Ozzie Jurock
Sun

Received tons of email…Not – all favorable. Some people wish to bet me money – some a case of beer, that real estate is going to go down…just wait and see. Likely they are all the people who never bought anything. If you go to www.realestatetalks.com you can see some 46,000 people arguing for more than 14 years the ups and downs of Vancouver real estate. It is always the same guys and gals that argue collapse and (yep) often the same that argue that eventually we will always be higher (because of monetary expansion creating it).

So, take it easy. If you had listened to the experts who were dispensing the best advice available 20 years ago and locked yourself and your wealth into a plan which guaranteed to remit the then prevailing ‘safe amount’ of an income stream of $500 per month (a lot back then – pocket-change today) for the rest of your life, imagine the desperate poverty that you would retire to today. Stone soup would be a luxury.

Yes, we need more money now but who knows what this money will be worth tomorrow. Yes, we need more income, but who can possibly know the state of the world three months from now … much less 20 years from now? Nobody knows for sure the ‘what and where’ of interest rates and inflation rates and the value of money. It’s just not possible.

What we do know is that the safety that was inherent in the projected big income of 20 years ago is a pitiful joke today.

Yep, forecasting is never easy – particularly when it’s about the future. Crystal balls crack, vaunted talk-show soothsayers wither and drop off the television scene and the books that were treasure maps wind up in the remainder bin at the bookstore. In the last three decades stock markets have surged up and crashed down. Certain mutual funds that looked like they were blue chips sprang leaks and sank while others soared like rockets only to burn out and fall back down. Through all of this the average folk watched their savings chewed away by insidious inflation.

However, in all the turmoil of this sound and fury, one asset has weathered the changes. Three decades ago, had you bought good quality real estate you would not be concerned about your future today. That real estate would have kept up with inflation, remained secure in value, and steadily appreciated. Sure, there would have been some temporary dips. There has to be because real estate is cyclical in nature. But one thing is certain – over the years, the base values have been steadily increasing. Back to that purchase 30 years ago – today it would be paid off and clear title – which means either a mortgage-free home (no more monthly ‘rent’ payments to the bank) and/or a steady rental income courtesy of your tenants.

Put into perspective, if you place a good portion of your assets into real estate today, you won’t have to worry about tomorrow. It doesn’t matter how wild or turbulent the economy or the marketplace. It’s like riding a horse with one spur – if half the horse goes, the other half has to go along with it. No matter how deep or tempestuous the water, you’re going to be floating on top of it.

Let’s review something all of us already know. The Chinese have used real estate holdings for wealth creation for 2,000 years. All huge fortunes were either started or extended with real estate. Home ownership (the most common form of real estate holding) has been the single largest factor in the accumulation of wealth for the average North American, firstly because of straight appreciation due to inflation, secondly, due to the leverage involved and thirdly real estate has a use and therefore always a value.

This basic principle of appreciation holds true for pretty well any healthy major urban center. Let’s take Vancouver, B.C. for an example.

In 1960 the average Vancouver home sold for $13,105. Thirty-eight years later in 1998 the average sale price was some $310,000. Almost a 2,300 per cent return. But in March 2008 the average sale price was $895,000. Almost a 6,830 per cent return. That’s on the price. Play with the return on down payment of $655 and you get tens of thousands per cent returns

If this kind of appreciation is going to continue, you have to be on the conveyor belt. If you’re not, you’re going to be left so far behind that it will be financially disastrous. And here we’re only talking from the perspective of a place to live. This isn’t even addressing the investment aspect of those monies outside the family home.

When you combine appreciation with leverage, you unlock the great secret of achieving the optimum result with real estate investment. And as you can see from the foregoing numbers, the ‘lever’ can lift you up or the ‘appreciation’, if you’re on the wrong side, can crush you down.

When your gain is measured on the capital invested, not the actual price of the property, some really astounding results come into focus. But the game is not as simple as it used to be. The goal posts move. The only constant is that everything is always changing. The secret of surviving and prospering is the ability to adapt to the changes.

The 1980s were very forgiving for the amateur. Benign with a capital ‘B’. That ‘B’ could also represent ‘Bucks’ and ‘Brainless’. Back then if you had a few dollars you could buy any piece of real estate, anywhere, and you would make money. Even if you could barely hear thunder and see lightning, it was almost impossible to make a big enough mistake. If you paid too much, it only meant that you had bought a little too soon. The clock and the calendar made you into a financial wizard. Thanks to inflation, prices soon caught up to you and bailed you out.

Still, there were lots of people in the early 1980s who managed to lose all their money in real estate. Those were the people who put their money into the wrong syndications, limited partnerships or real estate investment trusts. But we’ll talk more about that later. In the late eighties fortunes were made.

But after the 1980s the real estate world became less forgiving. For some investors the times were downright terrifying. All of a sudden there was the sudden change. Markets fluctuated area by area both as to volume of sales and prices. Different real estate categories rose or fell without any apparent linkage to each other. You could see in one market area the average single-family detached home rise in value by 40 per cent while in the exact same market area downtown condos slumped in value by 12 to 20 per cent (Vancouver 1990-1995).

The people who tried to play by the old rules found themselves playing someone else’s game. And most of the time they were handed their heads. Was it possible to avoid the dangers and yet at the same time prosper with the good stuff) Yes it was, but you had to put aside location, location, location, and instead you had to read the trends, position yourself as to the timing and then implement some new techniques.

To be successful real estate investors we must understand ourselves. That means we have to understand our investment objectives in relation to the risks we are willing and able to tolerate. But having done that we then must understand that aspect of ‘ourselves’ that is part of the New Consumer.

Ozzie Jurock

President of Jurock Publishing Ltd.

web: www.reag.ca

email: [email protected]

© The Vancouver Sun 2008

College Heights neighbourhool prices fall two per cent from 2007

Derrick Penner
Sun

The city of Prince George, in the grips of a forestry downturn, was the weak spot in a major realtor’s semi-annual survey of real estate prices.

Century 21’s 2008 spring national house price survey showed that the price of a typical bungalow in that city’s lower College Heights neighbourhood dipped two per cent year over year to $219,000, and showed no change in another subdivision at $190,000.

“Any communities significantly affected by an industry that has a softening, real estate in those communities would suffer,” Century 21 president Don Lawby said in an interview.

However, the Century 21 survey did conflict with B.C. Northern Real Estate Board statistics which showed the average Prince George house price up six per cent to $246,839 so far this year.

Dan Seibel, with Century 21’s office in Prince George, said that while the town’s mills are cutting shifts, “the rest of the economy is looking good, if half the [projects] happen that have been announced.”

Century 21 collected the information for its survey by canvassing its offices and asking realtors in select locations to pick the sale of a property considered representative of a neighbourhood’s typical housing, and then calculate change in value using comparable sales and listings.

Lawby added that market strength “all relates to strength of the economy and consumer confidence.”

And in that respect, confidence in much of the rest of the province is still holding up.

Among the other 22 neighbourhoods in nine communities that Century 21 surveyed, the low point was two per cent price growth in both Prince George’s Heritage subdivision and Central Abbotsford, the high point was 19 per cent in the Marpole neighbourhood on Vancouver’s west side.

Robyn Adamache, a senior market analyst at Canada Mortgage and Housing, said that while B.C.’s economy is still strong overall, real estate markets have slowed.

Sales during the first quarter of this year declined 14 per cent across the province, Adamache added, and new listings were up 12 per cent hitting the highest level since Canada Mortgage and Housing first started keeping statistics in 1980.

Adamache attributed the slowdown in part to consumer worries in the face of bad economic news in the U.S. and central Canada.

The rise in listing activity, she added, is due to “homeowners feeling that same sort of nervousness, thinking ‘I’d better put my home on sale now rather than later.’ “

However, the rise in listing activity has so far not caused the inventory of unsold homes to overwhelm demand.

Adamache noted that across B.C., prices during the first quarter were still up 14 per cent compared with the same quarter a year ago.

Lawby said sales volumes in most markets across Canada have slowed as economic growth eases, but “prices in the spring of 2008 are strong and stable nearly everywhere across the country.”

Century 21’s canvass of 198 neighbourhoods in 66 cities across Canada turned up nine locations where prices dropped and 21 communities where prices remained flat. Prices increased in the remaining 167.

Lawby said some of the Alberta locations that saw price decreases were overbuilt with developers banging up units at the same time significant numbers of residents put their houses up for sale to realize their equity gains and move out of the province.

“We’re not going to have anywhere as near a strong market in unit sales as we had last year . . . probably down seven per cent or so across the country,” said Lawby. “The economy has performed very well . . . it may go down a bit, but it’s not going to go down to where it’s going to affect the real estate market in a significant fashion,” Lawby said.

HOUSE PRICES SOFTEN IN CENTRAL CITY

© The Vancouver Sun 2008

 

Club president Bob Lenarduzzi says city had no strategy to develop Greg Kerfoot-owned rail yard land in 2005

Doug Ward
Sun

VANCOUVER – Vancouver Whitecaps president Bob Lenarduzzi says team owner Greg Kerfoot had no plans for condos or any commercial development when he purchased land on the waterfront for his proposed new soccer stadium.

The former Vancouver soccer star said a front-page story in Wednesday’s Vancouver Sun headlined “Stadium plan includes condos” conveyed the impression that Kerfoot’s plan to build a $90-million stadium was as much a real estate play as it was an investment in professional soccer.

“If I read that headline, I’m thinking that there is something sinister taking place here,” Lenarduzzi told The Vancouver Sun’s editorial board Wednesday.

“That’s bulls—. That’s not the case.”

The article, by Sun columnist Miro Cernetig, said Kerfoot plans to build a “phalanx of towers” around the new stadium on Burrard Inlet.

But Lenarduzzi said Kerfoot has no specific plans to build condo towers, and that when the reclusive billionaire purchased the rail yard land between Gastown and Vancouver Harbour in 2005 for $22 million, the City of Vancouver had no strategy to bring development to the area.

The likelihood that there would be development on the waterfront land became apparent only in 2007 when the city initiated a planning program to create an urban design and transportation plan for the Central Waterfront Hub area around Waterfront Station.

A city report on the Hub plan talks about extending the downtown business district to the water to provide new development such as offices, shops, restaurants, hotels and public facilities.

The possibility that Kerfoot could sell land around the stadium for commercial development came as a surprise to him and the Whitecaps, said Lenarduzzi.

“We had no idea that there were any plans to develop when we bought.”

Whitecaps chief operating officer Rachel Lewis said the city has “put forward plans to expand the city limits and that will involve all kinds of property owners, not just the Whitecaps.”

Lewis said the eventual mix of development is unclear, adding that the development costs will be high because “you’re building on a railway.”

The Whitecaps considered the waterfront site only after the initial choice of a stadium site at Main and Terminal was rejected by the city, she added, because of a mistaken expectation that it would be needed for the 2010 Winter Olympics.

But Lenarduzzi acknowledged that Kerfoot will probably sell some of the waterfront land for commercial development.

“We haven’t gone into any detail on that side of it. But having said that, if the Hub study confirms that in the end they [the city] are going to develop that area, somebody is going to develop it.”

Lenarduzzi said that Kerfoot is “not using the stadium for the ability to develop.”

“And if you were into it to develop, you’d forget about the stadium and have the opportunity to make much more money.”

But Kerfoot’s priority is the stadium, Lenarduzzi added.

“The real estate aspects of it — unlike what your paper suggests this morning — have not been the driving force. And if we’d had the approval at Main and Terminal, we’d have a stadium there.”

Lenarduzzi said the Whitecaps bought the whole stretch of railway land from Waterfront Station to Main Street because Canadian Pacific wouldn’t break it up into parcels.

The Whitecaps have been given conditional approval by the city to proceed with the 15,000-seat stadium project.

But the stadium is on hold until the Whitecaps can resolve a land dispute with the Vancouver Port Authority.

Kerfoot owns 10.5 hectares of rail yard behind Water Street, but he also needs about 1.5 hectares of waterfront owned by the Port Authority.

The Port Authority wants the rail yard to guarantee rail access to the port. Port officials say the land Kerfoot is offering in trade — roughly the eastern half of the rail yard — is worth $30 million less than the port’s waterfront parcel to the north.

© The Vancouver Sun 2008

 

B.C. neighbourhood homes rank with the best

Paul Luke
Province

A few neighbourhoods across B.C. number among Canada‘s strongest housing markets, according to a new Century 21 survey.

The spring survey released yesterday pinpoints neighbourhoods in Castlegar and Vancouver as having robust year-over-year price increases for typical homes.

Prices in the south, north and rural areas of Castlegar increased 16 per cent, 18 per cent and 18 per cent, respectively, Century 21 said.

In Vancouver, neighbourhoods in the east side, Yaletown, Kitsilano and Marpole, prices rose between five and 19 per cent, the survey said.

Price growth in Abbotsford was strong but variable, the survey said. Prices for similar bi-level homes in the central, western and eastern areas of the city rose two per cent, seven per cent and eight per cent, respectively.

The annual survey looked at typical homes in 198 neighbourhoods in 66 cities across the country. It found prices rose in 167 neighbourhoods, were flat in nine and fell in 21.

Century 21 Canada president Don Lawby said the strength of the Canadian housing market is based on conservative lending practices and regulations, in contrast to boom-bust excesses in the U.S.

In that country, many homeowners took equity out of their homes and spent it on vacations, cars and flat-screen televisions, he said.

“The price collapse in the U.S. housing market, which happened 18 months ago, was based on lending practices and mortgage-interest deductibility tax regulations that lured new buyers into mortgages they couldn’t sustain,” Lawby said. In Canada, housing sales volumes are easing in most areas as the economic growth rate slows. “But prices in the spring of 2008 were strong and stable nearly everywhere across the country,” he added.

Among the 21 neighbourhoods in Canada in which prices fell, one was in Prince George, where softening reflects weakness in the forest industry, Century 21 said.

In Greater Vancouver, other pockets of strength were:

n North Vancouver, where a one-bedroom condo rose 17 per cent from $320,000 to $375,000.

n Richmond, where the price of a two-storey in the Hamilton neighbourhood rose seven per cent from $520,000 to $558,000. A two-storey in Steveston climbed 14 per cent from $604,000 to $729,900.

In Victoria, price jumps ranged from nine per cent for a two-storey in Thetis Vale to five per cent for a split-level in Lakehill.

Century 21 defines ” typical home” as the type of home found most frequently in a neighbourhood.

Saskatchewan posted Canada‘s largest price increases. A three-bedroom bungalow in Regina‘s Whitmore park neighbourhood rose 57 per cent to $330,000.

© The Vancouver Province 2008