Ashley Ford
Province

Surging B.C. housing starts continue poking sticks in the eyes of economists warning of a cooling market. Canada Mortgage and Housing Corp. said yesterday urban housing starts roared ahead last month in B.C by 47 per cent and in Greater Vancouver by 64 per cent.

And, to make sure the industry doesn’t really tumble out of bed, CMHC has introduced a pilot program that will offer 30-year mortgages, up five years from the traditional 25-year amortization period.

“The availability of extended amortization periods will improve access to home ownership for Canadians by lowering monthly principal and interest costs,” said Karen Kinsley, CMHC president.

The pilot program will run to the end of June and then be determined whether it be made permanent.

Last month’s starts caught many observers by surprise and, despite the performance, many continue to warn the housing market is poised for a rest.

But not in Vancouver or B.C, where starts climbed to 1,988 units and 2,877 units, respectively.

“Demand for new housing remains strong. The inventory of newly completed and unoccupied units has fallen 30 per cent from a year ago,” Cameron Muir, senior CMHC analyst in Vancouver, said.

He said the condominium market is tight with only 90 newly and unoccupied units available.

Muir sees a strong future and says a combination of rising wages, low unemployment and strong consumer confidence is driving new housing demand.

Across Canada, housing starts slipped 2.9 per cent to 240,900 on an annualized basis last month from January’s 248,100.

But industry observers had been expecting starts to drop to 231,000, BMO Nesbitt Burns chief economist Sherry Cooper said.

“After an incredibly warm January, February’s chillier temperatures only managed to cool housing activity modestly,” she said.

Scotia Economics analyst Sarah Hughes also pointed out that despite the month-over-month slippage, starts for the first two months of 2006 were 16 per cent above the same period last year.

However, TD Bank economist Sebastien Lavoie noted that strong national numbers mask a wide divergence in regional performance.

Ontario, Quebec and the Atlantic region saw starts fall by 15, nine and 18 per cent respectively from January.

© The Vancouver Province 2006

Days of big price gains end for a while

Bruce Constantineau
Sun

B.C. housing markets will “cool off and level out” this year as the fifth Bank of Canada interest-rate hike in the past six months creates conditions that dampen economic growth in the province, Business Council of B.C. executive vice-president Jock Finlayson said Tuesday.

The central bank boosted its trendsetting rate by a quarter-point Tuesday to 3.75 per cent, causing chartered banks to increase the prime lending rate to 5.5 per cent while some also hiked variable-rate mortgages by a quarter point.

“Higher rates won’t throw us into a downturn but they’ll be one of the factors that lead to some cooling off in housing markets for sure,” Finlayson said in an interview. “The days of significantly escalating house prices have come to an end, at least for a while.”

The surging Canadian dollar fell 0.81 cents US Tuesday to close at 86.92 cents US, amid financial market concerns that Canadian interest rate have almost peaked.

The Bank of Canada said some “modest further increase in the policy interest rate may be required” to keep inflation between the central bank’s target of one to three per cent.

Previous statements appeared to signal more strongly that rate hikes would definitely be needed.

Finlayson expects higher interest rates will help constrain B.C.’s economic growth this year to 3.3 per cent, down from an estimated four-per-cent growth rate in 2005.

“That’s a somewhat weaker economy for B.C. but still strong economy by Canadian standards,” he said, noting that Ontario’s economy is expected to grow by two per cent or less this year.

Real Estate Board of Greater Vancouver president Georges Pahud said recent rate hikes in Canada won’t have a significant impact on the housing market.

“Obviously it makes things a little tougher on people who are close to the margin in terms of qualifying for a mortgage,” he said.

“But the impact of rising interest rates is pretty much offset by increases in wages.”

The high-flying Greater Vancouver real estate market experienced a 4.1-per-cent decline in sales last month when compared with February 2005, the first year-over-year decline since last March. The real estate board said there were 2,941 sales on the Multiple Listing Service, down from 3,068 sales a year ago.

“The market is still very robust,” Pahud said. “We still have multiple offers on some properties, there’s still a shortage of product and people still believe in real estate as an investment . . . We’d need to see a sudden, unexpected interest-rate increase in the two-point range before there’s a significant negative impact.”

Credit Union Central of B.C. chief economist Helmut Pastrick expects 2006 housing sales will be similar to last year, although rising interest rates will reduce house-price increases this year. He expects B.C. house prices to rise by about 10 per cent this year, down from 14 or 15 per cent in 2005.

“I think the B.C. economy is strong enough to absorb [higher interest rates],” Pastrick said. “But in Ontario, where the economy is weaker, I suspect the impact would be more noticeable on their housing market and related sectors.”

Retail BC president Mark Startup said most retailers in the province report that higher interest rates have not hurt sales or affected consumer confidence.

“No one seems worried right now,” he said. “But if the trend towards higher rates were to continue for another six months, they’d be very concerned.”

Finlayson expects the Bank of Canada will take a pause from its rate-increasing activity by the late spring because there is no evidence of “significant inflationary pressure” in the Canadian economy.

© The Vancouver Sun 2006

Railway-themed eatery to create 75 jobs

Bruce Constantineau
Sun

Steamworks Brewing Co. owner Eli Gershkovitch plans to open a new multi-million-dollar, railway-themed Vancouver restaurant a stone’s throw from his popular Steamworks pub — in the historic former CP Rail western terminus building called The Station.

He said the restaurant project on West Cordova Street, tentatively called The Steamworks Transcontinental, will create about 75 new jobs when it opens in November.

“This is a major heritage project and our goal is to bring it back to its former glory and to do something that’s in keeping with the grandeur and elegance of the main concourse of The Station,” Gershkovitch said in an interview.

The heritage building opened in 1912 as the CPR’s main Vancouver terminus, and now serves as a major commuter hub for SkyTrain, SeaBus and the West Coast Express. The space for the new Steamworks restaurant was formerly used as offices for various tenants.

Gershkovitch expects the restaurant will have 6,000 to 7,000 square feet of space on three levels, with seating for 299 people, including patio seating on Cordova Street. Construction is expected to begin after all approvals are in place by June, with a projected opening date of mid-November.

Gershkovitch said builders will recycle or salvage as much material as possible when converting the space from office to restaurant use. The restaurant will focus on steak, prime rib and seafood, and will target business people, locals and tourists, including cruise ship passengers getting off at nearby Canada Place.

“It will be mid-priced, falling a bit higher than Steamworks Brewing Company, but not as highfalutin as Gotham or Morton’s,” Gershkovitch said.

He said the investment is timely because business is migrating to the downtown waterfront area and tourism activity is returning to pre-9/11 levels, despite the rising Canadian dollar. The prospect of a new Vancouver Whitecaps waterfront soccer stadium in the area also bodes well for future Steamworks business.

“It’s not a done deal, so we’re not banking on it,” Gershkovitch said. “But should the stadium go through, we consider ourselves to be very well-positioned to take advantage of the traffic.”

The Station general manager Shirley Vaux said the new restaurant will be an excellent addition for the building, as the concourse level generates a lot of traffic, making retail uses more practical than office use.

The restaurant will be Gershkovitch’s third major business venture in the Vancouver hospitality industry. The 15,000-square-foot Steamworks pub in Gastown — which attracts more than 350,000 patrons a year — opened in 1995, and Gershkovitch opened a second Steamworks facility at The Village at Park Royal project in West Vancouver in 2004.

The 43-year-old entrepreneur and transportation enthusiast has maintained a business office in The Station since 1999, and he said the prospect of building a railway-themed restaurant in the heritage building will allow him to indulge his passion for rail travel.

© The Vancouver Sun 2006

Fiona Anderson
Sun

The number of British Columbians who say they are likely to buy a home dropped significantly in the last year, according to a survey by RBC Royal Bank.

Only 11 per cent of those surveyed in the province said they were very likely to buy a home in the next two years, down from 16 per cent a year earlier.

While 31 per cent of British Columbians surveyed said they might buy, it’s the “very likely” statistic that reflects the market, said John Wright, senior vice-president of Ipsos Reid who conducted the 13th annual home-ownership survey on behalf of RBC.

The decline in the number of likely buyers could be for a variety of reasons, said Inde Sumal, regional manager, Mortgage Specialists, with RBC Financial Group.

“It could mean the housing market has been exceptionally strong over the last few years and now people have already bought,” Sumal said. “It could mean that affordability is high.”

The survey also found that people in B.C. and across Canada expect mortgage rates to increase, another reason buyers may decide against buying a home, Sumal said.

Of those surveyed, homeowners in B.C. had the most expensive homes, averaging $313,370, well over the Canadian average of $214,337. British Columbians also carried the country’s largest mortgages on average, $128,086 compared with the national average of $95,840.

Georges Pahud, president of the Real Estate Board of Greater Vancouver, is not concerned about the lower intentions to buy, even though sales in the Vancouver area fell 4.1 per cent in February, compared with the month a year earlier.

“People’s preferences and what they do are different things,” Pahud said. “[So] I don’t attach a lot of importance to this report.”

Pahud believes home sales may be lower in 2006 than 2005, but 2005 was a record year and the market can’t expect every year to be a record.

“If we are slower in 2006 than 2005 we will still be better than 2001 and 2002,” he said.

Economists are predicting a strong market for the foreseeable future and so does Pahud.

“Interest rates, employment, confidence in the economy, in-migration: all those elements are there and none of them indicate anything but a positive outlook,” he said.

Potential realtors are anticipating a strong market as well, if the numbers registering to be licensed is any indication. About 4,500 people took the licensing course in 2005, and 2006 is looking to be the same, said Anthony Cavanaugh, communications officer with the Real Estate Council of B.C.

Across Canada, buying intentions were the lowest since 2000, with 29 per cent of Canadians surveyed saying they might buy a home, but only 10 per cent saying they were very likely to do so, down from 13 per cent a year earlier. Only Alberta and the Atlantic provinces bucked the trend, with the number of Albertans who said they were likely to buy remaining steady at 18 per cent while the number of Easterners looking for a home increasing to 14 per cent from eight per cent, Wright said.

Suites on a new top floor quickly sold out

Derrick Penner
Sun

Costs on the Shangri-La project are up “tens of millions” of dollars from when it was first proposed as a $250-million tower. Developers have been able to recoup some of the losses. Photograph by : Peter Battistoni, Vancouver Sun

The Shangri-La tower in Vancouver’s West End is breaking its own records as the city’s tallest structure even before it begins taking shape above ground.

Ian Gillespie, head of project co-developer Westbank Projects, said his firm quietly added a 61st floor to the building’s plan several months ago, squeezing in seven extra suites driven a little by demand and a bit by necessity.

Gillespie said the additional units were easy to sell. The developer simply put word out to potential buyers who were unsuccessful during the first rounds of sales.

Plus, Gillespie added, “[the] extra floor was a fairly cost-effective floor to add.”

And with its suites ranging in price from $900,000 to $1.7 million, the additional space gives Westbank several million dollars in additional revenue to help balance escalating construction costs.

Gillespie did not specify the exact amount, just that costs on the mega project are up “tens of millions” of dollars from when it was first proposed as a $250-million tower.

Gillespie said developers have been able to recoup about one-third of the additional costs from increasing prices on the 40 per cent of units that were not sold in the first round of pre-sales.

Another third is being made up from contingency funds in the building’s existing budget, with the remainder coming “out of [our] pockets, quite frankly, and the margins aren’t what [we] expected them to be when we started.”

Gillespie said his firm can absorb the costs rather than having to “value-engineer” by cutting elements out of the project to reduce costs.

Shangri-La is now planned to be a 61-storey, 648-foot tall luxury hotel and deluxe condominium tower, and Gillespie said he and his partners aren’t interested in “sacrificing quality.”

“If you cut corners, people are going to see that,” he added.

Gillespie, and partner Ben Yuen of the Peterson Investment Group, hired James Cheng to design the iconic tower that will form the ceiling of Vancouver’s skyline.

Right now, however, the project is still a hole in the ground.

Since pouring the Shangri-La’s core foundation footing last October, a 100-foot by 100-foot by 12-foot deep block of steel-reinforced concrete, Ledcor Construction Ltd. has built the first three of what will be seven underground levels.

Bruce Dale, the project’s construction manager, said planning is key to making sure the job runs efficiently.

Planning has gone as far as contemplating putting a cafeteria for workers into the building half way up to ease demands on vertical transportation.

Dale added that contractors are also building mock ups of hotel suites and condominiums, from studs down to finishes, so designers can work out details and workers will know how to build a room before they’ve even built a room.

“You want to be out of reaction [mode],” Dale said. “You want to be as proactive as you can.”

Gillespie said that so far, the project is only a few days off its initial schedule, which will still see Shangri-La completed between the spring and summer of 2008.

© The Vancouver Sun 2006

An economist points out that the decline is from a record level

Fiona Anderson
Sun

The value of building permits issued in B.C. fell by 27.4 per cent in January, with drops in almost all construction sectors, according to a report released Monday by Statistics Canada.

Permits for $762 million of activity were issued in the province during January, down from $1.05 billion in December. Residential permits were down 33.1 per cent — from $785.2 million to $525.5 million — while non-residential permits fell 10.7 per cent — from $264.9 million to $236.6 million.

But the decline comes after a record month in B.C.

“So, yes, it’s a decline, but from a record level,” Statistics Canada economist Etienne Saint-Pierre said in an interview.

The only sector to buck the downward trend was single family dwellings, where the value of building permits eked up 0.3 per cent to a new record. But that increase may be due to increased costs of construction and not increased activity, as the actual number of units approved was only 1,355, a number high by historical standards, but not a record, Saint-Pierre said.

“The increase in prices inflates the value of permits, but for sure what is clear is there is a strong demand for single family dwellings in B.C.,” he said.

The strength in demand for single-family dwellings is throughout Western Canada.

“In Western Canada the economy is doing very well, so consumer confidence is good, the mortgage rates are still very advantageous [and] people are moving from the Eastern part of the country to the Western part of the country,” Saint-Pierre said. “So that generates a lot of demand for dwellings.”

The small increase in single family permits was more than offset by a drop of almost 60 per cent in the value of permits for multi-family units.

That doesn’t reflect what’s actually happening in the residential construction industry where more developers are looking to build multi-family units, Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said in an interview.

Ninety-four per cent of new detached homes in the Lower Mainland are priced at more than $350,000 because of rising costs, Simpson said.

“So what builders are doing is looking at ways to introduce new housing forms like row housing and high density communities with town houses and condominiums,” Simpson said. “They are trying to make housing more affordable by offering other forms of housing.”

He calls the drop in multi-family permits a “timing issue.”

“There’s lots of new [multi-unit] projects on the way,” he said. “I’m seeing a lot of activity out there.”

In the non-residential sector, industrial buildings, such as warehouses, led the drop, with a 63.5 per cent decline from December. Commercial building permits, including office buildings and hotels, dropped 11.1 per cent while permits for institutional building such as schools were up 30.1 per cent.

The increase in institutional building permits was from a very low level in December, Saint-Pierre said. Also, the non-residential is “very, very volatile”, so it is difficult to draw any conclusion based on one month, he said.

In Vancouver, the total value of building permits dropped 17.3 per cent in January compared to December, from $499 million to $412.6 million. The January figures were still a 14.7 per cent improvement over the $359.9 million worth of permits that were issued in January 2005.

Canada-wide the value of building permits was down 19.3 per cent to $5.1 billion from the record high of $6.3 set in December. Residential permits were down 21.4 per cent, while non-residential permits dropped 13.4 per cent.

© The Vancouver Sun 2006

Province

January was a quieter month for B.C. municipalities as construction plans slowed in the province, according to a Statistics Canada report released yesterday.

Across the province, municipalities issued a total 27 per cent fewer building permits worth $762 million in January compared to December, 2005. Residential permits were down 33 per cent and non-residential permits dropped by 10.7 per cent, the report said.

Despite the decline, B.C. building permits increased 14 per cent in January compared to the same month last year.

Nationally, building plans eased in January after record levels set late last year. Municipalities issued $5.1 billion in permits, down 19.3 per cent from December, it said.

In the residential sector, contractors took out $3.5 billion in permits in January, down 21.4 per cent from the previous month, mainly the result of a decline in multi-family permits issued for the Greater Toronto area.

Permits declined for both residential and non-residential projects, although StatsCan noted a 2.9-per-cent rise in single-family home construction plans.

The value of single-family permits reached new records in B.C., Alberta and Saskatchewan as well as in Newfoundland and Labrador and Nova Scotia.

In the non-residential sector, building permits dropped 14.3 per cent to $1.6 billion, which is the lowest level since January, 2005.

© The Vancouver Province 2006

Much of the pent-up demand driving market is fulfilled

Province

TORONTO — In a possible sign of a housing market cool-down, a recent survey suggests fewer Canadians are “very likely” to buy in the near future amid high prices and rising interest rates.

The Royal Bank survey of buying intentions over the next two years found the share of those people saying they were very likely to buy had dropped to 10 per cent — down from 13 per cent last year and at the lowest point in more than five years.

The percentage of those who plan to buy a home in the next six months also fell — to eight per cent, down from 10 per cent last year.

Catherine Adams, RBC Royal Bank’s vice-president for home equity financing, said the decline appears to be the result of higher interest rates, rising home prices and the fulfilment of much of the pent-up demand driving the market.

“It definitely is a signal of change — this engine is not just continuing on at the same pace as it was in the past,” Adams said.

Royal Bank said the only part of the country likely to see an increase is Atlantic Canada, where those “very likely to purchase” in the poll increased to 14 per cent, from eight per cent last year.

Royal LePage Real Estate Services Ltd. agrees that home sales are forecast to slow between three and five per cent in 2006, but the year would still be the second-best on record, the firm said.

© The Vancouver Province 2006

Steamworks Transcontinental to reflect elegant age

Ashley Ford
Province

Steamworks owner Eli Gershkovitch plans to open a period-style restaurant in the eastern wing of the former CP Rail station on Cordova Street in Vancouver. First in his plan’s agenda is cleaning the war memorial outside. Photograph by : Jon Murray, The Province

The golden age of travel is returning to its ancestral Vancouver home, the Cordova Street Canadian Pacific Railway Station — at least the food and beverage portion of that famous rail era is.

Vancouver businessman Eli Gershkovitch, president and owner of privately held Steamworks Brewing Co., plans a multimillion-dollar historically accurate remake of the eastern side of the station facing Cordova.

Gershkovitch has signed a long-term lease with the Ontario Teachers Pension Fund, the building’s owner, and plans a grand remake of the nearly 7,000-square-foot area into The Steamworks Transcontinental a mid-priced seafood/steak restaurant and bar that will reflect the building’s old glory.

The Transcontinental will be evocative of the golden age of rail travel, in particular the “deco-streamlined steam era when the grand public spaces were the great railway stations of the 1930s and ’40s,” he said.

“This was the era of when the journey was itself more important than the destination,” he said.

“We want to integrate the elegance, grandeur, history and lore of this place into a dining experience and create a heritage restaurant and railway lounge.

“But it is also our goal to make it a totally inclusionary venue where Vancouver locals, the business crowd and tourists can easily rub shoulders in comfort,” he said.

Although the golden era may have gone, the fact is the old station is doing what it was originally designed for, handling transportation and passengers, he said.

“It remains a transportation hub, what with SkyTrain, the new RAV line, heliport, buses and Westcoast Express, all virtually operating from within its confines.”

He says he rode on Europe’s famed Orient Express in 2002 and stations he encountered in Budapest and Bucharest that had “been unmolested by the Cold War” fascinated him.

He is painstakingly researching the building’s original look and is travelling to Paris, New York and Washington to view the old rail stations of those cities.

“We have had our corporate offices in this building since 1999 and every time I walked by this space — long boarded up — I thought the wonderful soaring ceilings deserved better than just providing cover for offices. This was one of North America’s signature railway stations and deserves to be restored to that grandeur,” he said.

Preparatory work is about to begin and one of his first actions will be to clean up the grimy, but grandly eloquent, CP Rail war memorial at the eastern side of the station.

“Unfortunately, the statue doesn’t appear to have been cleaned since the last CPR train departed the station about 40 years ago. It will be the first order of business,” he said.

He says construction will start in June with a late-fall opening contemplated. The next couple of months will largely involve taking inventory of the heritage elements.

“We have already discovered that part of the space was the main arrivals area, a sort of West Coast Ellis Island, if you will, and the first place many immigrants actually stood in Canada.”

Soren Rasmussen, a Vancouver architect who has won awards for previous heritage restoration work, is doing the design work.

Gershkovitch is seeking original artifacts and art from the 1930s and ’40s to incorporate into the final design that will likely include dining car, bar car and observation- deck themes.

© The Vancouver Province 2006