HOUSING: Days of tight sellers’ market are coming to an end

Paul Luke
Province

B.C.’s housing market is likely heading toward its first-ever soft landing as sales slide, starts decline and price increases slow over the next two years, Credit Union Central of B.C. says.

The days of a tight, sellers’ market are coming to an end as more supply rises, Central chief economist Helmut Pastrick said.

“A soft landing could ultimately produce declining prices after a long adjustment period,” Pastrick said. “Such a soft landing cycle peak would be the first in B.C.’s housing market history.”

Higher-cost housing regions such as the Lower Mainland and Victoria will experience the greatest impact over the next two years, driven by deteriorating affordability for low-equity buyers, Pastrick said.

But higher income growth and rising in-migration will continue to underpin demand in these areas, he said.

Average prices for residential multiple-listing sales are expected to rise by about 18 per cent this year, six per cent next year and three per cent in 2008.

However, higher-than-average price hikes are foreseen for the B.C. Northern, Kamloops, Kootenay, Northern Lights and South Okanagan real estate boards.

Total B.C. residential sales are expected to fall by about four per cent this year, led by a 15-per-cent fall in Vancouver and 10-per-cent drops in the Fraser Valley and Victoria regions. The B.C. Northern, Chilliwack and Kamloops real estate board areas should, however, experience gains.

Across the province, housing starts should reach 37,000 units in 2006, easing to 36,600 next year and 34,900 in 2008. Construction will remain more active in smaller rural markets.

The vacancy rate in the province’s rental market is expected to fall to 1.2 per cent this year, 0.8 per cent in 2007 and 0.6 per cent in 2008, Central said.

A decline in interest rates, however, could yield different results in the overall housing market.

“If interest rates decline, as some forecasters suggest, higher unit sales and starts would prevail and maintain their upward trajectory in 2007,” Central said.

© The Vancouver Province 2006

 

Other

Download Document

COMMENTARY I The real estate market can’t continue to escalate as it has without the bubble bursting. Overall, it remains healthy

Jennifer Podmore
Sun

At MPC Intelligence, we have been tracking new-home-project sales since July. For the first time, we are seeing small corrections in some areas of Greater Vancouver. In those areas, supply is outpacing demand.

We think the Lower Mainland real estate market will continue to move forward with strength and certainty and, further, fluctuations currently seen in the marketplace will be of short duration. The fundamentals remain strong.

Changes in sales activity throughout the Greater Vancouver market have created a raised level of buyer uncertainty for both the resale and new-housing markets.

Recent surveys demonstrate that while some caution is warranted, the local real estate market will continue to move at a stable pace.

Questions on the continuing health of the real estate market were ignited by reports that real estate has ceased to escalate at the same pace as it did in 2004 and 2005.

This is true, but while some take this as an indication of a bursting bubble, present activity indicates plateauing of price escalations and absorption are strong signs of future strength.

The reality of the market is that it cannot continue to escalate in a straight line. (The longer it does, the more likely we will see a bubble.) Levelling off of sales volumes and absorption allows the market to return to more normalized conditions.

For those looking to purchase homes or condominiums, this allows for added time to survey the market before making buying decisions.

For those wanting to sell, this means their homes may sit on the market for a short period of time. (It should be noted that the market is still very much a buyers’ market).

Inconsistent activity in new development throughout Greater Vancouver locales has led to a raised level of uncertainty for both the resale and new housing markets. This inconsistency is the result of submarkets moving at various paces.

Areas such as New Westminster, south Surrey and Maple Ridge have experienced a slight cooling in sales volume. On the other hand, the markets of North Vancouver, Burnaby and Abbotsford have noticed expedited sales and increased pricing.

Over all, the market continues to move at a consistent pace; however, we anticipate that we will see more differences between submarkets in pricing and sales absorption.

Developers can avoid less favourable conditions through proper timing and release of new real estate entering the market.

Areas with large amounts of new developments simultaneously entering the market will, in the short term, experience declines in sales volumes. Areas with staggered releases will continue at a predictable and stable pace.

Regardless of the short term fluctuations in the market, the overall health of the industry remains strong.

Sales pricing and absorptions continue to surpass previous performance records and the short-term investor has become far less active in today’s market. The “supplier” performance and the ”buyer” performance suggest stable but not rapid growth for the future.

Perhaps the strongest indication of a continued healthy market is in the evaluation of new developments released in the last two months.

Since Labour Day, local developers and builders have released just over 3,800 residences to sale in 43 developments. Eighty per cent of that has been in the form of apartments; 19 per cent, townhouses; and one per cent single family detached.

Of the more than 3,800 homes released since Labour Day, only 38 per cent of them remain available.

Within the entire market, in all product types, barely 21 per cent, or a little over 4,200 homes, remain available for purchase.

These numbers mean just over one-third of all available real estate on the market has been available for purchase for 60 days or less.

© The Vancouver Sun 2006

 

Michael Sasges
Sun

First in an occasional series

In metro Vancouver right now the buyer of a new-construction home must negotiate two challenges, one pleasant, one less so.

Product is plentiful, report after report demonstrates.

But it is costing builders and developers more than ever to bring to market, because of shortages of labour and material, some of the shortages due to Winter Olympic projects.

With land availability, the competition for labour and material dominates the deliberations of development company owners and their managers, they have told me time and time again.

What follows is an introduction to a tool that might help the new-home shopper make choices worthy of the most important financial decision he or she will probably ever make.

This tool is the provincial building-industry competition known to all involved as the Georgies.

Let’s get out of the way what a Georgie is not.

Possession of a Georgie by a developer, builder or renovator is no guarantee of delivery of a new home or a renovation on time and on budget.

But it is a signal that company principals and their managers have enough management acuity and ability, and care enough about their public record, to organize an entry in a province-wide industry competition, with tight deadlines, adjudicated by out-of-town judges

Possession of a Georgie is no guarantee of a dispute-free or grievance-free relationship.

The improbability of that occurrence is well recorded, perhaps best recorded in House, a book about the construction of a single-family detached home in the United States, by an award-winning author, Tracy Kidder. (The Vancouver public library has two copies; Amazon.com, about 350 copies, new and used.)

Now let’s have a look, with one example, of what a Georgie is, or what possession of a Georgie might indicate.

Suppose you have narrowed your new-home choice to two similar products. One is from a company that year-in, year-out is a finalist in one of the Georgie categories, customer service. The other is from a company with no demonstrable customer-service record.

The former is selling its apartment for $460 a sq. ft.; the latter, at $455.

Is it worth parting with an extra $5 to buy from a company that has demonstrated to adjudicators of a provincial competition the presence of a “service strategy;” “creativity in addressing industry-client needs; strategies to eliminate callbacks or defects; and strategies to promote professional development?” It’s certainly worth considering.

– – –

The Georgies are organized by the Canadian Home Builders’ Association’s B.C. chapter.

This is a different organization than the Greater Vancouver Home Builders’ Association managed by Westcoast Homes columnist Peter Simpson, although both are affiliates of the Canadian Home Builders’ Association and both share members.

The first requirement of a Georgie competitor is CHBABC membership. So, to say a Georgie is emblematic of new-construction or renovation excellence is to under-report. It is more accurate to say a Georgie is emblematic of excellence among CHBABC members.

The second requirement is temporal. For the 15th Georgie competition, the project entered must have been “built, renovated, developed, created and/or marketed” between Jan. 1, 2005 and Sept. 30, 2006.

In other words, the competition is annual, but the entries have a competition eligibility of almost two years.

Finalists were announced Oct. 31, after three days of judges’ review. Winners will be announced at an awards banquet on Feb. 2.

This year, the Georgie organizers accepted entries in 44 categories, six of them new. It makes for a lengthy awards banquet and the inevitable jokes about the most improbable category as the evening passes, best crawl-space renovation under three feet in height, for example.

For the 2006 finalist list, and the category criteria, visit chbabc.org on the Internet.

SHOW-HOME FINALISTS

The 2006 Georgie finalists in the show-home category, or ‘best interior design display suite’ category, are Woodland Hills on the Ridge, Kelowna; Westone Properties Ltd., for Sonnet, Langley; Concord Pacific, for Flagship, Vancouver; Onni, for Flo, Richmond; Adera, for Red, Richmond; and Townline, for 1168 Richards, Vancouver.

Townline’s 1168 Richards project (above, left) is the first of six downtown Vancouver projects completed by the long-time suburban developer and builder, under the Metroliving brand. The ‘garage door’ behind the seated Yvonne Drinovz, the 1168 Richards sales manager, is a signature feature of the Metroliving homes. Alda Pereira is the interior designer.

The Red interior designer, Daniele Lareau (above, right), is a Georgie finalist for the third year in a row. Watch the runways of Milan if you want to know what’s coming down in a metro Vancouver show home in a year or two, she advised in the Westcoast Homes story on the Red development.

At Sonnet, Jessica Matlock (left) is a buyer, with boyfriend Wesley Phillips. Further, she likes the project so much she hired a sales assistant. Triple J Interiors is the Sonnet interior designer.

© The Vancouver Sun 2006

 

Michael Sasges
Sun

5955 BALSAM

Location: 43rd and Balsam, Vancouver

Project size: 41 residences, 12-storey building

Residence size: 1,215 sq.ft. – 2,406 sq. ft.

Prices: From $889,900

Presentation centre address: 2036 West 41st

Hours: Noon to 5 p.m., Sat – Thu

Telephone: 604-264-5955

Web: kerrisdaleliving.com

Developer: Grosvenor Canada

Architect: IBI/HB

Interior design: Scott Trepp Interior Design

Tentative completion: August 2008

The 5955 Balsam story is simple: International property developer responds to locally expressed need. It is also complicated: International property developer responds with a product it hopes worthy of neighbourhood and putative market.

The developer is Grosvenor Canada, owned by one of the world’s great family fortunes. The Duke of Westminster’s investment history can be traced back almost 350 years, to a fortuitous marriage that brought 300 acres of today’s central London into the Grosvenor family fold.

The need is one that has been annunciated and examined from time to time on these pages, the opportunity to age in place.

It was most loudly and frequently heard in inquiries from west-side Vancouver residents to one of the oldest real estate outfits on the west side, Macdonald Realty, reports George Wong of Platinum Project Marketing Group, Macdonald Realty, organizer of the 5955 Balsam sales and marketing campaign.

Grosvenor and Platinum are aiming the project at two groups of older west-side residents, reports Lily Korstanje, the Platinum Project sales manager for 5955 Balsam.

“We think 5955 Balsam will appeal to the discerning elderly who want to maintain a west-side lifestyle, but do not want the stairs or the maintenance of the large family home. . . ,” she says.

“Additionally, we expect strong interest from discerning empty nesters who are of the modern mindset that ‘there is life after kids and retirement,’ who want to get out of the large home with the maintenance and get into the lock-up-and-go apartment, travel, eat out and start adventuring . . . .”

“The operative word here is ‘discerning.’ These people will come from large custom homes and will not compromise on the ‘sense’ of space or quality.”

The 5955 Balsam homes will be big homes, absolutely and comparatively, three or four to a floor, and they will be finished richly.

“Many new Vancouver condominium developments focus on smaller plans that reduce room sizes, eliminate storage rooms and do not allow room for traditionally sized furniture. It also creates many suites per floor,” George Wong says of the square footages.

“At 5955 Balsam, our suites start at well over 1,200 square feet, with the majority of suites over 1,500 square feet. What this does is create a ’boutique’ development with just three or four suite on a floor and provides its owners with a sense of exclusivity.”

The “big” names in the features line-up, Miele, Dornbracht, Duravit, were almost inevitable.

“It is definitely the very first multi-family west-side development that offers these custom-home, top-of-the-line European name brands,” Lily Korstanje says.

As previously mentioned, Grosvenor Canada has established for itself an ambitious agenda at 5955 Balsam, its first residential development in the Lower Mainland.

Outside, the building, when completed, “respects and honours the neighbourhood’s legacy,” in the words of the sales literature. Inside, the homes will address “the contemporary needs of 21st century residents,” again in the words of the sales literature.

Components in the 5955 Balsam homes, Korstanje reports, include “open floor plans with a contemporary squared-off configuration for functional/ optimum use of space; great living /dining/family rooms which would accommodate large pieces of heirloom furniture; and flex spaces that can be used as an office, or a pantry, for storage, as media room, perhaps a guest bedroom.”

The decision to commit more than 80 per cent of the site ” to landscaping” will be the most visible legacy statement from Grosvenor. “The choice to landscape a substantial part of the site will provide a beautiful integration into the existing neighbourhood,” Korstanje says.

“The homes and streets around the site have been here for over a century. It is the tall, mature flowering plants and trees that line these streets that make Kerrisdale so visually pleasing. 5955 Balsam carries on Kerrisdale’s appreciation for a beautiful backdrop to the homes and buildings in this community.”

James Patillo, a Grosvenor executive, also points to interior finishes “that nod to the richness of the past — the warm teak and walnut hardwood, the bottocino classico marble — create a warm and distinctive backdrop, totally in keeping with the distinctive character of Kerrisdale while the open, flexible floor plans leave buyers the room to design and stylize their homes with the greatest of flexibility.”

Grosvenor and Platinum are calling three of the residences “garden homes,” to reflect their ground-level location.

“With extensive landscaping around the building and nine-foot-high ceilings, these homes will feel larger as the exterior space will read as if part of the homes and provide a ‘connectedness’ with the gardens,” Korstanje says.

”Two of the garden homes have private enclosed garages that are directly accessible from the residences offering utmost privacy and convenience.”

The grounds will have a ”Great Lawn,” for pet runs; a lawn bowling and croquet green; a fireside terrace for resident gatherings; and a “poet’s corner . . . a secluded area in the extensive landscaped garden where one can contemplate, meditate and ruminate,” Korstanje says.

One common amenity Grosvenor is not installing at 5955 Balsam is a fitness centre.

One reason is the presence of Kerrisdale Community Centre a few blocks away. Its facilities are well known to anyone who has raised a family on the west-side.

Another reason is money. “Many Kerrisdale residents have memberships in various private clubs, like the Arbutus Club, and much prefer to stay with the basics in the residential building to keep maintenance fees manageable,” Korstanje says.

The 5955 Balsam news release opens with a strong statement, that the project “is the first of its kind in over five years.”

George Wong does not issue superlatives easily or readily; they have a nasty propensity of biting back over a long career, and his has been long and successful.

“There have not been any high-rise/ high-end developments in Kerrisdale for over five years, and no new development that matches or comes close to the luxury we are offering at 5955 Balsam,” he says.

”With the quality of concrete [construction], the views and a strong developer name like Grosvenor, a project with this winning combination will likely not come again in this lifetime.”

© The Vancouver Sun 2006

 

Derrick Penner
Sun

Well-heeled pleasure seekers, tantalized for months with the prospect of living a Donald-Trump-sized lifestyle in Waikiki, on Thursday laid down just over $700 million US in commitments to buy into the latest hotel and condominium resort marketed under the Trump brand.

Vancouver-based S&P Destination Properties handled the marketing job, and company president Sid Landolt called the sellout of all 464 units in the Trump International Hotel & Tower Waikiki Beach Walk a record.

Intrawest last claimed the one-day record almost a year ago with a $425-million US sell out of its Honua Kai resort project on Maui.

Landolt, speaking from the project’s Waikiki office, said that when the last buyer made the final selection, the sales centre exploded “like a New Year’s Eve celebration.”

Ivanka Trump, The Donald’s daughter and vice-president of development and acquisitions at the Trump Organization, said the success itself wasn’t a surprise.

“But just the volume of units we moved, in the amount of time we moved them, was definitely a shock,” Ivanka said in an interview.

Donald Trump Jr., Ivanka’s brother and executive vice-president in the family firm, added that selling $700 million worth of property in a day “is unheard of in real estate.”

However, while pre-registrations, line ups and one-day sales frenzies, such as the Woodward’s project which sold all its 536 units on April 22, might be commonplace in Vancouver, Donald Jr. said the concept was an experiment for the Trumps.

Their company typically works on real estate projects that sell units on a “yield-management” basis, where units are released for sale slowly to build up prices.

“This system takes care of some of that [price build-up],” Donald said. “These are great numbers.”

Ivanka added that though the tactic is unique, “it’s a great mitigation against changing climates and environments,” and they will “absolutely” do it again.

The siblings even bought a one-bedroom unit in the Waikiki project themselves.

S&P was hired by the Los-Angeles-based builder, Irongate, last winter, and opened its Waikiki preview centre in April.

Landolt said each of the 1,500 prospective buyers have been receiving information for between 60 and 90 days, enough time to line up financing and understand the legal agreements involved.

S&P consummated its seven-month marketing campaign Thursday with a by-reservation-only, simultaneous sales event in Waikiki and Tokyo.

While Landolt said Hawaii state law gives buyers up to 30 days to change their minds, every one of them signed unconditional contracts and were required to put down 10-per-cent deposits, with a further 10 per cent due when construction starts.

Buyers don’t pay the balance until the project’s closing, which is expected in 2009.

HAWAIIAN BUNCH

Selling luxury real estate on Oahu is no trick, really. Celebrities alone keep the market hot. Even the 6.7 earthquake on Oct. 15 hasn’t slowed things down, David Robins of Prudential Locations in Honolulu says. “We have had some serious celebrity buying and selling activity over here,” said Robins.

Daniel Dae Kim, who plays Jin-Soo Kwon on the hit ABC show Lost and was voted one of the sexiest men last year by People magazine, just bought a 3,500-square-foot house on Oahu for about $1.5 million US.

Cameron Diaz and singer Justin Timberlake recently bought a beachfront estate with 12 bedrooms and nine bathrooms in slightly more than 11,000 square feet. The property sold for close to its $16.9-million asking price.

Media mogul David Geffen just sold an oceanfront lot on Kahala Avenue, one of the most upscale streets in Honolulu, to a computer company for $35 million.

Michelle Pfeiffer and her husband, writer-producer David E. Kelley, are selling a 4,400-square-foot beachfront home on the windward side of Oahu, listed at $12.9 million.

Earlier this year, John Travolta and Kelly Preston sold their oceanfront Oahu home with a sandy beach and an indoor pool to fitness expert and actress Kathy Ireland for about $3 million.

And there is buzz among local real estate agents that Bill Gates is planning to build a home on Oahu and has purchased the site. The Microsoft billionaire’s house near Seattle is 48,000 square feet.

Source: Los Angeles Times

© The Vancouver Sun 2006

agency: REAL ESTATE I Forecast predicts price gains likely to continue, however

Derrick Penner
Sun

British Columbia is experiencing the slowly approaching end to its real estate market cycle due to astronomically high prices in the most expensive regions, Credit Union Central B.C. reported Friday.

In releasing its housing market forecast for the next two years, the agency predicts overall housing sales to drop to 128,000 units in 2007 from an expected 133,000 this year. Housing starts should dip to 36,600 next year, the report forecast, compared with 37,000 this year.

However, price gains are expected to continue, the forecast projects, with increases of six per cent in 2007 on the heels of 18-per-cent gains this year.

Provincewide, the average Multiple Listing Service recorded price is expected to hit $415,000 in 2007, compared with $392,000 this year.

Credit Union Central chief economist Helmut Pastrick said in an interview Friday that this represents “a gradual market adjustment” brought about by the affordability squeeze.

First-time buyers, the so-called low-equity purchasers, are being priced out of the market, which will reduce pressure on sales and housing starts, Pastrick said.

However, because the B.C. economy is still experiencing job, wage and population growth, sales will remain at relatively high levels and keep at least some upward pressure on prices through 2008, when he predicts price increases to slow to three per cent.

The cycle, however, is shifting. Pastrick said unit sales have been declining for the past 14 months, and housing starts have eased over the last seven to eight months.

Prices, he added, “are always sticky downwards.”

“Perhaps we won’t really see a negative sign in front of prices for the next couple of years,” Pastrick said.

However, in regions outside Greater Vancouver, the Fraser Valley, Victoria and perhaps Kelowna, Pastrick is forecasting stronger-than-average housing growth.

Pastrick added that this cycle shift is unique.

“There hasn’t been a phase like this,” he added, “in the sense that the market adjustment is price-driven, affordability driven.”

“Every other housing cycle has ended because of negative economic fundamentals [such as] rising mortgage rates, recession: those kinds of things.”

However, B.C.’s fundamentals still look stable. Pastrick estimates job growth to continue, though it will slow due to labour-supply constraints. And, because of tight labour supplies, Pastrick is forecasting the average family income will climb to $76,600 by 2008 compared with $69,700 this year.

David Baxter, an economist and demographer with the Vancouver-based Urban Futures Institute, said he would refer to the real estate market’s shift as a plateau rather than a downward adjustment, because sales and construction will remain at high levels.

And Baxter believes the slowing of housing demand is coming at the high end rather than at the low end with first-time buyers.

By that, he means people who wanted to cash in the equity they’ve earned in their properties through rising prices have “already done their thing.”

Baxter added that B.C. markets have exhausted all of the price increases that were sparked by low mortgage rates that increased buyer ability to take on more debt. However, he believes that income growth could put more upward pressure on prices.

“We never have a normal market,” Baxter said. “But we’re going back to a stable or steady market. . . . We all know the market had to slow in terms of price and volume just because it can’t continue at an exponential rate.”

Tsur Somerville, director of the centre for urban economics and real estate at the University of B.C.’s Sauder School of Business, said high prices alone typically don’t bring markets down, because buyers adjust.

Somerville added that higher-priced markets than Vancouver, such as San Francisco and London, have even higher home ownership rates.

High prices “put a brake on demand, but as long as there’s not a lot of speculative building in the face of slowing sales, you’re not going to drive some awful stake through the market,” Somerville said.

© The Vancouver Sun 2006