Planners want a ban on residential development in a new commercial area and more density for office towers

Frances Bula
Sun

Vancouver is about to radically reshape its downtown business core to create new commercial office space and keep condos at bay.

City planners are proposing that residential development be banned from an expanded new commercial district, that office towers automatically be granted 20 to 40 per cent more density, and developers be encouraged to build as high as possible without blocking designated views.

“When you look at the capacity for job space in the city, there’s a problem, particularly in the downtown,” said planner Kevin McNaney, who is in charge of the city’s massive metro-core jobs study that has been examining occupations and locations the city will need in the future. “And it really has nowhere to go but up. There’s heritage on one side, strata condos on the others and then the port.”

The city is also proposing that all conversions from office to residential in buildings over 50,000 square feet will be discouraged through the new central business district, which will now stretch from Bute to Beatty and Robson to Cordova. Similarly, conversions of buildings over 30,000 square feet in Yaletown, Chinatown and Gastown will also be discouraged.

That change is being welcomed by the business community, which has been raising the alarm for a couple of years about the way office development has been losing the battle to more profitable condo development.

“It’s all good to walk and bike to work, but if you don’t have offices for people to go to, that makes things rather difficult,” said Bernie Magnan, the chief economist for the Vancouver Board of Trade. “You won’t have the business and the jobs that you’re asking people to move down here for.”

Condominium development in the downtown core has been escalating for 20 years, ever since the city started promoting a “Living First” policy of encouraging people to move downtown. It took off in the late 1980s, after the office market collapsed in Vancouver and elsewhere and developers were looking for new opportunities to build. Since then, the size of the downtown population has more than doubled to about 90,000.

As it became clear that condo projects were selling at phenomenal rates and available sites became less and less available, residential developers started pushing into the central business district or converting former office buildings. The famous one-time Westcoast Transmission building on Georgia became the Qube condos, while prime sites, one at Georgia and Thurlow and one at Dunsmuir at Granville, were developed as the Shangri-La and Hudson, which were all or partly condos.

The city put a moratorium on that kind of conversion and development almost four years ago, because of concern about the effect it was having on the price of the remaining commercial land. In the meantime, the office vacancy rate downtown has dropped to a record low.

City planners have estimated that the downtown needs about six million square feet more of office space to accommodate an increase from the 120,000 jobs that now exist downtown.

McNaney said the city will also be making changes in other parts of what it calls the metro core — everything north of 16th Avenue from Clark to Arbutus — to create more job space.

He said that it’s unlikely that Vancouver will see exceptionally high office towers because the business market in Vancouver isn’t strong enough for that. Vancouver has no head offices and much of its office space goes to companies leasing relatively small amounts of space.

© The Vancouver Sun 2008

 

Conditions unlikely to change in near future: CMHC

Bruce Constantineau
Sun

Nearly half of B.C. communities have apartment vacancy rates below one per cent as strong demand fuels rental shortages and higher rents, Canada Mortgage and Housing Corp. reported Thursday.

CMHC said the provincial vacancy rate fell to 1.1 per cent in April from 1.2 per cent a year ago while the average rent for a two-bedroom unit climbed from $893 to $921.

CMHC regional economist Carol Frketich said the apartment rental squeeze comes from strong international migration to B.C. and a labour market that continues to attract people from other parts of Canada.

“There’s nothing to indicate things will change very much in the near future, which suggests the vacancy rate will remain relatively low,” she said in an interview.

The CMHC report said 11 of 27 B.C. cities surveyed had vacancy rates below one per cent while about half recorded either a decline or no change in the vacancy rate in the past year.

Metro Vancouver‘s vacancy rate was unchanged from a year ago at 0.9 per cent while Victoria fell from 0.8 per cent to 0.3 per cent and Kelowna fell from 0.7 per cent to 0.3 per cent.

Abbotsford’s vacancy rate rose from 0.6 per cent to 2.4 per cent while the rate in Prince George climbed from two per cent to 2.7 per cent.

Frketich said high land prices and rising construction costs in B.C. have made it hard for developers to build new rental units to meet the surging demand.

“It’s just not viable to build new rental accommodation and make it available at rents people can pay,” she said.

Frketich said rising house prices have kept many potential home buyers in rental accommodation for longer than they expected, while construction delays on some new housing projects have had the same effect.

The CMHC report also notes the strong demand for entry-level home ownership has led to the conversion of rental units to home ownership units.

Frketich said most of the new rental supply in B.C. comes from secondary suites, including investor-owned condominiums. CMHC estimates more than 18 per cent of Metro Vancouver condominiums are rented out by investor-owners.

Vancouver posted the highest average rent for a two-bedroom apartment — at $1,071 — followed by Victoria ($900), Fort St. John ($894) and Kelowna ($881).

A recent CB Richard Ellis report said Lower Mainland apartment buildings have maintained their strong values but the U.S. credit crunch caused the number of Lower Mainland apartment sales to fall to 24 transactions during the first quarter this year, from 54 a year earlier.

Macdonald Commercial Real Estate Ltd. broker David Goodman said the stability of the Lower Mainland apartment market has attracted many new buyers but agrees sales are down.

“Apartments probably carry the least risk of all real estate commodities,” he said. “Hotels swing back and forth and industrial properties are feast or famine … A lot of investors like the stability of apartment investments.”

Goodman said an east Vancouver apartment valued at $122,000 a suite a year ago now carries a price tag of $144,000 a suite.

“Prices have not dropped off, but sales volumes have,” he said.

© The Vancouver Sun 2008

Province

OTTAWA — The outlook for construction activity brightened in May with the value of building permits jumping 14.5 per cent to the highest level in six months, Statistics Canada said yesterday.

Contractors took out $6.4 billion worth of permits in April “as construction intentions rose in all provinces and in both the residential and non-residential sectors,” the federal agency said.

The surge in building permits comes after a 4.6-per-cent drop the previous month, and was above analysts’ expectations of a 0.5-per-cent increase in April.

The residential sector saw a 13.4-per-cent rise in permits to $4 billion, while the value of non-residential permits increased 16.5 per cent to $2.4 billion, with the biggest gains in Ontario, B.C., Alberta and Quebec.

“The fact that all of this increase came from the volatile multi-units component does suggest that some give-back in the coming month,” said Millan Mulraine, an economics strategist at TD Securities.

© The Vancouver Province 2008

 

Monthly rate for a two-bedroom in B.C. climbs above $900

Paul Luke
Province

Strong demand for apartments across B.C. and limited rental construction are pushing rents higher, a new survey by Canada Mortgage and Housing Corp. shows.

B.C. accounted for four of five Canadian cities with the lowest overall vacancy rates, according to the CMHC rental survey released yesterday.

The upshot of B.C.’s tight rental market is that the average monthly rent for two-bedroom apartments in the province rose to $921 in April, 2008, from $893 a year earlier.

At $1,071, Vancouver has Canada‘s third-highest average monthly rents for two-bedroom apartments, just behind Toronto‘s $1,075 and Calgary‘s $1,096, CMHC said.

And at 9.1 per cent, Abbotsford posted the nation’s fourth highest year-over-year rent increase for two-bedroom apartments in existing structures.

B.C.’s healthy labour market has played a major role in boosting vacancy rates, said Carol Frketich, CMHC’s regional economist.

“Above average job growth, very low unemployment rates and people moving to the region are a few of the factors behind the trend to lower vacancy rates,” Frketich said.

“The widening gap between the cost of home ownership and the cost of renting, and delays in completions of condominiums, are also adding to rental demand.”

Victoria and Kelowna had Canada‘s lowest vacancy rates for all apartments at 0.3 per cent each in April, CMHC said.

The Sudbury area’s was 0.7 per cent, while Vancouver and Saskatoon each had 0.9 per cent.

B.C.’s average vacancy rate for two-bedroom apartments edged upwards to 1.6 per cent from 1.4 per cent a year ago.

“There is some relief for renters looking for two-bedroom apartments, although vacancies remain very low,” it said. “Larger apartments are becoming more difficult to find.” The vacancy rate for units with three or more bedrooms stood at 1.3 per cent in April.

Nationally, vacancy rates for all apartments moved down to 2.6 per cent in April from 2.8 per cent a year ago, as resilience in the Canadian economy continued to drive demand for rental accommodation.

“The Canadian economy remains very supportive of strong demand for both ownership and rental housing thanks to solid job creation and healthy income gains,” CMHC chief economist Bob Dugan said.

“High levels of immigration and the increasing gap between the cost of home ownership and renting continue to drive rental demand in 2008. These factors have put downward pressure on vacancy rates over the past year.”

© The Vancouver Province 2008

 

debt soars; Canadians stretching loans over longer time, StatsCan says

Gillian Shaw
Sun

The dream of home ownership is a reality for more Canadians than in a generation, but so is the increasingly sober reality of soaring debt levels.

And we are stretching that debt out over longer timelines, to the extent that a growing number may never pay off their mortgages.

Home ownership across the country is now at its highest level since 1971, according to a report from Statistics Canada released Wednesday. About two-thirds of Canada‘s 12.4 million households own their home.

The report also shows that British Columbians are paying the highest proportion of their income among all Canadians to housing costs, as nearly a third are spending more than 30 per cent of their income to keep a roof over their heads.

More than one-third of the new mortgages being taken out in Canada are now amortized for more than 25 years, a portion labelled by one expert as “phenomenal” for a relatively new mortgage product, and the expectation is that the percentage for B.C.’s homebuyers would be at least that high.

“From the fall of 2006 through the fall of 2007, 37 per cent of all new mortgages in Canada were for amortizations longer than 25 years,” said Jim Murphy, president and chief executive of the Canadian Association of Accredited Mortgage Professionals. “Of all the mortgage products that have been introduced, the ones longer than 25 years are the most popular.

“Thirty-seven per cent is quite high. It is phenomenal for a product that is relatively new.”

Among all outstanding mortgages last year, some nine per cent were pegged with payoff dates stretching more than 25 years all the way to 40 years.

“That number will obviously increase every year,” said Murphy.

The embracing of the 25-year-plus mortgage — which federal Finance Minister Jim Flaherty recently cited as a concern, and a trend he said the government is watching — comes at a time when British Columbians are already paying the highest proportion of their income among all Canadians to housing costs, according to StatCan’s report.

Across the country, the percentage of Canadian homeowners who have a mortgage is at a 25-year high, with almost six out of every 10 homes mortgaged.

In British Columbia, the 57.6 per cent of owners who have a mortgage is close to the national average of 57.9 per cent, but the financially beleaguered B.C. residents have the highest percentage of households shelling out more than 30 per cent of their income on shelter.

High home prices in B.C. are to blame.

“British Columbia has always had the highest housing prices in Canada,” said Murphy. “That would lead the province to have the highest average mortgages and it is not a surprise that British Columbians would have a high percentage of their income going to mortgage or shelter costs because they have the highest housing prices in the country.”

Murphy said he expects British Columbians share the national penchant for longer-term amortizations.

“I don’t think British Columbia would be much below that 37 per cent,” he said.

High home prices here make the lower payments of the longer amortization, which comes with considerably higher interest costs over the life of a mortgage, appealing particularly for first-time buyers trying to get into the market.

“That is one of the reasons these products have come in,” said Murphy. “It deals with affordability.

“There are also some people with a lot of equity in their home who for some reason want to lower their payments.”

Among all households, almost 29 per cent of British Columbians are spending more than 30 per cent of their income keeping a roof over their head, according to statistics compiled from the 2006 census. Nationally, 24.9 per cent of households were in that category.

B.C. renters fare the worst at 44 per cent, while 22.8 per cent of B.C. homeowners, up from 20.7 per cent in the 2001 census, are spending more than 30 per cent of their income on shelter costs that include mortgage payments, property taxes, condominium fees and utilities. That compares to 17.8 per cent of homeowners across Canada who see more than 30 per cent of their income go to housing.

The B.C. numbers outstrip the national average of 24.9 per cent by a wide margin and are higher than five years ago, when 28.6 per cent of households in B.C. spent 30 per cent or more of their income on shelter.

Vancouver came second only to Toronto in the proportion of households spending 30 per cent or more of their income on shelter among census metropolitan areas.

Susan Teakles, a market analyst with CMHC, said an increasing number of households are paying more than 30 per cent of their income towards housing.

“In Canada, it is up by almost 12 per cent and in B.C. it is up 9.4 per cent and most of that has come from the home ownership side,” she said.

Among homeowners, there was about a 25-per-cent increase in paying more than 30 per cent toward housing costs and it was close to that in B.C.

In Vancouver, 65 per cent of people own their own home, a 15-per-cent increase in the five years between the 2001 and 2006 census findings.

Not surprisingly for a province that in its most recent real estate stats found the average price of a detached house in Greater Vancouver to be $771,250, B.C.’s metropolitan areas rank as the condo leaders in Canada.

Condo ownership accounted for 31 per cent all home ownership in Vancouver in 2006, for 23.8 per cent in Abbotsford, 21.2 per cent in Victoria and 21.1 per cent in Kelowna.

Condos also saw the largest increase across Canada of owners spending 30 per cent or more of their income on shelter. In 2006, 37.5 per cent of condo owners spent 30 per cent or more compared to 32.3 per cent five years earlier.

The dream of burning the mortgage appears to be a more elusive one for Canadian owners, with the percentage of mortgage-free owners declining between 2001 and 2006, bucking an expectation that aging baby boomers would be paying off their mortgages by now.

“The share of owner households with mortgages has not been at such a high level in Canada since 1981,” the report said.

“This was when baby boomers were entering the housing market.

“With the aging of the population and with baby boomers entering their 60s, when mortgages traditionally are paid off, the percentage of households with mortgages could be expected to decline and the percentage that are mortgage-free could be expected to rise.

“Instead, the reverse occurred between 2001 and 2006.”

The report suggested most of the increase in the proportion of mortgage holders could be explained by renters buying, with some of the increase due to homeowners taking on new mortgages or adding to existing ones, perhaps to finance renovations or other large purchases.

Another factor could be couples breaking up and creating the need to purchase a second residence or two smaller or less expensive ones.

© The Vancouver Sun 2008

B.C. leads nation in home ownership

Wendy McLellan
Province

It may cost them a whopping chunk of income, but B.C. residents are more interested in buying real estate than renting someone else’s, a Statistics Canada report says.

Almost 70 per cent of B.C. households counted during the 2006 census own the place they live in, giving the province a higher number of home owners than the national average, according to the report released yesterday.

B.C. also posted the largest drop in renters in Canada in the five years since the previous census.

“There’s a lot of talk about high home prices, but they haven’t stopped people from buying,” said Tsur Somerville, director of the University of B.C.‘s Centre for Urban Economics and Real Estate and an associate professor at UBC’s Sauder School of Business.

With high housing prices, condominiums have become the dwelling of choice in urban areas, and B.C. has Canada‘s highest rate of condo ownership, the report said.

In Vancouver, condo owners accounted for about 31 per cent of households in 2006.

In Abbotsford, nearly 24 per cent of home owners lived in their own condos, while about 21 per cent of households in Victoria and Kelowna own the condos they live in.

“I suspect there are more young people trying to buy — and they’re buying condos,” Somerville said.

“I’m guessing that with real-estate prices rising so quickly, they want to get into the game and they’re probably willing to live in a smaller unit than they would if they were renting.”

But owning our own homes comes at a price.

In B.C., 29.1 per cent of home owners spent more than 30 per cent of their income on shelter in 2006.

That’s up from 28.6 per cent five years earlier and well above the national average of 24.9 per cent.

Nearly one-third of Vancouver home owners spent more than 30 per cent of their income on housing costs, second only to Toronto as the city with the highest proportion of income spent on shelter.

Nationally, Canada‘s home ownership rates in 2006 were the highest since 1971, with 68.4 per cent of households owning their own place, according to StatsCan.

More than one-quarter of the increase is due to Canadians buying condos. With lenders offering mortgages with longer amortization times and little money required for down payments, people can readily enter the real-estate market.

“Overall, home ownership is a positive factor,” Somerville said.

“It does affect mobility to some extent, but it forces people to get on the path of wealth accumulation faster and it increases neighbourhood stability.”

© The Vancouver Province 2008