‘Decade-long boom is over,’ be prepared for declining values

Sun

VANCOUVER – Homeowners in the majority of Canada‘s urban centres should be prepared for the possibility of housing price declines, according to a news release by researchers at the Sauder School of Business at the University of British Columbia.

Their study shows that with the exception of Toronto and Edmonton, houses in Canada‘s major cities are overvalued, priced up to 25 per cent higher than they should be to balance with rents – given interest rates, holding costs and historical rates of price appreciation.

“The decade-long boom in Canadian markets is over,” says Tsur Somerville, the study’s lead author and Sauder’s Real Estate Foundation of B.C. Professor in Real Estate Finance.

Titled Are Canadian Housing Markets Overpriced?, the study observes that housing affordability is a severe problem in some Canadian cities, limiting the ability of markets to continue to rise.

“House prices can correct through rapid declines, through longer and slower declines, or by staying essentially flat for a long period,” says Somerville, in the release.

Canada‘s more conservative lending practices have prevented the speculative excess and severe downturn experienced in U.S. markets. However, the study warns that the potential for price declines is greatest in cities that have a large supply of unsold inventory or a mismatch between the number of units and the number of households ready to occupy them. Recent data suggests that Vancouver is the most at risk in this regard.

To analyze whether housing prices are overvalued, the researchers looked at current house prices in nine major Canadian cities. They compared these prices to their equilibrium or balanced market levels, which is derived from the relationship between house prices and rents in a market when compared with cost of investing in housing. The study finds:

 –  Only in Toronto are prices in balance with rents

 –  In Halifax, Montreal, Ottawa, Regina and Winnipeg prices would need to drop by at least 20 per cent to be in balance

 –  Equilibrium in Calgary and Vancouver requires a 7 to 11 per cent drop in prices

 –  In Edmonton prices are actually below equilibrium, by 8 per cent

USA Today

WASHINGTON (AP) — The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.

Officials announced that the executives of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.

Treasury Secretary Henry Paulson says the actions were being taken because “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe.”

The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.

“A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance,” Paulson said.

Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.

The Federal Reserve and other federal banking regulators said in a joint statement Sunday that “a limited number of smaller institutions” have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were “prepared to work with these institutions to develop capital-restoration plans.”

The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

Copyright 2008 The Associated Press. All rights reserved

 

Living beyond six-star service

Sun

With occupancy of the Living Shangri-La homes scheduled to begin in the fall, luxury-hotel residency is a Vancouver story awaiting a reporter. A trip to Hong Kong by Vancouver broadcaster and reporter Claudia Kwan, a young woman who also knows fine real estate and fine dining, put her front of queue for the task. Her report follows:

I drag myself off the plane feeling, and probably looking, like a slack-jawed zombie, wishing the man sitting next to me on the 14-hour flight between Vancouver and Hong Kong had kept his shoes on and had supplied everyone around him with earplugs.

After conking out in air-conditioned comfort on a shuttle to the hotel, I recover enough basic humanity to smile back at the doorman snappily opening the front door of the Island Shangri-La in the posh Central neighbourhood of Hong Kong.

The surrounding mall has some seriously high-end shopping, but all I can think of is a bed. Cheerful faces and greetings are everywhere as I’m ushered smoothly through the check-in process, having declined bellhop service for my battered backpack.

I had sent in a wish list in an e-mail before my arrival, and lo and behold, everything has been set up.

First is what ends up being a three-hour lunch at the Summer Palace, one of the five restaurants in the hotel. The stereotype of Chinese cuisine would have you believe it’s oil- and MSG-centric, but a thorough sampling of dishes reveals light and interesting combinations of flavours and textures, and unusual treats like delicately deep-fried ox brisket, duck tongue in abalone sauce and scallops with shrimp mousse in crab “coral” sauce (also known as the rich lining of a crab shell.)

On the morrow, I can have French, Japanese, or a swirl of other cosmopolitan cuisines as my whim dictates, or room service round the clock with one phone call. Through my stay, the very observant staff will try to anticipate every need I have before I know I have it. For example, they notice I leave a mango behind in the fruit basket (a little too messy for a klutz like me in a fancy hotel). The basket the following day doesn’t contain any. It’s both impressive and a little unsettling for someone who’s not used to being the object of so much attention.

After a nap, it’s off for an hour-long massage, where I’m told I have a lot of toxin build-up. Sorry about that. Then a long luxurious soak in the tub while watching television, and it’s off to sleep in a king-size bed under crisp cotton sheets.

This is the kind of six-star service that goes beyond being well taken care of. It could be termed no-brainer living, and it’s what people will begin experiencing in November shortly after moving into the Living Shangri-La development in Vancouver. The hotel is scheduled to go into full operation on Jan. 24, 2009.

The hotel chain was named after the paradise portrayed in James Hilton’s novel Lost Horizon, and peace, calm, and happiness are what they are striving to impart to guests, states Stephen Darling. The regional vice-president for Shangri-La Hotels and general manager knows there is stiff competition coming for luxury hotel living in the likes of the Fairmont Pacific Rim, the Residences at Ritz Carlton, and the Private Residences at Hotel Georgia, all scheduled to open within the next three years.

“Each hotel brand evokes a different feeling, and specializes in different services,” Darling writes in an e-mail. “I think of Shangri-La as a brand that builds on our Asian roots of fine service and hospitality. Asian hospitality is seen globally as perhaps the most thoughtful and gracious in the world today. It evokes both humble pride and a true sense of welcome. It will actually be the people — our staff — who set the Shangri-La experience apart from our competition.”

Which may prove to be true, but there’s nothing humble about the luxury hotel-living concept as a whole. Uber real estate marketer Bob Rennie (involved with selling all of the above projects except Hotel Georgia) says there’s a strong contingent of international buyers, but there’s also strong local representation from Vancouverites trading in addresses in Shaughnessy, on Point Grey Road, or Bellevue in West Vancouver.

What do they get? A signature address with “name-drop” factor on a world scale — not just a regional one — and security on a day-to-day basis and on their purchase as a whole, he says.

With doormen, concierges, housekeepers galore, “these could be considered the finest seniors’ homes on the planet,” Rennie declares. “If my mom lives at the Shangri-La, I know that there’s extra eyes watching her. I know if she’s having a bad day, she can order a cheeseburger.”

Others want a second home with no extra thinking required. Rennie says in addition to the convenience of having hotel staff and services just moments away, there are implied guarantees when one buys into such well-known brands.

Failed condominium projects have grabbed headlines recently in Vancouver, but he believes that will never be an issue in projects attached to such high-end hotels. “They will not allow their brand to be tampered with,” Rennie says adamantly.

The developers own the hotels themselves, while paying huge fees for management and brand association, so Rennie says they also have a vested interest in making sure the people who live above the hotel are happy.

That means the wireless television will work as planned, and the custom millwork won’t have any dings in it when it’s moved in. The limo service will be prompt, the spa staff pleasant, the gym equipment will never be out of order, and the pool will always be the right temperature.

In addition to the hefty property purchase prices themselves, there are hefty levies involved in living in luxury. Condo fees are likely 150 to 200 per cent of what you would pay for a similarly sized unit in a different building, confirms Rennie. (Residents will get a preferred rate on spa services at the Shangri-La, but if they run up a hefty tab at the restaurant, it’s entirely their responsibility.) Fees on that scale translate to entire mortgage payments for regular folks.

“This lifestyle is elitist, I can’t even couch that,” laughs Rennie. “When you look at people who want this, they’ve been paying that $500 and $700 a night for that luxury hotel brand for a night or a week. This way they never have to leave.”

I had a peek at paradise, and I was happy to return to normality. But then it’s clear that permanent residency of this sort is not meant for me.

© The Vancouver Sun 2008

 

Keeping a bit of the past for the future

Bob Ransford
Sun

Vancouver‘s citizen-based City Planning Commission has been pondering an interesting question for the last year or so. How does Vancouver adapt to change?

Old cliches suggest that today’s pace of change is accelerating and that we’ve seen more change in our relatively short lifetimes than has occurred since the beginning of time. That may or may not be the case.

However, we do know that there are a number of drivers of change that seem to be converging today — economic change, demographic change, climate and environmental change. The sudden dose of reality that comes with this convergence of change begs the question: is there a better way to build a city so that it is more resilient to change over time?

Rome is more than 2,700 years old. London is more than 1,900 years old.

New York is North America‘s oldest big city, at just over 380 years old.

St. John’s, Newfoundland, is Canada‘s oldest continuously inhabited European established settlement and the oldest English established settlement in North America, founded 467 years ago. Barely a century and a quarter have passed since Vancouver became a permanent place for new-world human settlement.

The great cities of the world were designed and built using timeless architectural and planning principles that have allowed their buildings and public spaces to adapt so that they have remained relevant as cultural and social trends changed — many of those trends evolving over centuries.

Most of Vancouver‘s built form — the buildings, roads and man-made public spaces — is relatively new. Few of the small collection of buildings constructed around the time of Vancouver‘s birth remain today. Most have been adapted for modern re-use.

It is hard to imagine how most of our modern-day buildings might be adapted over time to meet future needs. For example, can you imagine the many highrises that sit atop townhouse-wrapped podiums in Vancouver‘s downtown south being transformed into buildings that might accommodate light technical manufacturing or even educational institutional uses 100 years from now?

The way we design and construct buildings today, it is hard to imagine those structures will still be standing a century from now.

One possible direction that Vancouver could head in addressing the widespread concern about housing affordability and choice is to rethink the form and layout of Vancouver‘s single-family neighbourhoods and their limited building types to adapt to the growing need for change.

In considering such a direction, we need to ask questions, like how can a neighbourhood adapt to meet changing societal needs, like aging in place?

How can we create more alternative transportation choices and provide more places of work close to home ?

The 13 citizens who sit on Vancouver‘s Planning Commission, which includes me, have been attempting to engage the community in a discussion about how Vancouver might become a “city built for change”, embracing ideas about more adaptable buildings and public spaces.

The commission has developed three unique events aimed at engaging a broad group of stakeholders in an informed discussion.

This input will be incorporated into the commission’s draft “Change Charter,” which will be presented to city council.

The third and final event of the commission’s series takes place Sept. 18 and 19.

Highlighting this session is a public presentation by British professor Robert Kronenburg, author of Flexible: Architecture That Responds to Change and chair of architecture at the University of Liverpool School of Architecture.

Prof. Kronenburg will open this two-day exploration of adaptability with a public lecture on flexible architecture and city building on Thursday, Sept. 18 at 6:30 p.m. at the HR MacMillan Space Centre at 1100 Chestnut St. in Vancouver.

Kronenburg’s talk is sure to stimulate some thoughtful and lively discussion about how a city as young and livable of Vancouver might adapt to change so that we become a timeless city in the future.

Bob Ransford is a public affairs consultant with CounterPoint Communications Inc.

E-mail him at: [email protected]

© The Vancouver Sun 2008

 

Morgan Crossing value pledge signals both buyer caution and developer certainty, exec writes

Jim Nesbitt
Sun

There is no denying that homebuyers in the Lower Mainland have recently become more cautious. The current market condition is proving that, in times of uncertainty, it takes more than top-of-the line fixtures and a decent location to inspire the purchase of a home.

Today, developers need to think beyond traditional single-purpose condo developments. Homebuyers are looking for more than just a place to live. They are looking for a community. They want to live with everything at their doorstep.

Take, for example, Morgan Crossing, a new lifestyle centre that is being developed in south Surrey. As the developer of this project, Larco Investments had a vision to create a neighbourhood from the ground up. The concept is a walkable community, where people can live and enjoy entertainment, leisure, recreation, shopping, and dining amenities, all within a few steps from their front doors.

We know that at Morgan Crossing we are creating more than a collection of high-quality condos. We are creating a vibrant, dynamic community. That is a compelling argument, but how do we assure homebuyers who might be hesitant about where the market is headed?

It’s simple. We are so confident in what we are creating at Morgan Crossing, that we are guaranteeing the value of our condominiums through our “Guarantee My Property Value” program. It is an unusual and bold step and is not something that has been done before in the Lower Mainland. And we can only do it because we are certain of the high quality of the homes we are building and the community we are creating.

What we are offering is straightforward. Before Morgan Crossing buyers complete the purchase of their homes, an accredited real estate appraiser will assess their value. Should the value have decreased upon completion, we will deduct the decreased amount from the purchase price by up to 10 per cent.

In addition to the value guarantee offer that we are making, we have introduced two other incentive programs for potential homebuyers, who will be able to choose one of the three incentive programs being offered.

The “Mortgage Payment Assistance” program subsidizes mortgages at Morgan Crossing, allowing buyers to save almost 50 per cent of their mortgage payments for the first 24 months. Subsidized monthly mortgage payments start as low as $647 for a one-bedroom suite, $830 for two bedrooms and $962 for a three-bedroom suite.

Alternatively, buyers can choose the “Extra Parking Space” program. This program entitles the buyer to a second parking space, which adds an additional $15,000 to the value of the home.

Once completed, there will be approximately 60 shops and services on site, including restaurants, cafes, brand name fashion boutiques, Thrifty Foods, London Drugs, Best Buy and the Steve Nash Sports Club.

In addition to the retail experience, Morgan Crossing offers numerous community gathering spaces and nearby walking trails and green spaces.

It’s true that as a developer we have become creative with the kinds of incentive programs we are offering to potential homebuyers at Morgan Crossing. But, in fact, these incentives are just icing on the cake. We are creating a different kind of community at Morgan Crossing, and that is the greatest incentive of all.

Jim Nesbitt is vice-president of Larco Investments Ltd.

© The Vancouver Sun 2008

 

Lumen’s lures: Much to stay home for, much to go out for

Sun

LUMEN

Project location: Kitsilano, Vancouver

Project size: 62 apartments

Residence size: 466 sq. ft. – 808 sq. ft.

Prices: studios, from $369,900; 2 bed, from $599,900

Sales centre: 1679 West Third

Hours: noon – 6 p.m., Sat – Thu

Telephone: 604-731-9199

Web: lumenvancouver.com

Developer: Bucci Developments

Architect: Hywel Jones Architects

Interior design: Portico Design Group

Occupancy: August, 2009

– – –

With Granville Island, Kitsilano Beach and the shops and restaurants of West Fourth steps away, the Lumen location defines prime location.

Certainly, location was the main draw for buyer Sean Courtenay, a 34-year-old construction manager.

“It’s an up-and-coming area and the product looked good. The finishes were well done and the layout was a good one. I’m not a big fan of the U-shaped kitchen, which most condos have. This one is linear.”

Courtenay, the owner of three previous Vancouver condos, should know what works from his first-hand experience living in different projects. His last condo was in Kitsilano, but after selling that a year ago he’s been living at his parents’ condo in downtown Vancouver at Robson and Cambie.

Wanting to get back to Kitsilano, Courtenay has now bought a two-bedroom at Lumen.

The 62-condo project is located in a mostly commercial area on West Third Avenue, between Burrard and Fir, but Bucci Developments was able to make a deal with the city to create Lumen, says MAC Marketing Solutions’ Cameron McNeill, organizer of the Lumen sales and marketing campaign.

“The city definitely wants the commercial area protected,” says McNeill. “It’s a great location but the city isn’t allowing much residential in that area. It’s one of the few chances to be close to Granville Island, which is just a couple of blocks away.”

McNeill explains the developer, who owns the adjacent commercial property to Lumen, was able to “dedicate it in perpetuity” as commercial in exchange for the right to create the residential project next door.

The location is going through a revitalization and its residents will have easy access to the sea wall and transit.

“We’ve had a lot of interest from people who want to be in the heart of Vancouver. But they want a quieter area. It’s a nice alternative to the Yaletown experience with all the hustle and bustle and nightclubs at your doorstep.”

Most of the buyers (half of the condos have been sold to date) have been young professionals and mature buyers.

“They are looking for access 24/7 to the things they do — their work and play. It’s all accessible from their location.”

The buyers also share a sense of being “design and fashion forward conscious,” says McNeill.

And to that end, Lumen is offering high-end, incredible interior finishings, including a Bosch stainless steel appliance package, trendy wood and lacquer cabinetry with soft-close detail and custom cutlery drawers, stone countertops and glass panel backsplash.

“It’s almost a loft feeling,” says McNeill.

“Most of the spaces are open spaces. It’s probably more of the open spaces and the linear kitchen layout that gives it that loft vibe.”

Buyers will also have access to the rooftop patio with barbecue and stunning views of downtown.

And with today’s emphasis in new homes on going green, the developer has opted to make the project geothermal.

According to its marketing brochure, the geothermal heating could reduce the annual heating bill by $400 to $800 compared to natural gas and $700 to $1,800 compared with heating oil and propane.

Those figures are based on its heating system alone. The geothermal system also doubles as an energy efficient air conditioning system during the summer.

© The Vancouver Sun 2008