Ashley Ford
Province

Greater Vancouver’s housing market won’t lose much steam next year and should mirror this year’s strong performance, Re/Max real-estate company predicted yesterday in its latest national survey.

Prices will climb by eight per cent next year to an average $543,240 from this year, but that reflects a slowing of the 18-per-cent rise in the average price experienced this year, the Re/Max report said.

It also said that increasing inventory levels will help ease the upward pressure on Greater Vancouver house prices next year.

The vast majority of new listings coming to market are condominiums and townhomes while the shortage of single-detached homes is expected to continue.

Affordability has become a serious issue in the city with many first-time buyers looking to the suburbs for home ownership.

Nationally, 462,000 properties are forecast to change hands next year, making 2007 the third best year on record.

After four years of double-digit gains, average prices are expected to climb five per cent to $290,000 by year-end 2007, up from $275,000 a year ago.

All but three of the markets surveyed — Kitchener-Waterloo, St. John’s and Charlottetown — are predicting further escalation in housing values, ranging from three to 10 per cent in 2007, Re/Max said.

The highest price increases are projected in Calgary and Edmonton, with housing values rising 10 per cent to $385,000 and $265,900, respectively.

“Both markets experienced substantial upward pressure in pricing during 2006 — with Calgary climbing 40 per cent to $350,000 and Edmonton rising 25 per cent to $241,750,” the company said.

“Affordability is eroding, particularly in Western Canadian markets, but consumers are adjusting to new market realities.”

© The Vancouver Province 2006

 

Price difference between rent and a mortgage is the highest in decades

Mario Ton
Sun

CALGARY — A report on real estate trends indicates that steadily rising home prices and the recent upward drift in mortgage rates is tilting the economics of housing back in favour of renting over home ownership.

The Scotiabank Group report released Tuesday said the difference between the typical monthly mortgage payment on an average resale home in Canada and the average rent on a two-bedroom apartment is currently over $800 — up from about $575 last year and as low as $250 per month in 1997.

“This brings the affordability gap between the two competing accommodation choices back to levels not seen since 1990,” said the report.

This growing gap is creating an economic decision of whether to rent or to own in many Canadians’ minds.

“Now that that gap is growing, I think it’s just a part of the slowing down of the overall housing market,” said Adrienne Warren, senior economist with Scotiabank Group and author of the report.

“Essentially what we saw in the late 1980s and early 1990s were rising home prices had pushed up that rent-versus-own gap to historic highs, and then you saw a period of cooling off in activity. We’re going through a similar process, where gradually vacancy rates have moved up and home prices have moved up and you’re getting a little bit of that shift.”

Warren notes there are sizeable regional differences when calculating the cost of owning versus renting.

“Among major urban areas, the buy-over-rent premium in 2005 ranged from just $31 per month in Winnipeg to $1,220 in Vancouver. Nevertheless, in most centres, the affordability gap is widening.”

Relative price trends in recent years have consistently favoured renters over homeowners, the report said. Between 2000 and 2005, renters’ shelter costs increased at an average annual rate of 1.3 per cent. Homeowners’ costs, on the other hand, rose an average 2.7 per cent yearly. Rising home prices have been a major inflationary factor, but homeowners have also faced relatively larger increases in insurance premiums and maintenance costs. In certain markets the cost increases have been much more dramatic.

In Calgary’s hot housing market, for example, the monthly carrying costs of owning a home have increased more than 60 per cent in the last year. At the same time, rental rates in that city are expected to jump by a record 25 per cent this year, Canada Mortgage and Housing Corp. says.

The average monthly carrying cost for a Calgary homeowner, including principal, interest, taxes, mortgage insurance premium and heating, has hit $2,724. CMHC is forecasting average rental rates in Calgary for a two-bedroom apartment to rise by 25 per cent this year to $1,005 a month compared with $804 in 2005.

© The Vancouver Sun 2006

Government must invest in the best options — co-op and non-profit housing

Thom Armstrong
Sun

When Housing Minister Rich Coleman unveiled the government’s new housing strategy earlier this month, he missed a golden opportunity to address the biggest problem in British Columbia’s hot real estate market — the dwindling supply of affordable rental housing.

Instead, Coleman introduced a new rental assistance program, featuring portable housing allowances for low-income working families.

There’s no doubt that the new program will help some renters. Under the right conditions — a stable supply of rental housing and healthy vacancy rates being the most important — housing allowances can be effective as part of a broader housing and income supplement strategy. On its own, a housing allowance scheme is more likely to be too little help for too few in need.

Consider a family of four earning $22,000 a year. By the government’s measure, an affordable rent for that family is $550 a month. They may be forced to pay twice that or more in today’s market, but they won’t qualify for help under the new program because they earn too much.

They’re not alone. More than 61,000 households in B.C. spend more than half of their income on rent. More than 14,000 households remain on the BC Housing waiting list.

The problem seems obvious enough: There’s not enough affordable rental housing to go around. In fact, the rental housing supply is shrinking, as older stock is redeveloped to build condos or renovated so that landlords can raise rents. Recently the city of Vancouver reported that the south Granville area has lost more than three per cent of its rental stock in the past year.

The solution seems just as obvious: The government must invest in a continuing supply of affordable rental housing. And its best option, by far, will be to build more co-op and non-profit housing.

The knock on housing supply programs is that they’re expensive and take too long to deliver results. Besides, critics claim, it’s the private sector’s job to build rental housing.

But the market hasn’t supplied affordable rental housing for decades. And for good reason — it’s not profitable. Housing co-ops, on the other hand, have a 35-year track record of affordable housing in healthy, mixed-income communities. They work because their goal is to provide affordable housing to their members, not to deliver a profit to shareholders.

Is it more expensive to invest in new housing supply?

At least one recent study suggests that, over time, building new affordable housing is cheaper than maintaining a housing allowance program. And critics of supply programs rarely mention the health and other social costs of failing to ensure that people have a safe, affordable place to live.

Of course it will take longer to build new housing than to mail someone a housing allowance cheque. That’s hardly an excuse for further delay.

We all know that the best time to plant a tree was 20 years ago, but the next best time is today. And having a longer-term strategy in place to deal with the longstanding problem of housing supply just seems like good planning.

For a sobering look at what happens when governments don’t think that housing supply is a priority, one need only read the media reports from Alberta, where people with full-time jobs are living in cars because they can’t find any other place to live.

We have the means to act now on the housing supply problem. Government revenues are healthy. The co-op and non-profit housing sectors have proven track records in building and managing affordable homes. BC Housing is the most effective government housing agency in the country. And the federal government has just pledged an additional $106 million in housing funds to the province.

Coleman should take immediate steps to increase the supply of affordable housing by investing in a new co-op and non-profit housing program. Perhaps then the new rental assistance program will be seen as a useful transition to a long-term housing strategy long after it is swallowed up in the next round of market rent increases.

Thom Armstrong is executive director of the Co-operative Housing Federation of B.C.

© The Vancouver Sun 2006

 

Let the market work, with some positive measures from government

Lynda Pasacreta
Sun

In the late 1960s and early 1970s, government intervention into a viable rental housing market brought new construction of purpose-built rental housing to a halt.

Rent controls were introduced and tax incentives were eliminated. The private market could not economically build rental housing.

We are now faced with limited aging stock of rental apartment buildings. With today’s increases in land and construction costs, no one, not even government, can build affordable housing.

In areas of rapid economic growth, sudden increases in demand for housing can result in housing shortages, and substantial price and rent increases as we have seen in the B.C. market this past year.

Vancouver, Victoria and Kelowna have all experienced tight rental markets over the past decade. Factor in a booming economy and you get people yelling at each other trying to figure out how to solve the problem, who is at fault and who should fix it. Everyone is taking sides, pointing fingers, and are just plain mad at each other.

How can we fix this? What is needed from all levels of government? There has been a lot of discussion on the issue of affordable housing across Canada for many years now. We know what is wrong and we know what needs to be fixed.

If the market is allowed to work, the supply of housing can increase rapidly. Government measures that could help increase the supply of rental housing include expediting land use, planning and building approvals for new construction; allowing builders to sell new housing without full finishes; allowing builders to include secondary suites in new subdivision housing; making surplus land available for new rental construction and rental conversion of all types; facilitating the expansion or addition of mobile home parks; reducing the income taxes on rental property; allowing deferral of tax on capital gains and recapture, and allowing increased capital cost allowances.

Rich Coleman, the minister responsible for housing, recently announced a new housing strategy for B.C. The government introduced a portable housing allowance, paid directly to tenants, that is immediately available to 15,000 families currently on a waiting list for low-income housing. The key element in this housing allowance program is the word “portable,” which means if a family that needs income assistance would like to move to another home in the province better suited to them, the housing allowance program moves with them. As the minister so eloquently announced in Victoria, he hopes this program is a huge success so that it can continue to expand to other residents in need.

Earlier this year, low-income seniors also benefited from an increase in the Shelter Aid for Elderly Renters Program which provides income assistance directly to elderly renters in need. The program was expanded to include seniors who pay pad rental fees in mobile home parks.

These types of initiatives immediately mitigate the effect of an increase in the demand for rental housing. Those 15,000 people on the waiting list for low-income housing are living in market housing right now. With the housing allowance program, they can choose to stay or move to another home that meets their family’s needs — for schooling, a better neighbourhood, or to be closer to work.

The Canadian Federation of Apartment Associations, Canadian Real Estate Association, REALpac (the association of major real property owners of multi-residential, office and commercial owners), Urban Development Institute and the Canadian Home Builders Association have all been lobbying the federal government for changes to the restrictive federal tax laws that discourage new development of rental housing.

The Conservative government seems amenable to these lobbying efforts.

There has been some progress with proposals to the federal government regarding changes to the rollover provisions that would allow tax deferrals on the proceeds of sales of rental property if a replacement property is purchased within a predetermined time period.

The lobbying continues on all fronts to force the federal government to bring back the tax incentives of the 1960s to encourage an increase in the supply of purpose-built rental housing.

Taking action now, while the economy is booming, by implementing government income assistance programs, removing restrictive federal taxes that impede increasing the supply of rental housing and by allowing the housing market to operate as freely as possible will ensure that B.C. residents receive adequate housing in the private market sector.

Lynda Pasacreta is chief executive officer of the B.C. Apartment Owners and Managers Association.

© The Vancouver Sun 2006

 

Burnaby leads building boom

Ashley Ford
Province

There is literally “no room at the office” in downtown Vancouver and the tight situation is forcing expansionist companies to either flee to the suburbs or split their operations and open a second location.

A combination of the rebirth of the inner city as “the place to live” and a vibrant provincial economy is forcing up leasing rates to dizzying heights downtown, says Colliers International in its latest office market report.

With downtown square- footage rates of $57 compared with as low as $24 in the ‘burbs, the appeal of fleeing the inner city is becoming more pronounced.

“With the addition of new transportation initiatives, such as the Canada Line, more tenants are continuing to consider a location in the suburbs more feasible,” it says.

Further, Collier says, there is very little chance of any major new office space becoming available in the downtown core in the immediate future.

The additions now under way on Bentall V on Burrard will result in 238,000 square feet of new space and the Jameson House Development on West Hastings will add another 75,000 square feet.

But that’s about all and it is simply not enough. The vacancy level in topline space is now well below five per cent and destined to tumble even further.

By comparison, Burnaby is leading the suburbs with 238,000 square feet of new development under way and the possibility of an additional 1.1 million square feet over the next few years.

Richmond is also adding to its inventory and the completion of the B.C. Institute of Technology aerospace technology campus early next year will add another 100,000 square feet of space.

At first glance it would appear that Surrey has a surfeit of vacant space with a vacancy rate of 8.3 per cent.

However, Shawna Rogowski, a researcher at Colliers, says it is primarily because a major building, the 259,400-square-foot 104 Avenue, remains unleased.

Despite plenty of interest in the building, the owners are looking for a major tenant, she said.

© The Vancouver Province 2006