First-time buyer, however, has her mind made up and wants quality ‘specs’
Kim Pemberton
Sun
Jen Natic is a 25-year-old first-time buyer who says buying the best she can buy will pay dividends. ‘In a perfect world, I’d have a new place with high specifications like granite countertops and hardwood flooring. If it was going to be a choice between hardwood and laminate I’d go for hardwood. You wouldn’t have to upgrade and it would be easier for resale.’ Photograph by: Ian Lindsay, Vancouver Sun
The recession brings out uncertainty in all areas and no more so than in housing. One question that has been raised is whether cutting back will affect new home buyers — can they, for instance, still expect high-end features like granite countertops and stainless steel appliance packages now the industry standard?
“We cannot keep building the same product as yesterday,” Bob Rennie, a long-time Vancouver real estate agent, recently told the Vancouver chapter of the Urban Development Institute.
“What will tomorrow’s starter condo look like? . . . It is back to basics. I mean back to a basic affordable model. I do not think that we can rely on the investor driven demographic as much as we have been for high-rises in the suburbs.”
In an interview with the Vancouver Sun, Rennie points out when his parents raised their two children in the 820-square-foot family home. They waited 20 years before they could afford the kitchen they wanted.
“I’m not saying everybody has to do that. But we’re into instant gratification. The trouble is that our salaries aren’t keeping up with instant gratification. So we’re going to have to back off.
”There goes the granite. Maybe we don’t have stainless steel gourmet appliances right away; we start with basic cooking facilities and refrigeration. Maybe it’s a cork floor and we’re not going to start with marble at the entrance, we’re not going to start with hardwood.”
Rennie believes it’s better to pare back and go for a basic starter home because it at least gets your name on the title.
But whether today’s discriminating consumer will accept laminate counters or basic appliance packages still has to be determined.
First-time buyer Jen Natic, a 25-year-old legal assistant looking for an apartment in south Surrey, admits she is hoping to get as many high-end finishes as possible for her money.
”I have high expectations for what I can afford,” she says.
“In a perfect world, I’d have a new place with high specifications like granite countertops and hardwood flooring. If it was going to be a choice between hardwood and laminate I’d go for hardwood. You wouldn’t have to upgrade and it would be easier for resale.”
Natic says she’s seen some resale product with laminate countertops but she isn’t interested.
“It’s just not up to par anymore,” she says.
According to Ralph Archibald, of Polygon, buyers want affordability but they aren’t willing to compromise on design and style.
“Just because it’s more of a buyer’s market, compared to recent years, doesn’t mean buyers will accept less in terms of finishes. They won’t accept less. The challenge is to offer high specs at an affordable rate,” he says.
To achieve that affordability every part of the development process needs to be analysed with cost-savings in mind, says Archibald, giving the example of working with the trades to lower construction costs, which he adds aren’t expected to rise in the near future.
The federal New House Price Index determined it costs 61/2 per cent less to build a new home in January, 2009 compared to January 2008. The fact housing prices have dropped since that time are an indication those savings have been passed on to the customer, as the industry claims.
So just what do buyers want?
The lowest possible price was the priority for potential buyers, when asked to rank their reasons for purchasing a first property.
The Royal LePage First-Time Home Buyers’ Report 2009 found affordability was their top consideration, but in a market like B.C. where high house prices have kept them out of the market for years a second close consideration were low interest rates.
Ninety-two per cent of all potential buyers in B.C. reported they were more likely to buy because of low interest rates compared to the 86 per cent of Canadians for the same reason. Still, lower house prices still came in as the top priority for British Columbians, with 96 per cent saying this was the main reason they would buy now.
“The biggest thing helping the entry level buyers is interest rates,” says Archibald. “It’s a rare combination to have those two worlds collide (low prices and low interest rates). People are coming out of rental accommodation with a minimal down payment of 10 per cent and finding they can buy for not much more than the cost of renting. That’s what is driving the market.”
Anyone not buying now Archibald considers a gambler.
“What are you going to wait for? Lower rates? I don’t know how they can go any lower. Lower prices? Inventory is being gobbled up and come next year we will have a shortage of product
because there are no new ones being built and won’t be in the foreseeable future.”
Polygon has eight projects on the go, from North Vancouver to south Surrey, but no plans to start new projects immediately. Archibald wouldn’t release sale figures, other than to say the current projects are exceeding expectations originally forecast when the recession hit.
Peter Simpson, of the Greater Vancouver Home Builders’ Association, says while there’s some validity in going back to basics to create affordable housing he believes it can’t really be done because of buyer reluctance.
“Buyers today are very sophisticated, savvy buyers. I don’t think you have to sacrifice quality and go back to 1980 products. Granite before was expensive but not so much anymore.”
The issue of affordability is more than just the finishes and for B.C. residents the real reason why prices here are higher than elsewhere in Canada comes down to geography, he says.
“B.C. is a very desirable place. It’s always going to be more expensive than other regions, because we have many geographic constraints — mountains, oceans, forest, [Agricultural] Land Reserve and whatever is left is pricey,” says Simpson.
“Because we live in a more expensive area it behooves industry, community planners, designers to find ways to making housing affordable. Everyone has to be working towards the same goal.”
But Simpson adds he doesn’t believe everyone is equally working towards that affordability goal and blames government for adding to the housing costs, specifically the tax fee levies.
“We have the feds, the province, the regional government and 21 municipalities (in the Lower Mainland) and now first nations bands all wanting a say in land use. That’s five levels of government. The more fingers in the pie the more expensive it (housing) will be,” he says.
Simpson says municipal governments can start by reconsidering just how much they are charging to developers and builders wanting to create new housing stock.
But Vancouver‘s director of planning, Brent Toderian, challenges the assertion city fees affect affordability, saying the main issue is about supply and land when it comes to affordability.
“It’s a developer’s industry perpetuated myth that fees and charges affect affordability,” says Toderian, adding even if the fees were reduced the consumer wouldn’t necessarily benefit.
“If the fees were reduced it’s a windfall for the developer. They’d get more profits.”
Toderian notes the fees are necessary to pay for city amenities and infrastructures necessary to support growth and this in turn determines how liveable a city is.
“It’s no accident Vancouver is rated the number one liveable city and that is in part due to developers being required to contribute to the city’s amenities.
He pointed out right now the city charges large developers $6 a sq. ft. as a cost levy, but the figure should actually be in the $10 to $11 range to keep up with the costs.
City council had just directed staff to explore a price catch up “when the worst of the downturn (in the economy) hit so we’re in a process of trying to catch up but not raise the fees.”
Later this fall, city hall will make a decision on whether to consider waive fees and charges for developments that offer rental accommodation.
The goal is to make Vancouver an affordable city to live in and that may not apply to buyers.
“Can you afford to live in Vancouver and can you afford own in Vancouver are two different things. I’m a renter and I’m not anticipating buying in Vancouver because even for me the size of that mortgage isn’t necessarily doable,” he says.
“It’s not always a city goal to have (home) ownership. The key in most North American cities is to have affordable rents so the teachers, the nurses, the service providers can live here.”
He says developers know how to go after the high end of the market but maybe the time has come with this recession to go after the “modest” market.
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