Speculative activity also declining, but other market factors holding up despite economic uncertainty

Brian Morton
Sun

Housing starts and new home prices in Metro Vancouver are beginning to head south at a time when speculative activity in the market is declining significantly, according to a local housing analyst and two surveys released Monday.

Preliminary figures from Canada Mortgage and Housing Corporation, Canada’s national housing agency, indicate that housing starts in Metro Vancouver stood at 1,846 homes in October, a slight decline compared to September.

However, year-to-date housing starts are about four per cent above 2007 figures.

As well, a Statistics Canada new housing price index indicated that Vancouver dropped 0.1 per cent in September compared to August, and rose just 1.4 per cent from September 2007 to September 2008 — below the national average of 2.1 per cent over the same period.

CMHC market analyst Richard Sam said in an interview Monday the numbers indicate Metro Vancouver is not doing too badly, considering the climate of economic uncertainty.

He said that despite a softening resale market, developers are still going ahead with projects that have been in the pre-construction stage.

“Right now, I think it’s been okay in terms of jobs created and personal income growth,” said Sam. “In terms of October, we see the actual numbers as a solid figure. Any time you reach over 1,200 units for the month is a good sign.”

Sam said a lot of projects won’t be completed until late 2009 or 2010, when CMHC expects the market to pick up again. “And the number of construction jobs have actually been pretty solid.”

The CMHC report also indicated that housing starts in the Abbotsford area for the month declined by nearly two-thirds from the number started in October 2007 (71 in 2007 compared to 29 in 2008). However, for the whole year, starts in the Abbotsford area are up 26.5 per cent, from 976 to 1,235.

A housing analyst also said in an interview Monday that speculation is dropping off in Metro Vancouver.

“We’ve seen a decline in the number of concrete condominium sales in this quarter compared to 2007,” said Jennifer Podmore, managing partner of Vancouver-based MPC Intelligence, a research group that tracks and analyses the new residential development market.

“That tells us that speculative activity has declined significantly in the last year. But that’s also quite good. It means homes now being bought are for people who intend to live in them. They’re real homes for real people.”

Podmore said the lower speculative activity is one reason for the levelling off in housing starts, “which we see as a good thing because it’s keeping the equilibrium of supply and demand in check.

“We haven’t seen any dramatic declines in value,” added Podmore. “Those who have to sell immediately are selling for a discount. That’s where prices are coming off. But most people are adopting a wait-and-see [attitude] and they’re getting their price.

“We’re seeing a market that’s not a buyer’s or a seller’s market.”

Podmore said the number of sales are down from 2007, but there are some bright spots, or potential bright spots, in the coming months.

She said the market is relatively strong in the Fraser Valley and “we’re also seeing the number of townhouse sales this quarter compared to last year holding steady.”

Podmore said there’s not much product available in Squamish now and that sales activity should increase there next year.

“They’re about to get a brand- new highway and they’re centre ice in terms of the exposure they’re about to get [with the 2010 Olympics].

“[The highway upgrade] brings Squamish a lot closer and makes it just as viable a commute as Langley or Surrey.”

Peter Simpson, chief executive officer of the Greater Vancouver Home Builders’ Association, also said in an interview that the CMHC’s year-to-date statistics bode well for the industry.

“There were 17,510 housing starts [in Metro Vancouver], which are up four per cent over last year. They’ve generated a tad over 49,000 full-time jobs for the year.”

Simpson said that if the pace continues, Vancouver will achieve its highest number of starts since 1993.

“That’s the silver lining in all this negative news. A lot of projects are going forward.”

Simpson said starts are expected to drop to about 16,500 in 2009.

“We’ll slide somewhat next year, but the numbers are still healthy in a historical context.”

Meanwhile, StatsCan reported Friday that a decline in construction and manufacturing jobs pushed B.C.’s unemployment rate up half a percentage point in October.

B.C.’s jobless rate now stands at 5.1 per cent, the highest since December 2006, and represents 8,200 fewer full-time jobs than were available in September.

The construction sector took the biggest hit with 6,200 fewer jobs than a month earlier — a 2.8-per-cent decline.

Across B.C., there were still 16.1 per cent more construction jobs compared to October 2007. In the Lower Mainland, 17.8 per cent more people were working in construction compared to October 2007.

© The Vancouver Sun 2008

Borrowers pay more for the privilege through higher interest

Derrick Penner
Sun

The federal government officially closed the door on no-money-down mortgages Oct. 15, but exceptions remain that allow buyers to effectively finance 100 per cent of a home purchase.

Federal finance officials announced the changes in July, to take effect Oct. 15, banning 100-per-cent mortgages and loans with 40-year payouts. They called the move “a responsible and measured approach,” to “reduce the risk of a U.S.-style housing bubble” in Canada.

Except Invis mortgage broker Paula Siemens counts three ways in which buyers can still get 100-per-cent financing or skirt the 100-per-cent rule by borrowing a down payment or taking so-called “cash back” mortgages.

The U.S. bank Wells Fargo offers 100-per-cent mortgages, Siemens said, and can do so through brokers because it self-insures those loans.

The maximum amount Canadian lenders can now advance on a mortgage is 95 per cent of a home’s value to still qualify for mortgage insurance, which is guaranteed by the federal government.

However, Siemens said home buyers can borrow their down payment — sometimes even on lines of credit or credit cards — and their mortgage will comply with the new federal rules as long as the actual mortgage is no more than 95 per cent of the home’s value.

David Gamble, director of public affairs for the federal department of finance, said in an e-mail exchange, that lenders have “flexibility in establishing their own standards on the source of a down payment.”

However, on these mortgages, Canada Mortgage and Housing Corp., Genworth and AIG will not insure the borrowed down payment, only the 95-per-cent balance of the mortgage.

Then, Siemens said, there are the cash-back mortgages that offer the borrower anywhere from four per cent to seven per cent of the home’s value as “cash back” on closing

Scotiabank bills its option as a “free down payment” mortgage for borrowers who haven’t had a chance to save the minimum five per cent.

Spokespersons for the TD Bank (which offers a four-per-cent cash back mortgage) and RBC Financial Group (which gives five per cent to seven per cent back) both said the cash is supposed to be used for closing costs or furnishings and they specifically will not allow borrowers to use the cash-back as a down payment.

“In the interview process, it’s very important to us to ensure those [down-payment] funds have come from your own resources and are not borrowed funds,” Kevin Lutz, RBC’s B.C. mortgage manager, said in an interview.

However, Siemens said it is not unheard of for a borrower to raise the five-per-cent down payment from family or friends, then use the cash back to repay the money.

And, as far as the federal finance department is concerned, if a cash-back program has the effect of leaving a loan-to-home-value of 95 per cent, “this would not be precluded under the new measures,” according to Gamble.

Siemens added that the cash-back options do come with a price: a higher interest rate that will be one or two percentage points over the discounted rate borrowers can obtain for other mortgage products.

David Yuzpe, vice-president of Real Mortgage Associates, another national mortgage broker, said the zero-down options still available have never been a big part of his business. They are probably only suitable for young professionals who haven’t had a chance to save for a down payment, but also have a very high credit score.

Yuzpe said there is a higher risk of borrowers walking away from 100-per-cent mortgages since they haven’t put any of their own money into the loans.

Siemens guessed that the last time she arranged a cash-back mortgage was seven years ago.

makes financial sense,” she said. “I would probably find a way for a client to work with family members [to come up with a down payment], because the difference in interest rates “is going to be a significant cost to them.”

© The Vancouver Sun 2008

Association predicts 7.8-per-cent decline in 2009

Sun

B.C. will see the nation’s steepest 2009 drop in the average residential home sales price, the Canadian Real Estate Association predicted Monday in its updated housing market forecast.

The association predicted a 7.8-per- cent decline next year in the average residential sales price in B.C., compared to a 2.1-per-cent decrease across Canada.

B.C. still has some of the most expensive housing markets in the country and saw some of the steepest price increases during the housing boom — to a point some experts believed to be beyond its equilibrium.

The association is also forecasting an 11.7-per-cent drop in sales activity in B.C. for 2009, compared to a three-per-cent drop across the country. Only Saskatchewan, with a predicted 13.6-per- cent drop, is expected to see a larger sales activity drop than B.C.

For 2008, national sales activity is expected to decrease by 12 per cent.

“Canadian economic growth is being sideswiped by financial market turmoil, slowing world economic growth and weaker commodity prices,” says Gregory Klump, chief economist with the association. “The question of whether Canada will avoid a technical recession is moot, growth will be slow enough that it will feel like a recession.”

The Ottawa-based group expects that fewer new listings next year will help stabilize the market, but not enough to stop prices from continuing to fall. The national average sale price is expected to fall by 2.1 per cent in 2009 with conditions in the housing market not likely to improve until 2010.

“Consumer confidence is being battered by downbeat headline news. Homebuyer sentiment has become very cautious, by contrast to the urgency to purchase in 2007. There are fewer buyers and they are taking longer to shop, so the pricing environment is very competitive. Unrealistically priced homes will sit on the market,” said Klump.

CREA president Calvin Lindberg said the U.S. market is much different, most notably because the Canadian market does not have the same oversupply of homes. “Canadians are definitely concerned by the economic news out of the U.S., and much of that news stems from distress in the U.S. housing market. Canadians should realize that Canada‘s economy and housing market are in better shape,” said Lindberg. “This means the downturn in consumer confidence will pass and when it does, housing demand will rebound, especially when they realize the window of opportunity to buy at reduced prices and at low interest rates will begin to narrow once economic growth shows signs of rebounding next year.”

© The Vancouver Sun 2008

 

Provincial leaders meet with Harper about economy

Jonathan Fowlie, David Akin, Andrew Mayeda
Sun

Premier Gordon Campbell was in Ottawa Monday trying to convince federal and provincial leaders to embark on a “major initiative” to build housing for seniors, first nations and the homeless.

“There are literally hundreds of thousands of construction workers across the country who we want to keep at work,” Campbell said after a meeting with Prime Minister Stephen Harper and Canada‘s provincial and territorial leaders.

“Housing to meet the challenges of an aging population, to meet the challenges of homelessness, and to meet the challenges of first nations communities would be a very strong economic package that we could put together.”

Held in advance of the G-20 meeting in Washington next weekend, Monday’s gathering was intended to allow provincial and territorial leaders to share their ideas and concerns about the economy. Alberta‘s Ed Stelmach, who was in Europe on a trade mission, was the only premier not to attend. Education Minister Dave Hancock attended in his place.

Calling the meeting “cordial and productive,” Harper said he was eager to hear what the premiers had to say.

“We did not agree on everything, but there were many common themes and I’m pleased that every one of our positions received a full and fair hearing,” he said.

Harper added that despite some differences, the leaders all agreed that investment in the country’s infrastructure is the best and fastest way to use public funds to help Canada avoid the worst of a global economic recession.

“We all agreed that we should see infrastructure spending accelerated. This will help support general economic activity,” he said.

“I am very confident that is going to occur over the next year.”

Campbell — who called for accelerated infrastructure spending in his economic update last month — said on Monday he pushed his housing idea as one way to spend that infrastructure money.

“One of the things that I suggested is we should look at a major initiative around housing,” Campbell said, adding he does not yet have any specific projects in mind.

“We’ve got the builders who can build these places now,” he added. “Let’s try and keep them busy.”

New Democratic Party finance critic Bruce Ralston said Campbell took the idea from the economic address B.C. NDP leader Carole James gave last month.

“He’s adopted Carole James’s initiative she put forward in her speech two weeks ago,” said Ralston.

“He’s been caught flatfooted so he’s scrambling around for ideas.”

New spending on housing projects was not part of the 10-point plan Campbell delivered during his economic update last month.

In its first three budgets, the Harper government set aside more than $37 billion in infrastructure spending.

While a portion of that money is already being spent on some projects, billions more are waiting for everything from building permits to federal bureaucratic approval.

“We’re committed to doing everything we can to expedite the paperwork,” Infrastructure Minister John Baird said in a telephone interview.

But provinces and municipalities need to do their bit as well, identifying projects and hiring designers and construction crews.

“We need accountability and we need to do our due diligence,” Baird said. “But we don’t want to take years to do this.”

© The Vancouver Sun 2008

 

Recession? Might as well be

Garry Marr
Province

OTTAWA –We might as well be in a recession because the current economic environment is having the same effect on the housing market, according to the Canadian Real Estate Association.

“Canadian economic growth is being sideswiped by financial-market turmoil, slowing world economic growth and weaker commodity prices,” said Gregory Klump, chief economist with CREA. “The question of whether Canada will avoid a technical recession is moot. Growth will be slow enough that it will feel like a recession.”

The Ottawa-based group updated its housing forecast for 2008 and 2009 and is now calling for B.C. sales to fall by 28.7 per cent this year from 2007 — the largest drop in Canada. Sales in B.C. should then decline another 11.7 per cent next year, it said.

The average B.C. house price will rise 2.7 per cent to $451,100 this year but in 2009 is expected to drop 7.8 per cent — again, the largest drop in Canada — to $416,100.

Nationally, the association expects sales to decline by 12 per cent this year from 2007 and then fall a further three per cent in 2009.

It expects that fewer new listings next year will help stabilize the market, but not enough to stop prices from continuing to fall. The national average sale price is expected to fall by 2.1 per cent in 2009, following a 0.6-per-cent dip this year, with conditions in the housing market not likely to improve until 2010.

“Consumer confidence is being battered by downbeat headline news,” Klump said. “Homebuyer sentiment has become very cautious, by contrast to the urgency to purchase in 2007.

“There are fewer buyers and they are taking longer to shop, so the pricing environment is very competitive. Unrealistically priced homes will sit on the market.”

CREA president Calvin Lindberg said the U.S. market is much different, most notably because the Canadian market does not have the same oversupply of homes.

“Canadians are definitely concerned by the economic news out of the U.S., and much of that news stems from distress in the U.S. housing market,” he said.

But Lindberg added: “Canadians should realize that Canada‘s economy and housing market are in better shape. This means the downturn in consumer confidence will pass and, when it does, housing demand will rebound, especially when they realize the window of opportunity to buy at reduced prices and at low interest rates will begin to narrow once economic growth shows signs of rebounding next year.”

© The Vancouver Province 2008

Vision says public has right to know, NPA says misinformation spread

Christina Montgomery, with a file from John Colebourn
Province

NPA mayoral candidate Peter Ladner said Friday he was prepared to lose the election rather than go public with — and risk — negotiations on a controversal $100-million city loan to developers of the financially troubled False Creek Olympic athletes’ village.

“I am willing to lose the election to protect taxpayers’ interests in the Olympic Village,” Ladner said.

And he accused his opponent — Vision Vancouver’s Gregor Robertson — of “spreading misinformation” about the city’s involvement in the project and of costing the city millions of dollars by harming the city’s negotiating position.

Ladner’s comments came Friday night, just minutes before Vision Vancouver councillors attempted to table an emergency motion asking for a public council debate on the loan before the Nov. 15 civic election.

The effort failed when the motion was ruled out of order.

Known as the Vancouver Olympic Village, the project occupies a seven-block area on the southeast shore of False Creek. It will feature 1,100 housing units in 14 residential buildings, along with retail space and a community centre. After the Games, it will be converted to 850 market-value homes and 250 units of social housing. About half the residential units have been sold.

On Oct. 14, COPE, Vision and NPA councillors and NPA Mayor Sam Sullivan voted unanimously at a confidential session to approve $100 million in loans to Millennium Development.

All councillors present at the in-camera session are legally sworn to keep proceedings confidential. An open council forum would allow councillors to ask questions about the city’s level of risk as the village is completed — and after the Games, when units will be sold and monies recovered.

Council also reportedly voted to approve up to $450,000 to hire a third party to oversee construction of the rest of the project.

The city has already signed a $193-million guarantee to satisfy the lender, U.S.-based Fortress, and has already advanced nearly $30 million to Fortress on behalf of the developer.

Millennium was facing about $60 million in cost overruns on the construction of the village for the 2010 Winter Games. As host city, Vancouver is bound to deliver completed housing to Games officials next year — hence its attempt to move the project along. The company’s projects in West Vancouver and Nanaimo also face troubles.

Money for the City of Vancouver’s village loan is to come from the city’s $2-billion property endowment fund, a bank of land and cash built up over the years to do things like purchase land for civic theatres or social housing. Its cash reserves fluctuate and can be as little as $30 million or as high as $200 mil-

lion.

The failure of Friday night’s motion to council didn’t stop the accusations, and Ladner insisted Robertson of turning critical negotiations into a “political football.”

The accusation didn’t stop Robertson, who continued to insist that “the citizens of Vancouver should expect no less than full and open disclosure of how every one of their tax dollars are spent — let alone $100 million of them.”

Robertson told The Province that a number of issues not directly related to financial details of the deal should be moved into open debate — including clarification of the status of the city’s financial director, Estelle Lo, who is reported to have tendered her resignation after repeatedly voicing concerns about the city’s financial involvement in the project.

© The Vancouver Province 2008

 

It’s a crap shoot for everyone except owners of high-end commercial properties

Don Cayo
Sun

Gordon Campbell’s decision to freeze B.C. property assessments at the 2007 level will mean a six- or seven-figure windfall for owners of high-end office and commercial properties.

For everyone else, it’s a crap shoot with loaded dice. The odds of not losing at least a few bucks, and maybe your shirt, are nil if you’re a developer, poor if you own a business in a second-best location, and worse than at a casino if you own a home.

Why? Let’s start by dispensing with three misconceptions. Two stem from over-optimistic interpretations of what Campbell said. First, your tax bill isn’t frozen, only the assessed value of your property. Thus the tax bill may still go up, possibly by a lot, depending on how much your municipal council spends next year. This fact is absolutely unaffected by the freeze.

And your assessment isn’t frozen at the level you paid tax on in 2007 — an era that looks like the good old days to most B.C. taxpayers. It’s frozen at the July 1, 2007, level, which is the basis for your 2008 tax bill and which, for most of us, reflected a big jump from the year before.

Finally, Campbell was wrong when he rationalized the freeze with a claim that prices peaked on or about July 1, 2008 — the date that would be the basis for 2009 tax bills if he hadn’t frozen the assessments.

Maybe a few properties did. But most values peaked months before that — except for those high-end commercial properties whose owners will profit so greatly from this new policy. Big commercial buildings are rarely sold, probably because they’re in short supply and occupancy rates are sky high. If one does come on the market, it’s snapped up — especially now as any investor with money desperately wants places to park it other than in volatile stocks. So prices are still rising.

I found records for only seven such sales in the last quarter, and my calculations show the freeze will benefit the new owners to the tune of hundreds of thousands, even millions, of dollars. The region’s largest recent sale, a collection of buildings in Richmond‘s Crestwood Corporate Centre, is reported by Colliers International to have sold for $209 million. Yet when I calculate the 2007 assessed value, it’s just $147 million, or $62 million less. Most years, the 2009 tax bill would be based on the selling price, but now it will be based on the old valuation. The total business tax rate is $16.75 per $1,000, so the tax savings is more than $1 million.

It’s impossible to say precisely what the savings is for any of the hundreds of buildings that haven’t change hands — only a selling price could tell us exactly what the value would be without the freeze. But the story is similar for the handful of other recent sales I checked. Clearly, the price trend is high and still rising.

The price trend on virtually every other kind of property is, of course, dropping. And that’s why the outcome of this tax freeze is so unequal and unfair.

Since the percentage of city costs paid by businesses is fixed, any company not housed in these privileged buildings will lose thanks to this freeze. They must pick up the tab for the millions and millions the big guys save.

What about housing? If your 2007 assessment was less than your house was actually worth — and, according to a West Vancouver study I wrote about recently, quite a few are — then your luck will continue for another year. If your assessment was too high, you’ll lose for another year. And even if it was dead on, you’ll be stuck with extra costs because those with low assessments won’t be paying their share.

But that’s just the beginning. It’s clear from an analysis of Metro-area condo and townhouse sales data that prices peaked months earlier than the premier claims. Average prices tell only part of the story as they don’t necessarily compare the similar units, but it’s significant that they trended downward between July ’07 and July ’08. The drop was about five per cent in Vancouver, and a little less in surrounding communities.

Sales volumes, however, tanked. From 220 units to 90 in Vancouver, 380 to 203 in Surrey, 347 to 150 in Richmond, and so on. This jibes with what real estate contacts and newspaper stories tell me about new developments. Not only are a few high-profile projects stalled, but nobody is starting new ones. This means land suitable for development is, for the short-term, unsaleable unless it’s at anything approaching yesterday’s prices. For modest older homes that could be torn down, developers who just want the land are no longer competing with starter homebuyers, so the lower end of the market for stand-alone homes — for example, those bungalows on 33-foot lots in Kits — is taking a beating, too.

Upscale homes might resist the trend a little longer. But, with every class of home, it depends on specific circumstances — neighbourhood, amenities, whether you find a buyer who wants it bad enough.

And regardless of what kind of home you have, what will happen to your right to appeal if your assessment is way too high and/or there’s evidence prices in your neighbourhood are in the toilet? For example, a condo in a Victoria building that’s leaky and in dire need of repair was recently dumped for just $60,000 as the owner scrambled to avoid liability. Will other units in the building still be valued at the July 1, 2007, level — typically in the high $300,000s?

I’ve found nothing on BC Assessments’ website to answer that kind of question, although the content seems to be changing constantly, so no telling what I might have missed. Revenue Minister Kevin Krueger has said you can still appeal, but, as I understand the freeze, either way someone will lose and lose big. If close neighbours of the Victoria leaky condo can’t get their assessments slashed, they lose. If they can, people in other sharply devalued properties that haven’t had a recent sale to cite in support of an appeal will lose because their property values will be unadjusted.

And think for a moment about the phrase “as I understand the freeze.” Because myriad details are foggy. What if you had an exemption — and there are several kinds — in ’07? Does it automatically continue in ’08? What if your house burned to the ground and you’re left with bare land, or it was gutted, and now you just have a shell? What if a ho-hum commercial building in a gentrifying area was converted into trendy lofts? Or what if a strata unit changed from owner- to renter-occupied, or vice versa? What if … ? What if … ? What if … ?

All BC Assessments has to do is find fair and consistent answers to these kinds of questions for 1.8 million properties and then get the bills out next month. Good luck.

And good luck to you, Dear Reader. I hope you win the crap shoot. But don’t bet the farm.

© The Vancouver Sun 2008

Buy smart, just as you would in Canada, former Vancouverite recommends

Michael Sasges
Sun

In Mexico, the asking price of a new-construction home is one-quarter to one-third the asking price of a comparable Canadian home. But property ownership by foreigners is restricted. The weather is lovely, but . . . And the scenery is so different, but . . .

A recent Mexican real-estate seminar by Canada2Mexico Consulting provided an opportunity to investigate the dream and the reality. Providing the answers below is Victoria Pratt, a former Vancouverite now selling Mexican real estate.

Q: At which Canadians was the Canada2Mexico Consulting seminar aimed?

A: We are seeking Canadians interested in buying a vacation home or a second residence, which could be either a condo or a single-family dwelling, on the Costa Vallarta of Mexico.

This zone is anchored by Puerto Vallarta and the greater Bay of Banderas, and includes towns and resort destinations that Vancouverites may have heard of, such as Nuevo Vallarta, Sayulita and San Francisco in the states of Jalisco and Nayarit.

Q: If a holiday or retirement home in Canada, on average, costs X, what is the Mexican equivalent, or Y?

A: The cost of a resort residence in our area is generally one-third to one-quarter the cost in Canada. Good developments are ranging from about $150 US to $250 US per square foot, completely outfitted with quality ceramic or marble floors, granite countertops, integrated kitchen cabinets and good carpentry for closets and finishes.

I have a buyer who bought a three-bedroom condo in Mexico as a second home for $425,000 US and jokingly commented that he had paid $1.2 million US for his False Creek condo of smaller square footage. Both were bought in pre-construction and both are waterfront properties.

Some listing examples:

[1] An excellent pre-construction condo development on the El Tigre golf course offers large two-bedroom plans for less than $250,000 US and includes beach-club and health-club memberships and golf-club privileges.

[2] A three-bedroom oceanfront townhouse with about 2,500 square feet, and fully-furnished, is listed at $789,000 US.

[3] A two-bedroom oceanview condo of about 1,400 square feet, fully-furnished, is listed for $445,000 US.

The very highest end condos and homes with the finest finishes and most exclusive locations would be in the $300 to $400 per-square-foot range.

Q: The seminar news release says rising house prices, an unstable economy and increasingly expensive medical and health-care costs in Canada are changing the way many Canadians consider their future. Is the Mexican economy stable? What’s stability?

A: As a resident of Mexico, I consider the Mexico economy as stable as the global economic conditions currently permit. I am not an economist so can’t elaborate on what stability is in technical terms, but can give you my sense of the economic environment in my area.

The tax base is increasing – more people are paying taxes – and tourism has steadily grown over the past 10 years, along with tourism infrastructure in our area, as has real estate development and investment. We will be most affected on a national basis by declining oil prices, similar to the factors that are currently affecting Canada.

Q: Can gringos own real property in Mexico?

A: Yes, foreigners can own property fee simple in the non-restricted area, which is 50 kilometres beyond the ocean borders and 100 kilometres beyond the national borders.

The restricted zone was established within the Mexican constitution for sovereignty reasons. In the mid-1970s, an administrative mechanism was created to permit foreigners to own in the restricted zone by way of deeding the property within a trust.

The trusts are administered by the chartered banks of Mexico and ownership is registered with the secretary of foreign affairs. The owner is named as the first beneficiary of the trust and has all the rights of being able to sell, bequeath, rent or chattel the property in the same manner as a fee-simple regime.

Q: How easy or difficult is probate down there? Is there probate in the Napoleonic Code? Is there joint tenancy? Tenancy in common?

A: A lawyer and the Canadian consulate could be your resource to answer those technicalities.

A foreigner buying real estate in the area in which I sell is required to register title to the property under a trust, as it is located in the “restricted zone.” The trust offers the advantage that one can name one’s heirs as beneficiaries and the process for claim is as simple as proving identity and presenting a death certificate to the authorities in Mexico, notarized and legitimized, of course.

Q: The last half-dozen headlines atop Mexican dispatches published on the Vancouver Sun’s news pages, and published before the seminar, suggest that Mexico is plagued by cultural and natural violence. People do ask, I am sure. What do you say?

A: The violence to which the headlines refer is all related to the crackdown on corruption and particularly drug trafficking that is the mandate of Mexico‘s presidente, Felipe Calderon. The violence is occurring between factions and in retaliation for policing and convictions, as the president implements his anti-corruption campaign.

My personal viewpoint is that there is a lot of money at stake and there is bound to be a power struggle, but it is infighting and the violence is not targeted at the public.

I know similar issues are affecting Vancouverites as one sees the reports and debate on rampant gun use, escalating gang violence and cross-border drug and gun-smuggling.

As residents of the Puerto Vallarta area, we have seen increased security personnel and we feel safe in that protection is there and, if one is not part of a criminal lifestyle, one should not be affected.

With regard to hurricanes, I chose the Costa Vallarta, as it is relatively safe from those perils, being protected by Mexico‘s third largest bay and having what sailors refer to as a meteorological trough off the coast and that buffets drastic weather. Hurricane risk is mainly in the Atlantic/Gulf/Caribbean area of Mexico and is seasonal.

Q: Please share with Sun readers one “horror story” and its lessons and one life-should-be-so-good story and its lessons.

A: In my 10 years as an owner and nine years living on the Costa Vallarta, I have not had any horror stories among my friends or clients that I could say are unique to Mexico.

There have been a couple of instances of medical emergencies for which my friends rave about the level of medical care. People are happily living their life of retirement, semi-retirement or on vacation.

One hears of folks making silly real-estate deals from time to time. I would say they have likely not acted in the manner they might at home and perhaps made snap decisions or have not consulted with credible professionals.

The lesson is to align yourself with reputable advisers and make an educated decision — same as in Canada.

Q: Am I wrong to think that in September, when your cross-Canada meetings were announced, they were anything but extraordinary, and now are extraordinary, with so much wealth disappearing around the world?

A: Of the two conferences staged by Canada2Mexico, I have identified buyers for my area. The common denominators are that they have funds earmarked for a vacation-home purchase.

There is, however, warranted concern on where the dollar will settle, but it has not stopped them from actively looking with a purchase goal in mind.

Many developers are considering setting an advantageous peso exchange rate or publishing in pesos (rather than the traditional U.S.-dollar-based price lists) to give a sense of stability to both national and foreign buyers.

We have had, and continue to have, many positive factors as stimulants in our market and we certainly hope they will at least partially offset the effects of the economic crisis . . . .

Victoria Pratt is a sales associate with Pacific Boutique Properties. Her Mexican telephone number is 011 52 1 322 779 9283. Her email address is [email protected]

© The Vancouver Sun 2008