Yet-to-be built downtown condo smashes lofty price barrier

Bruce Constantineau
Sun

Downtown Vancouver’s luxury condo market has shattered the $20-million price barrier, with a yet-to-be-built penthouse at 1133 West Georgia carrying a price tag of more than $28 million.

That’s at least $10 million more than the record $18 million paid by an unnamed U.S. businessman last year for a 48th-floor penthouse in the Private Residences at Hotel Georgia, set for completion by 2011.

The $28-million-plus condo will occupy about 7,400 square feet on the 59th and 60th floors of the Residences at Ritz-Carlton development, also set for occupancy in 2011.

Vancouver condo marketer Bob Rennie said the Ritz-Carlton project was going to have three penthouse suites, but demand for a larger unit prompted developers to combine two suites into one large penthouse.

“We have some serious interest in a large unit, so we decided to put the northwest and northeast penthouses together,” he said in an interview. “With people wanting size, it’s just a good business decision to put the two together.”

Rennie said potential buyers of the luxury condo include “corporate giants,” with two local clients and one overseas client already expressing a strong interest.

He said the penthouse’s current configuration calls for three bedrooms, two dens, a family room, formal dining room, a “massive” kitchen and butler’s pantry.

“But no matter what we pencil in with the architects, whoever buys this is going to add their signature to it,” Rennie said.

The asking price for the Ritz-Carlton condo works out to a whopping $3,800 a square foot, compared with $2,400 a square foot for the $18-million Hotel Georgia penthouse.

Rennie said that beyond $2,000 a square foot, prices almost don’t matter to some buyers.

“At what point does a Rolls- Royce buyer say he’ll only pay $500,000, not $600,000?” he said. “He doesn’t. He just pays for what he wants because you’re dealing with a very privileged buyer.

“So when you’re talking over $20 million, a million dollars is not going to make or break the sale. It’s a discretionary purchase. Nobody has to buy a $20-million condo but if they’re looking, there are very few to choose from.”

Construction of the $500-million Ritz-Carlton project — on Georgia Street between Thurlow and Bute — is slated to begin in March, with completion expected by the summer of 2011.

The site had been a vacant and derelict concrete shell for more than a decade, following failed attempts to develop a private members’ club and a strata-title office building. Vancouver-based Holborn Group bought the property from Cadillac Fairview about three years ago.

The development will contain a 127-room Ritz-Carlton hotel and 123 luxury condos. The entire building will be managed by Ritz-Carlton and condo owners will have access to hotel amenities like 24-hour room service, a concierge, housekeeping services and staffing for special entertainment events.

© The Vancouver Sun 2008

 

Price increases hurt buyers looking outside Metro

Brian Lewis
Province

The fact that the Fraser Valley continues as one of Canada‘s fastest-growing regions is reflected each January when year-end real-estate-sales statistics are released.

So when the Fraser Valley Real Estate Board announced the region’s 2007 sales numbers last week, the news that average home prices again showed annual double-digit increases was hardly surprising, even though total sales fell slightly compared to the previous two strong years.

However, now we’re beginning to hear concerns over the region’s housing affordability, especially since these substantial value increases were also reflected in property-tax assessments for 2007 that were mailed out last week by the B.C. Assessment Authority.

As one community newspaper, the Chilliwack Progress, noted recently in a commentary on higher property values: “They should provide a cautionary note to city planners and politicians about the need to ensure that affordability remains a fact of life in Chilliwack.”

That cautionary note applies anywhere in the Valley because, like it or not, many downsizing empty-nesters or young first-time homebuyers from Metro Vancouver now look to the relatively lower-priced Fraser Valley.

This means the challenge will only increase for city halls throughout the Valley to manage robust growth and the accompanying demands for community services, schools, parks, hospitals, etc.

And, as the Progress editorial says, part of successfully managing this robust growth will be for city halls to ensure that developers provide a residential mix that includes affordable housing for first-time buyers and young families.

“A combination of affordable housing and a great lifestyle for people in the Fraser Valley are definitely the main attractions,” says Jim McCaughan, president of the Fraser Valley Real Estate Board.

“You’re close to major shopping malls or places like Cultus Lake and great fishing in the Vedder River. And many of our clients are families with young children looking for more affordable options,” he adds.

But the FVRB’s numbers show those affordable options are becoming more difficult to find.

The average price of a single family detached home in the Fraser Valley increased by 11.4 per cent last year to $520,317 from $467,252 in 2006. Townhouses jumped 12.7 per cent to $322,578 from $286,127 while apartments increased by 14.9 per cent to $216,990 from $188,789.

If prices in the Fraser Valley become equally unattainable, there will be no other alternatives for these families in the Lower Mainland.

The need to preserve as much Valley land as possible for food production also places additional pressures on the region’s residential land prices and inventory.

That’s why the emerging trend in Valley real estate is to build up, not out. In Chilliwack, Abbotsford and Mission, for example, detached housing is creeping up local mountainsides.

Regardless, B.C.’s strong economy and favourable mortgage rates will continue to feed the market in 2008, the experts say.

© The Vancouver Province 2008

 

Tony Gioventu
Province

Dear Condo Smarts: In March, one of our fourth-floor units had a common water leak from a broken pipe. Contrary to my encouragement, our council voted not to file an insurance claim and to fix the damage ourselves. The cost for the repairs was about $2,900 and our deductible was $2,500. Seemed like a reasonable way to fix the problem and not increase our insurance risk or costs.

Fast forward to December. A first-floor unit below the flood has been complaining that her unit is extremely cold and musty. She called in a restoration company that removed a section of her living room wall and literally gallons of disgusting ooze poured out. With a water test the culprit was identified as the flood from March. All of the water released into the building had gradually made its way down to the first floor.

The estimate for restoration is now close to $50,000. The owners in the building are furious we didn’t file a claim or report it to them and they’re insisting that council pay the expenses out of their own pockets. What do we do?

— Carol D., Victoria

Dear Carol: Strata corporations have regrets every day for not following up or taking action when they could have acted quickly and economically. In your case, for example, you paid more than the cost of the deductible originally and left yourselves with a latent defect that will place your strata in much greater jeopardy and at great expense.

There is nothing to stop the strata owners from bringing a lawsuit against the council for their neglect.

I frequently hear from owners with claims that the strata corporation wants to prohibit them from filing a claim. If it’s a valid claim an owner can file it in the same manner as the strata council. The Act is clear.

Despite the terms of the insurance policy, those named as insured in a strata insurance policy include the strata, owners and tenants and persons who normally occupy the lots.

Your strata council needs to convene a special general meeting of the owners to report the damage and propose a resolution on how to raise the funds to pay the costs, either through a special levy or contingency approval.

The most important issue now is to fix the building properly. Settle the disputes on fault later.

Here’s a common list of 12 council regrets.

1. Don’t assume there’s no damage from water or fire. Report a claim immediately. Investigate it and restore it properly.

2. If the bylaw says no pets, enforce it when you see a pet move in. Don’t leave it for five years.

3. Even though you had a serious disagreement with an owner, don’t ever include libelist or slanderous information in your minutes.

4. Pay your strata fees. Don’t waive them in exchange for sacrificing your time on council.

5. Before the roof leaks, replace it. Do the math: Why pay 50 per cent or more to get one or two extra years out of your roof?

6. Strata council is not a good place for a romantic affair.

7. It’s not OK to allow a drug dealer to thrive in the building if they provide council with a share of the profits.

8. Buying insurance outside of the country is not worth the paper it’s written on.

9. Don’t make an 80-year-old owner shovel their own driveway.

10. Don’t use strata funds to pay your gambling debts.

11. Respect all cultures, faiths and traditions. Defending yourselves at a human-rights hearing is no fun.

12. Never agree on a verbal quote for anything. If it isn’t in writing, it can’t be true.

May your strata have a conflict- free New Year.

© The Vancouver Province 2008

Sun

Northern B.C. real estate sales last year fell 5.9 per cent below the record set in 2006 but the total value of all sales still hit a record $1.2 billion, the B.C. Northern Real Estate Board reported Friday.

The board said 6,639 Multiple Listing Service sales occurred last year, down from 7,055 in 2006 but still higher than the previous record of 6,344 sales in 2005.

The total value of 2007 sales was 13.6-per-cent higher than 2006 and 47-per-cent higher than 2005.

“Despite some regional differences, northern sellers enjoyed a strong market and buyers are still getting good value,” said board president Glen Holling. “Real estate overall fared very well from generally higher selling prices.”

He said values will likely increase slightly in some areas this year but an increase in the supply of available properties should ensure stable conditions.

A board survey found the average selling price of residential properties last year rose in 13 of 15 markets.

Some of the biggest price increases last year occurred in Terrace (up 26.6 per cent to $182,600), Houston (up 23.9 per cent to $133,500) and Prince George (up 21.6 per cent to $240,200).

© The Vancouver Sun 2008

 

Real estate prices have made B.C. the most mortgage-laden province in Canada

Fiona Anderson
Sun

When talking mortgages, 40 is the new 25. Less than two years ago, the longest amortization period for mortgages was 25 years. And that’s what most first-time buyers in British Columbia were opting for, as skyrocketing real estate prices translated into hefty monthly payments, even when spread over 25 years.

Then as house prices continued to climb, banks and other lenders stretched amortization periods first to 30 years, and then to 40 years, softening the monthly blow of home ownership. Today, the 40-year mortgage is now the norm among first-time buyers and common among other buyers as well. And with British Columbians anxious to own homes, B.C. has become the most mortgage-laden province in the country.

Feisal Panjwani, a senior mortgage consultant with Invis in Cloverdale, estimates that 95 per cent of his first-time clients are going long-term with 40. There are also zero-down mortgages and an interest-only mortgage that help them get into the market, he said.

Panjwani likes the 40-year mortgage because it allows flexibility with a safety net. If borrowers can afford to top up the payments they can, but if something happens and they can only make the minimum payment, that’s okay, too.

But without extra payments, not much equity builds up in the early days. For example, for a $300,000 mortgage at six per cent, less than $11,000 is paid off in the first five years of a 40-year mortgage, compared to more than $30,000 for the shorter 25-year mortgage. And part of the money owing on the longer option will go toward increased insurance costs which rise from 2.75 per cent for a 25-year mortgage with five per cent down to 3.35 per cent for a similar 40-year mortgage, Panjwani said.

But the monthly payments of $1,635 compared to $1,919 make the 40-year option the only affordable choice for many first-timers.

With B.C.’s high prices, more British Columbians than other Canadians are taking out 40-year mortgages, said Kevin Lutz, RBC Royal Bank’s regional sales manager, mortgages. British Columbians also take on more high-ratio or low down payment mortgages than the rest of the country.

The federal government’s Home Buyers’ Plan offers no relief. Despite the fact that house prices in B.C. have doubled in the past five years, the plan still only allows a first-time buyer to take a maximum of $20,000 out of his registered retirement savings plan.

So as prices in the province rise, and buyers rise to the bait, what is really going up is the amount of mortgage debt British Columbians carry.

According to statistics released by the Bank of Canada, British Columbians carry 19 per cent of the country’s mortgage debt, yet represent only 13 per cent of the population and 13 per cent of the country’s disposable income, Doug Porter, deputy chief economist with BMO Capital Markets said in an interview.

“When people talk about the potential risk of outsized household debt it’s probably most acute in B.C.,” Porter said.

And if problems arise in the housing market as they have in the United States, the large mortgages could be a problem, he said.

But Porter believes the economy in B.C. should remain strong and that B.C. is not headed “for a U.S.-style reversal of fortune.”

But the only people who have benefited from the increase in amortization periods are pre-existing home owners who saw their house prices bump up as a result, he said.

“It really doesn’t improve the long-term affordability at all,” Porter said.

It could spell trouble, however, if banks stopped offering the new mortgage options, said Andrey Pavlov, an associate professor of finance at Simon Fraser University. Because just as the new mortgages pushed up prices, no longer offering them would cause a drop in prices, Pavlov said. And that’s essentially what’s happening in the U.S.

On an individual basis, Pavlov said, it’s not necessarily a poor decision if someone buys a house they couldn’t afford with a conventional mortgage.

“All it says is that person is willing to forego a lot of other consumption to live in that house.”

Margaret Johnson, president of Solutions Credit Counselling Service Inc. in Surrey, worries that some first time buyers can’t really afford to buy a house, even if lenders say they can.

So while they may get parents to ante up the down payment, the monthly slog may prove to be too much especially when things go wrong and need fixing, Johnson said.

Forty-year mortgages are allowing people to get into the housing market “but I don’t know how long it’s going to allow them to remain in the housing market if anything happens,” Johnson said.

© The Vancouver Sun 2008

 

Property values in Vancouver’s west side have skyrocketed over the past five years, making the area virtually inaccessible to those without equity

Derrick Penner
Sun

When you drive the streets of Vancouver‘s west side, virtually every house for sale is worth $1 million or more, which prompts the question: Who is buying them?

The answer is people who are moving up, sometimes after also receiving inheritances or cash gifts from parents.

Still others are stretching themselves in surprising ways with huge mortgages and long periods of interest-only payments to get into the neighbourhood they want to live in, on the premise that appreciation in their equity will keep them afloat.

However, there is no getting around previous ownership, because equity is a requirement for entry to the $1-million club.

Don Bull, a 44-year-old independent branding and design consultant, carried equity from three purchases over some 15 years, starting with a 700-square-foot condo at Fourth Avenue and Main Street, to his purchase of a half-duplex in Kitsilano last April for $1.1 million.

“My grandmother, a long time ago, said to me, ‘don’t buy a car, buy real estate,’ ” Bull said in an interview. “And that is the only reason I’m in this building today.”

Bull added that he doesn’t like to boast, because he has almost always lived in the Kitsilano neighbourhood and didn’t do anything special to get there except follow some sage advice, buying property with downpayments and making lateral moves at the same time “the market went crazy.”

Now, he and interior-designer partner Donna Toppings are comfortably ensconced with a mortgage that is significantly less than 50 per cent of their purchase price.

West side property values have skyrocketed more than 100 per cent over the past five years, which Bull no longer finds shocking, since it is his neighbourhood and he’s kept close tabs on the market.

“It almost has a false economy aspect to it,” Bull added, because the assessed value of houses doesn’t represent cash in the bank.

“[Million-dollar homes] are a function of the economics of the area, and it’s only good to me if I move somewhere 400 miles from here. That is the only benefit I’m ever going to see out of it.”

Bull’s realtor, Lorne Goldman, with Macdonald Realty, said Bull and Topping are fairly typical of the demographic moving into westside million-dollar properties: A bit older, and with substantial equity to bring to a transaction.

Goldman added that more and more, buyers are relying on basement suites to make the economics of westside ownership work.

In making their requests with realtors, he said buyers will list which schools they want to be near, how many bedrooms they need and that they need a basement suite.

“And they need the suite specifically to make the mortgage payments,” Goldman added.

However, while million-dollar buyers need equity, not all of them are entering able to cover the majority of their property’s value.

Mortgage broker Geoff Willis, a partner in the Vancouver firm Origin Home Financial Partners, said he has dealt with a significant number of thirtysomething professional couples willing to heavily leverage their equity, buying for lifestyle reasons.

Willis said that lenders have catered to the people he has worked with, so long as they have the income, or the equity and good credit, to be in the market.

“As long as you can have the income to qualify for [a mortgage] at the three-year posted rate, you can get any mortgage product you want,” Willis added.

For some, Willis said, at the most exotic end, the loan has been an equity line of credit. Buyers take the loans at the prime interest rate, and only have to pay back interest, and they take the loans in order to reduce their monthly payments.

Willis brokered the mortgage for one thirtysomething couple, the husband a utility-company manager and the wife a chartered accountant, who put $300,000 down on a $1.15-million westside house, winding up with an $850,000 mortgage.

A basement suite in the house that rents for $1,500 per month, however, reduces their net mortgage payments from $4,800 to $3,400 per month.

“Really, their upside, from their personal net-worth statement, is in equity appreciation,” Willis said. “They’re not going to be chunking away at that mortgage anytime soon.”

However, Willis said that couple just received their latest property assessment, which has increased $250,000 since they bought their house a year ago.

Willis added that Vancouver buyers are aware of the market’s cycles, and that they may have to endure a downturn where values deflate, they are hedging that if and when a downturn hits, it won’t erase the equity appreciation they’ve earned.

In the meantime, Willis said a lot of westside buyers are sacrificing and pouring 40 to 50 per cent of their net income into housing, but do it because it is the neighbourhood they want to live in and worry that if they don’t get in now, they never will.

“It is definitely a live-for-now mentality,” Willis added.

© The Vancouver Sun 2008