun 2006

Beasley sees success in putting people first

John Bermingham
Province

Larry Beasley mingles at yesterday’s Urban Development Institute meeting. Photograph by : Wayne Leidenfrost, The Province

Vancouver‘s planning guru Larry Beasley said the successful developer of tomorrow will put people first.

In his farewell address to the Urban Development Institute yesterday, the outgoing director of current planning at the City of Vancouver laid out his broad-scope vision for the city.

With more build-out, Beasley predicts infill projects that will depend on citizen input — from design all the way to construction.

“The opportunities are amazing for the right kind of developer,” Beasley told a packed ballroom at the Four Seasons Hotel in Vancouver.

“Fewer and fewer projects will be straightforward,” he said. “Public and private objectives must be balanced.”

The new reality, he said, is that city planners, developers and citizens are becoming partners in building communities.

“The days of fighting one another have, generally, I think, come to an end. The days of being up against the community have to come to an end,” said Beasley.

The new developer will handle more complex issues, and offer creative solutions to communities who want greater input.

“I’m talking about the ability to piece together many project components, many of them public offerings, into a coherent result,” he said. “Looking at projects holistically — that takes a lot of lateral thinking.”

Beasley’s new breed is led by Gastown heritage developers Robert Fung and Jon Stovell.

He also singled out Ian Gillespie at Westbank, who has taken on the local community at Woodward’s as a partner. “He’s offered a solution to every community problem that’s been thrown at him.”

Beasley said he’s pleased that developers are returning to office and commercial projects, due to better market conditions.

He figures there are 15 neighbourhood centres around the city that will embrace higher-density projects, beginning with rezoning around Kingsway and Knight Street area.

Beasley, who retires from the city in September, said his successor will have to revive the Downtown Eastside, open up affordable housing and find new growth in the city’s metropolitan core.

“It’s time for some big thinking again, the kind of thinking that we were doing back in the 1980s, when we re-thought the whole city,” said Beasley.

“We need to do that again.”

© The Vancouver Province 2006

USA Today

Washington (Reuters) — House prices should increase about 5.8% this year, far below the double-digit appreciation posted in recent years, as mortgage rates rise and buying slows, a trade group said Monday.

The National Association of Realtors, in a monthly outlook, said the national median existing-home price should rise to $220,300 this year while the median price on a new home should increase 5.4% to $250,200.

Resales of U.S. homes will likely decline 5.7% to 6.67 million in 2006 from the record 7.08 million in 2005. new-home sales should fall 7.7% to 1.18 million from a record 1.28 million in 2005. Still those sales levels would be the third highest after 2005 and 2004, the group said.

Housing starts should hit 1.98 million this year, down from 2.06 million in 2005, the group said.

The 30-year fixed-rate mortgage should increase to 6.9% in the fourth quarter of the year, the Realtors said.