‘Encouraging signs’ that construction sector is bouncing back from the bottom, says industry spokesman

Becky Rynor
Sun

The value of building permits issued in southwestern British Columbia soared by more than 36 per cent in May, helping to lead the country to what one analyst called a “whopping” increase that beat expectations.

The increase in southwestern B.C. was led by a 95-per-cent rebound in non-residential permits, compared to the month before. That’s enough to prompt the head of the region’s construction sector to suggest the industry may be on the rebound.

Keith Sashaw, president of the Vancouver Regional Construction Association, cautioned in a news release Tuesday that “it is too early to tell if the worst is over for the construction industry,” but added: “There are certainly some encouraging signs the construction industry may have reached the bottom of the market and is now on an upward trend.”

Statistics Canada said Tuesday that the value of building permits issued nationally in May surpassed the $5-billion mark for the first time since October. That represents a “whopping” 14.8-per-cent hike over April, according to Charmaine Buskas, senior economics strategist with TD Securities.

“This report is at odds with expectations,” Buskas added.

For the province of B.C., the percentage increase was far greater, soaring 26.4 per cent over April’s figures.

Of his region, Sashaw said: “The large surge in commercial permits issued in May is the highest regional figure since last November.”

But, he noted, residential permits in the region increased by just one per cent. “The construction industry anticipates the institutional-government sector will be heading higher in the next year or so when more of the fiscal stimulus spending hits the economy,” said Sashaw. “It is our hope that increased building activity in 2009 will set the stage for a recovery in 2010.”

But May’s rebound also reflects just how far the sector has fallen. “Year-to-date, total building permit values in the Lower Mainland-Southwest region are down 57 per cent to $1.3 billion compared to last year, led by residential permits, which are down 65 per cent to $687.3 million,” the construction association release pointed out.

And, it added: “[Year-to-date] non-residential permits are down 42 per cent to $613.2 million in the same period.”

But Sashaw noted: “The June housing sales numbers released last week also offer hope that new housing construction will pick up in the coming months, possibly as early as the fourth quarter this year.”

And, he added: “The construction industry anticipates the institutional-government sector will be heading higher in the next year or so when more of the fiscal stimulus spending hits the economy. It is our hope that increased building activity in 2009 will set the stage for a recovery 2010.”

Buskas of TD Securities said the national increase could mostly be explained by “massive increases in two main sub components — multi-family units and institutional permits.”

“Clearly, builders were not scared off by the weak macro economic backdrop, and in fact were helped by government spending.” However, she also cautioned, “This pace of rising activity is unlikely to continue.”

Statistics Canada also attributed the new building activity to increases in the number of permits issued for multi-family dwellings in Ontario and institutional permits in Alberta and Ontario.

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Fiona Anderson
Sun

Resale home prices in the Vancouver area inched higher in the second quarter and are likely to continue going up, but they still remain well below what they were a year ago, according to Royal LePage’s quarterly house-price survey released Tuesday.

Prices either remained flat or increased from April to June for all types of homes in the four areas surveyed — Vancouver East, Vancouver West, North Vancouver and West Vancouver.

The biggest jump — eight per cent — was in condominiums in Vancouver East, which increased from $311,000 in the first three months of the year to $336,000, down only 0.6 per cent from the second quarter of 2008.

Royal LePage’s mid-year forecast for the average resale house price in Greater Vancouver is now $560,000 up substantially from the $540,100 predicted at the beginning of the year. However, that price is still 5.7 per cent below 2008’s average resale price of $593,767.

The change in forecast is “not just wishful thinking,” said Bill Binnie, president of Royal LePage Northshore.

June was the second-busiest month on record for the Greater Vancouver area and the fourth most active in the Fraser Valley.

“It’s been a very hot market, surprisingly so,” Binnie said.”

On one hand, he said, low interest rates and lower prices have made homes more affordable.

“But I think behind all that there was renewed confidence for people to march back into the market in such numbers,” Binnie said.

Much of the marching was done by first-time homebuyers.

“That’s typically where a market starts,” Binnie said. “The first-time homebuyer will push the old guy out of his house and he’ll either go buy a bigger house or a smaller house, who knows what. But he’ll go buy something.”

Another reason prices are moving up is they had fallen a long way.

“We had sort of a double whammy in that at the same time house prices corrected, we had that economic mess hit Canada,” Binnie said. “And our market had gone up more in price escalation.”

Binnie expends the trend of both increased sales and prices to continue.

“I’m pretty sure by the end of the year our prices will be up slightly from where they are today,” he said.

So too does the Mortgage Brokers Association of BC (MBABC), which reported this week that more potential home buyers have been shopping for mortgages.

“The increase in activity is quite dramatic,” the association said in a news release. “Lenders are experiencing application numbers similar to those a year ago.”

Those who were pre-approved at 3.69 per cent before mortgage rates went up are highly motivated to get out and bid on homes so they can close the deal before their pre-approval expires, MBABC president Joe Santos, said in the release.

The average rate for a five-year fixed mortgage now is 4.49 per cent.

“MBABC is not declaring an end to the real estate recession, but it is clear it may be much shorter than thought six months ago,” the release said.

© Copyright (c) The Vancouver Sun

Province

Vancouver house prices have hit bottom and should eke out a tiny increase by the end of the year, Royal LePage Real Estate Services says.

Vancouver area house prices, which have averaged $558,893 for the year so far, should crawl ahead to $560,000 by year’s end, Royal LePage said yesterday.

That would leave the end-of-the-year price 5.7 per cent below last year’s average price of $593,767.

Royal LePage Westside president Chris Simmons said houses generally sold below their owners’ asking price during the second quarter. But the inventory of unsold homes in the region was down about 25 per cent in the second quarter from a year earlier, Simmons said.

Regional prices have finished their correction as they head towards a supply-demand balance, he said.

“House prices have bottomed out,” Simmons said. “Prices may creep up in Metro Vancouver but increases will likely be in the low single digits.”

Sales in the region so far this year have reached 11,146 and are expected to hit 27,000 by the end of the year, Royal LePage said.

In the second quarter, average year-over-year prices for standard two-storey detached homes, standard condos and detached bungalows fell nine per cent to $677,000.

“Homes priced at, or below, market value are generating multiple offers from buyers,” Royal LePage said.

North Vancouver prices were “relatively steady” between the first and second quarters but have posted the region’s largest year-over-year drop, Royal LePage said.

Average prices in North Vancouver have fallen 14.3 per cent to $522,000 from last year.

Nationally, Royal LePage said it expects the average price for home sales to be $297,000 by year’s end, a two-per-cent drop from last year. It forecasts unit sales of 430,000, down one per cent from 2008.

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Economists dampen hopes of sustained revival

Province

The value of building permits issued in B.C. jumped 26.4 per cent between April and May, driven by a 69.8-per-cent increase in the non-residential sector, Statistics Canada says.

In the Vancouver area, the value of permits rose 42.1 per cent, while Abbotsford-Mission saw a 14.9-per-cent increase, and Kelowna a 131-per-cent jump, the federal agency said yesterday.

Across the country, the number of building permits issued in Canadian municipalities soared in May, but economists warned the flurry of activity won’t last.

StatsCan said the value of building permits issued in May surpassed the $5-billion mark for the first time since October. That represents a whopping 14.8-per-cent hike over April, said Charmaine Buskas, senior economics strategist with TD Securities.

“This report is at odds with expectations, but can be mostly explained by the massive increases in two main subcomponents — multi-family units and institutional permits,” Buskas said. “Clearly, builders were not scared off by the weak macro-economic backdrop, and in fact were helped by government spending.”

However, she said, “This pace of rising activity is unlikely to continue.”

Municipalities approved 13,087 new dwellings in May, an increase of 22.1 per cent, reflecting an 40.5-per-cent increase, or 7,948 multi-family units. The number of single-family units approved rose 1.5 per cent to 5,139.

“All provinces, except for Nova Scotia, reported increases in multi-family construction intentions,” StatsCan said. “Intentions nearly doubled in Ontario compared with April.”

The value of permits in the residential sector have increased for three consecutive months, the agency said.

Residential building intentions rose 14.4 per cent to $2.6 billion, with Ontario accounting for most of the increase.

In the non-residential sector, the value of permits rose 15.3 per cent to $2.4 billion following a 12.9-per-cent decrease in April.

The building permits survey covers 2,400 municipalities representing 95 per cent of the population and provides an early indication of projected building activity.

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savings: Couple will foot only $1,930 of $4,400 bill for new furnace thanks to ecoEnergy Retrofit program and other incentives

Randy Ray
Province

David and Linda Malcolm weren’t surprised when an energy assessment revealed the 48-year-old heating system in their Burnaby home was about two-thirds as efficient as today’s furnaces. Nor were they shocked to learn many of their windows were ready for the scrap heap.

Much bigger on the shock scale was finding out that it would cost more than $7,000 to replace their furnace and tackle a handful of other more minor energy efficiency upgrades such as sealing air leaks, adding insulation and beginning to replace windows.

But once they learned federal and B.C. government incentives would help pay part of the cost, the couple decided to spend several thousand dollars in a bid to reduce their gas and electricity bills, which annually suck $3,250 from their bank account.

“When I heard the financial grant numbers I thought it was worth checking out,” says Malcolm, a retired B.C. Institute of Technology business instructor. “I learned that I could get some nice grants and that if I bought a new furnace, I could pay it off in about three years.”

The Malcolms are among thousands of Canadians who are taking advantage of generous incentives to decrease fuel bills, improve home comfort and reduce greenhouse gases. One program alone, the federal ecoENERGY Retrofit-Homes incentive, has helped more than 85,000 homeowners offset the costs of energy-efficiency home improvements in the past two years.

To gain access to grant money, the Malcolms, as required by both the federal program and the LiveSmart BC Efficiency Incentive Program, hired a certified energy adviser who in late May performed an energy assessment of their home and produced an eight-page report showing the best ways to reduce energy use.

At the top of the list prepared by Garry Lowney, president of Vancouver-based The House Whisperers Energy Consultants, was a new furnace, followed by new windows and doors and improved insulation. Days later, the couple wrote a $4,400 cheque for a high-efficiency furnace that was installed in early June.

The new heating system will cost them only $1,930 thanks to a $790 grant from the ecoENERGY Retrofit – Homes program, $770 from the LiveSmart BC Efficiency Incentive Program, $510 from Ottawa’s Home Renovation Tax Credit and a $400 “cash card” from the Lennox furnace company, which can be redeemed at Costco, where they purchased the furnace.

And because the heating system has a 95 per cent efficiency rating — compared to 64 per cent for their old unit — they expect to shave $705 from the annual gas bill at their 3,000-square-foot home, which means their portion of the furnace’s cost will be paid for in less than 36 months.

“After seeing the report I came out of the process with my eyes wide open and motivated to make some changes,” says Malcolm, who plans to spend another $3,000 on a programmable furnace thermostat, a new patio door and installation of weather stripping, insulation and some new windows.

The weather stripping, insulation and windows will go a long way toward sealing air leaks in the Malcolms‘ post-and-beam-construction home. Some of that spending will also be eligible for rebates, although it’s too early to determine how much more grant money the Malcolms will receive. Once a second assessment is performed to verify their improvements comply with federal and provincial criteria, they’ll receive separate rebates from the federal and provincial governments.

The total cost for a pre- and post-energy assessment in B.C. is typically $450. The LiveSmart BC Incentive Program covers $150 of the cost directly to the energy adviser. Another $150 is reimbursed to those who complete both assessments, so the total cost to the homeowner is $150.

The federal ecoENERGY Retrofit – Homes program has doled out average grants of $1,130 per home, and energy-efficiency improvements have reduced greenhouse gas emissions on average by 3.41 tonnes per house per year, says Kathy Crate, acting chief of existing housing, Natural Resources Canada, which operates the program. “Typical upgrades cost $5,000 to $6,000,” says Crate, “which produce average savings of 30 per cent or $700 a year on a $2,000 heating bill.”

Improving their home’s energy efficiency without having to foot the entire bill is not the only reason the Malcolms are happy. Their new furnace is safer than their former model, which, had it broken down, could have contaminated their interior air with deadly carbon monoxide. And by having the new unit installed, they’re doing their part to help create jobs in tough economic times.

“We’re in a recession and many people are looking for work,” says Malcolm. “There are going to be a lot of guys out there installing furnaces and getting jobs.”

One area where the government programs have created new jobs is home energy assessments. In April 2009, 20,000 initial assessments were performed in Canada compared to 11,500 in April 2008, says Crate, who credits the increase to the federal program and similar programs in most provinces.

© Copyright (c) The Province

Tony Gioventu
Province

Dear Condo Smarts: A word of warning for anyone who is considering or has entered into a presales agreement.

In 2005, I was doing business in Vancouver and fell in love with a proposed development on the waterfront. It was originally planned for occupancy in 2008, but as delays mounted it ended up being available in 2009.

Seems simple enough except I transferred (sold) my presales contract to a Vancouver buyer in 2007 for a $50,000 premium.

They in turn transferred the contract to a Toronto buyer in 2008 for another premium. Well, we thought after our sale, it was the end, never to come up again.

Last fall, the third presales agreement holder defaulted on their obligation to complete the sale. The developer, in an effort to recover the losses from the sale, proceeded with a court action that has ended back at our doorstep. With both the second and third buyers defaulting, the developer has named us in the lawsuit.

Even though we sold or assigned our presales agreement, we did not discharge our obligation to the developer with their written consent, to complete the sale. As a result we may very likely end up having to complete the sale, or face the consequences of the lawsuit.

— J.C. B., Winnipeg

Attention Presales Buyers: If you are unable to complete your transaction of sale, or have assigned your agreement to another party who has not completed the transaction, gather your contracts and documents and make an appointment to meet your lawyer.

Presales agreements are contractual obligations with a developer, where you, the buyer, are compelled to purchase the unit when it is complete, at the fixed conditions in the agreement.

This is not a sales agreement. It binds the rights and obligations of the potential buyer and the developer to the conditions of the contract.

If you have transferred your presales agreement to another party, you may very likely have an obligation to the developer if the assigned buyer defaults.

Sales and marketing commissions might also be at risk, if they were paid as conditions of the completion during the presales period. Brokers and agents may also want to review their contractual relationships with the owner developer.

A growing problem in the development industry is the requirement that lenders impose on developers for presales.

As a condition of financing, developers are often obliged to pre-sell 75 per cent to 100 per cent of the project before the funding is released for the development.

This places a current value on a future product that might or might not be constant, and consumers often pay the price in significantly higher costs at the time of sale or a reduction of products and services.

A project strained by future uncontrollable costs or bankruptcy could also present a problem for buyers and strata corporations in reviewing operations, deficiencies and warranty claims in the early years of their strata corporation.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. E-mail [email protected]

© Copyright (c) The Province

Province

Lower prices are triggering more real-estate sales in some B.C. communities.

The Real Estate Board of Greater Vancouver reports that June 2009 saw 75 per cent more sales overall compared with last June.

A key driver of sales is dropping prices.

Benchmark prices of residential detached houses on MLS, the online database used by realtors, have fallen 8.4 per cent over the past 12 months.

That price decline contributed to an 81-per-cent increase in detached house sales this month versus last June.

Apartment prices have also fallen, with benchmark prices for condos down 8.2 per cent from June 2008.

The down market spurred 69 per cent more condo sales this month compared with last June.

REBGV president, Scott Russell, also credits low interest rates for the sales lift. “Price reductions and low interest rates have created an improvement in affordability,” he said in a release.

Yet he cautioned that current conditions still indicate a buyer’s market.

“The current marketplace is such that buyers are more inclined to walk if they don’t like the terms of an offer,” he said.

The Vancouver Island Real Estate Board saw house sales increase 20 per cent from a year ago, while average prices continued to drag, down 10 per cent from June 2008.

The Fraser Valley Real Estate Board also reported a better June, with 40 per cent more sales than last June.

Detached home benchmark prices were down eight per cent in the Fraser Valley since last June, while apartment prices fell 9.6 per cent and townhomes dropped 10 per cent.

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