Iris Win
Province

A lakeside property that can generate joy beats out the RRSP as a place to park retirement money.

As real-estate prices rise sharply, more boomers seem to be focusing on property as an investment vehicle.

According to the most recent Statistics Canada Survey of Financial Security, “a significant change in the composition of assets during this six-year period was growth investments in real estate such as cottages, timeshares, rental properties and other commercial properties.”

The value of real-estate holdings, excluding principal residences, increased by 80.5 per cent between 1999 and 2005. This, notes the survey, was “by far the largest rate of growth of any asset type.”

Other buyers buy and sell without renting, speculating the market will continue to rise, as it has done over the past decade.

Vacation property investment option for golden years

Inherited wealth being put back into the land

OTTAWA — As baby boomers look toward retirement, many are investing in real estate, often purchasing vacation properties.

According to an Angus Reid Strategies poll conducted in May, one in seven Canadians currently owns a vacation property and one in four would like to purchase recreational real estate in the future.

Forty-one per cent of vacation-property owners surveyed are over the age of 55, at the top end of the baby-boomer bracket.

baby boomers will go on buying vacation homes until the end of the decade, while the next group of boomers is likely to continue the trend until 2014.

“Luxury recreational property sales are set to soar as affluent baby boomers drive demand for upscale product from coast to coast,” says the 2007 RE/MAX recreational-property report.

Particularly for the most prosperous boomers looking to invest their wealth, concerns about stock-market fluctuations are among the main reasons they choose real estate, says Ottawa-based ScotiaMcleod director and senior investment executive David Cork.

A boomer himself, Cork specializes in the impact of demographics on social and economic life.

The co-author of The Pig and the Python: How to Prosper from the Aging Baby Boom, Cork says “the stock market blows real-estate markets out of the water over time, but doesn’t work out for a lot of investors because they see its volatility and don’t handle it very well. With real estate, it’s out of sight, out of mind, and you get to hang out in it, too.”

Other factors also steer the boomers toward the lakefront property or ski lodge.

“It’s a natural time for people to want to own that cottage and they can afford it,” says Cork.

“It is also a time when boomers’ parents are starting to pass away [with] positive implications from a financial perspective, in that they are starting to inherit.

“Significant amounts of wealth have been created in this country since the end of the Second World War and we are now seeing the results. A massive wealth transfer is taking place.

“So, there’s the element of wealth storage. When you have excess wealth, what do you put your money into?”

He says the four main investment possibilities are cash, bonds, stocks and real estate.

“Obviously, some of your money goes into RRSPs, but that brings you no joy,” says Cork.

“I work in this business and I don’t think people are able to build a family outing around their RRSPs.“.

© The Vancouver Province 2007

Vernon site of $100-million Kristall Resort ho

Province

Construction has begun on the 150-room Kristall Resort and Spa beside Predator Ridge golf course in Vernon, the company’s CEO said yesterday.

The $100-million hotel, the first phase of a proposed 300-room resort, will be completed and open in the winter of 2009, said Hans-Peter Mayr.

“Kristall Resort and Spa will feature an exclusive European-style spa and wellness centre without equal in North America,” he said.

architecture will be kept under wraps as the designs get their final massage,” Mayr added.

The 70-hectare property, purchased in 2003, has a development agreement with Vernon for a two-phased spa and wellness hotel and other resort-commercial development, including a future resort-residential development overlooking Lake Okanagan.

The resort will use geothermal energy for heating and cooling, said chief operating officer Jim Radford. A total of 150 120-metre-deep bore-holes have been drilled to tap into the equivalent of 3.6 million BTU worth of geothermal energy to heat the 157,000-square-foot hotel, he said.

Tim Spiegel, Kristell’s chief financial officer, said the resort’s building will cost about $55 million with another $45 million being spent on “furniture, fittings and spa and wellness infrastructure.”

Said Mayor Wayne Lippert: “This new and exciting development illustrates the confidence that the resort industry has in the city of Vernon. The city acknowledges the importance of their investment and the positive impact it has on Vernon‘s economic growth.”

© The Vancouver Province 2007

Derrick Penner
Sun

British Columbians are making compromises and relying on financial help from families, but are still getting into the province’s escalating property markets, according to a national real estate firm.

Century 21 Canada, on Tuesday, released results from a survey of its brokers on first-time buying.

The firm points to Statistics Canada numbers on home ownership, which show the rate at which people are buying their own property is growing faster than the population.

However, particularly in B.C.’s high-priced markets, the buyers aren’t getting exactly the property they want where they want to live.

Century 21 Canada president Don Lawby, in an interview, said buying habits are changing because “that’s just the reality of the marketplace today, for first-time buyers especially.

“They may have the great desire to have a wonderful lot and a detached home, but their financial wherewithall won’t allow that.”

Settling for locations that are less desired is something Christina Pughe, a mortgage-development manager at Vancity credit union is familiar with. Recent clients, a young couple, bought an apartment in Pitt Meadows when they really wanted to live in Richmond. “That’s a long commute,” she said.

Pughe added that a colleague worked with four clients who wanted to live in Vancouver, but bought in Surrey.

Lawby added that once first-time buyers do find properties, more are coming to the transactions with pre-inheritances or low-interest loans from parents, and are looking for help from mortgage brokers to navigate the complicated options available to them.

Kevin Lutz, B.C. mortgage manager for the Royal Bank, said 75 to 80 per cent of his bank’s first-time borrowers in B.C. are taking mortgages with 40-year amortizations, and a higher proportion are coming with less than a 25-per-cent down payment.

In Vancouver, Julie Jaggernath, director of education at the Credit Counseling Society, said her office is “a little bit busier than we were last year,” with clients including those who have gotten in over their heads buying property or upsizing their homes.

“We’re also seeing people spending about 70 per cent of their income on housing and housing-related costs,” Jaggernath said. “That’s a lot.”

Her advice to prospective homebuyers is to spend a year pretending they’ve already bought. So if they are paying $1,000 in rent, and expect to take on a $3,500 mortgage payment, try to set aside the difference to see if they are willing to make the sacrifices it would take to do so.

© The Vancouver Sun 2007

Sun

The benchmark price* of a detached house on the west side of Vancouver rose by more than 23 per cent from November of 2006 to the same month of this year, according to the Real Estate Board of Greater Vancouver. That was the biggest percentage increase of any area in the board’s region.

© The Vancouver Sun 2007

Fewer than ever single-family houses begun in November

Derrick Penner
Sun

Builders in Metro Vancouver began hammering up more homes in November than during any month in the past 30 years, and the most through the first 11 months since 1994, Canada Mortgage and Housing Corp. reported Monday.

However, an increasing number of those homes are condominiums and townhouses as the Lower Mainland’s high-priced markets make single-family houses a luxury item.

In November, only 364 of 2,704 new homes started were single-family houses, compared with 403 of 1,405 houses started in the same month a year ago.

To the end of November, single-family homes made up 3,826 of the 19,491 housing starts recorded, compared with 5,386 detached houses among 17,389 starts in the first 11 months of 2006.

“There has been a 30-per-cent increase in [multi-family] starts and it’s mainly Vancouver and Surrey [multi-family projects] that are driving the results,” Robyn Adamache, an analyst with Canada Mortgage and Housing said in an interview.

However, Adamache added that she expects housing starts to slip back to 18,500 in 2008, because builders won’t be able to find the workers to build all the homes the market will demand — and because of high prices.

“This is why we’ve seen such a large increase on the multi-family side,” she said.

The average price for a detached house in the Real Estate Board of Greater Vancouver’s reporting area was $813,137 in November. The average townhouse price was $483,210. The average condominium price was $418,709.

In Surrey, which is included in the Vancouver census metropolitan area but is not part of the REBGV area, the average house price was $511,580 in November. Surrey‘s average townhouse price was $317,522 and the average condominium price $208,107.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said rising costs and high prices, especially for first-time buyers, are the industry’s biggest concerns.

“If the new-entry [market segment] falters, it will start radiating through the market,” Simpson said. “But right now, a lot of these buildings are being sold out in short order to first-time buyers.”

He added that the range of housing forms available these days goes right down to small studio apartments that designers try to make as livable as possible with space-efficient designs.

“That’s a direct response to the affordability challenge,” Simpson added.

Province wide, work on 3,718 new homes began in November.

“It was a strong month for home building,” Carol Frketich, CMHC’s regional economist for B.C. said.

Right now, Frketich added, the province is on track to start construction on the most homes the province has seen since 1994.

She pointed to B.C.’s strong labour market, with the employment rate in November hitting an all-time high of 63.9 per cent.

“We’ve got more people moving here, there’s strong net migration,” Frketich said.

“There’s growth in income, growth in jobs, and this all contributes to an active housing market.”

Nationally, the pace of new-housing construction reached a seasonally adjusted average of 227,900 units for the year.

© The Vancouver Sun 2007

Province

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Tony Gioventu
Province

Condo SmartsDear Condo Smarts: We have a growing problem in our wood-frame building in New Westminster. We have noticed that at dinner time, we are smelling everyone else’s cooking, and our once warm hallways are freezing cold.

This has never been a problem over the past 10 years, but our residents are complaining constantly. We have tried to investigate the building system, and the only change we can identify is an owner who enclosed their patio in glass. Is this a common problem in buildings as they age?

— Strata Council, Emerald Greens.

Dear Emerald Greens Council: What you have is a failure of your hallway pressurization system. It delivers pressurized fresh air, normally from the roof area into the common-area hallways and entry.

During the winter months, the unit has a heater to regulate the temperature in the hallways, but hallway pressurization systems, if they are maintained and operated properly, contribute much more to your strata.

They maintain a positive pressure in hallways that reduces and, in many cases, eliminates cooking odours and cigarette smoke from travelling beyond the suites.

The system also brings fresh, circulated air into the building that reduces condensation and mould in common areas and prevents elevators from creating a chimney effect from parking garages that could exhaust emissions up into the living spaces.

In the event of fire, the pressurization is also instrumental in reducing smoke infiltration into the hallways, increasing safe exit and reducing building damages.

Both the strata corporation and owners have a responsibility to ensure the system operates. The strata council must maintain and repair the system, including changing of filters and maintenance of the heating and cooling units.

These systems are generally designed to operate 24 hours a day and the strata will gain little benefit if they only operate in peak hours of demand.

Make sure the maintenance and servicing of your pressurization system is an annual budget item so your strata can meet their obligations. And owners must ensure their door sweeps are not completely blocked to allow the pressurized air to circulate.

Tony Gioventu is executive director of the Condominium Home Owners Association (CHOA). Contact CHOA at 604-584-2462 or toll-free at 1-877-353-2462, or e-mail [email protected].

© The Vancouver Province 2007