Media will do what it does, the banks will do what they do and buyers and sellers will do what they do, buy and sell
PETER SIMPSON
Sun
Hey, folks, do yourselves a huge favour and quit freakin’ out over the daily media reports on the topsy-turvy global economy.
I mean it, stop right now or, I swear, your head will explode.
Toronto-based analysts are elbowing each other out of the way to gain position, trying to capture the attention of a perked-up national media: “Pick me, pick me — I have a gloomier story to tell.”
The media, having had mostly bullish economic news to report until recently, are eating it up. I can sense the perverse glee in the tone of some stories, particularly the headlines.
Then again, this should surprise no one. Reports from the pin-strippers on Wall and Bay streets are juicy, heart-racing mind bombs — stuff that scares the bejeebers out of everyone, at all income levels.
A lifetime ago, I was a columnist for a Toronto daily newspaper with a story-positioning credo — “if it bleeds, it leads” — meaning the gorier the detail, the better the chance for front-page placement.
With so much economic bloodletting globally, a wise investment opportunity might be in tourniquet manufacturing.
Everyone — homeowners, builders, realtors and industrywatchers — can generally agree that real estate has taken us all on a dizzying uphill ride over the past half dozen or so years.
During a heady three-year span, from 2005 to 2007, real estate values climbed nearly 45 per cent in the Lower Mainland. Enormous equity gains were realized by homeowners, builders expanded operations significantly and busy realtors pocketed more in sales commissions than ever before.
Governments, too, took their heaping servings, and second helpings, from the gravy boat.
For the provincial government, windfalls from unprecedented levels of tax revenue, including the cash-cow property transfer tax; for the federal government, buckets full of GST remittances from the purchase of new homes; and for regional and municipal governments, an expanding — and lucrative — menu of development charges and “voluntary” contributions to citymanaged initiatives.
The flip side to this story was a challenging affordability gap as first-time homebuyers had a devil of a time taking that all-important first step onto the property ladder.
With the cost of development land climbing to extraordinarily high levels, an effective industry response to housing affordability was the introduction of space-efficient apartments and townhouses. This year, for example, 80 per cent of all Lower Mainland housing starts have been multi-residence.
Many projects sold out in a matter of hours. People camped out for days. If the guy or gal at the front of the line didn’t buy, behind them were plenty of people eager to plonk down their deposit money.
Yes, there was no shortage of impulse buying, but with the economy now front and centre on the world stage, the panic has been taken out of the purchase, and buyers can take their time looking for a home that matches their needs and income.
Recently, the developer of a $350-million, 1,400-residence condo project experienced financing problems, sought relief from creditors and is trying to attract a new financial partner to complete the Whalley project. Instead of hiding his challenges, the developer swiftly issued a one-page news release.
In Victoria, a $1.4-billion residential project has been put on hold until more is known about how the global economic uncertainty will impact that region’s housing market.
In Kelowna, a similar situation emerged. Will more planned projects not yet marketed be placed on the back burner? Probably.
Banks are exercising caution these days, and being vigilant in how they assess a development’s economics. I suspect this level of prudence will be the norm for some time. None of this is sinister, and nor are lenders being overly reactionary. It is simply sound business practice and totally expected.
Be thankful the Canadian banking system, with its conservative mortgage-lending practices, is solid. In fact, the World Economic Forum rates Canada’s banking system the most sound in the world.
If buyers are concerned about the completion or delivery status of their new homes, particularly pre-sale condominiums, they should contact their builders for updates and assurances.
Chances are, there will be absolutely nothing to fret over, but peace of mind is a wonderful tonic. In my view, the issue is not so much a warning of buyer beware, as it is buyer be aware.
Prospective homebuyers should be flocking to established core developers and builders who have experienced the peaksand-valleys cycles of housing markets over the years, and who enjoy long-standing relationships with Canadian blue-chip lending institutions.
I spent time at the Vancouver Home & Interior Design show at BC Place last week and spoke with some of the nearly 40,000 attendees who were eager to learn what’s new on the home front. Not one expressed serious personal concerns about the economy. Instead, the people, who represented virtually all demographic cohorts, were fixated on how they could improve their living environments. I took this stance as a positive attitude that can only help to boost overall confidence.
A builder friend attended a recent house party. A guest, trolling for empathy, lamented he should have sold his home six months ago. The builder responded, “And what, used the money to buy stocks?”
A home should not be treated like some kind of pork-belly futures. The best long-term investment you can make for your family is a home, so don’t send yourselves into a tizzy checking out its value every 20 minutes.
