Builders, buyers hammered

John Bermingham
Province

Homebuyers will be the biggest losers under B.C.’s controversial new harmonized sales tax.

Once the numbers are crunched, buyers of new or used homes — whether their first or their 31st — will be squeezed for tens of thousands more in taxes come July 1 of next year.

They’ll pay tax on the land, tax on the house and tax on any professional who performs a service in the real-estate transaction.

Under the HST just announced by the Liberal government, an extra seven per cent in tax will be applied to all new homes.

Buyers of new homes already shell out for the five-per-cent federal goods-and-services tax.

B.C. also charges a property transfer tax of one to two per cent on a home, with a partial exemption for first-time homebuyers.

Builders say the HST will add $56,000 to the price of a new $800,000 home.

B.C. is promising to rebate seven per cent of the HST on new homes up to $400,000, with a flat $20,000 rebate on homes over that price — which still leaves $36,000 in extra sales tax.

Builders will now be able to pass on the provincial sales tax for building materials — about two per cent, which they currently embed in the price of a new home. Under the HST, they can claim that money back as an “input tax credit,” which would knock $8,000 off the tax bill if they passed the saving along to the buyer.

But in all, the HST still leaves the buyer of a new $800,000 home paying as much as $28,000 more in tax. In the Fraser Valley, where the average price for a detached house is $505,976, the HST would add $15,418.32, after the rebate.

The HST will also increase the cost for a host of transaction services. Realtors’ commissions will rise from five to 12 per cent, which will add several thousand dollars to the average commission of $40,000 on an $800,000 home. Throw in professional fees — a home inspector, a notary, surveyor and appraiser, who will also be charging 12-per-cent HST — and that adds several hundred dollars more. Finally, the tax will apply to “residual costs” — meaning all home renovations will carry a 12-per-cent tax instead of the current five.

“It’s going to be a huge increase in costs to the consumer,” said Jake Friesen, vice-president of Qualico Developments, which builds 150 new homes a year around the Lower Mainland.

“Either the consumer pays, or we reduce business and lay off people, or go out of business,” he added. “There’s going to be tremendous anger in the general public. For a time, they’ll refuse to pay it. Sales of new homes will stop.”

In anticipation of a cliff-like drop in demand, his firm will build flat-out to complete before July 1, Friesen said. Any home that can’t be finished by that date won’t be built, he insists.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, called the HST a “barrier to affordability.” “It’s going to hit the middle class,” he said. “It’s not going to be hitting the folks who pay the million-dollar-plus homes.”

M.J. Whitemarsh, CEO of the Canadian Home Builders’ Association of B.C., said 60 per cent of homebuyers will pay more in tax because they will go over the $400,000 threshold. She said a more realistic cut-off would be $750,000.

Finance Minister Colin Hansen has said that half of all new homes in Metro Vancouver are condos, so $400,000 is a truer standard.

Duncan realtor John Tillie, who heads the B.C. Real Estate Association, argued that the Liberal government should phase out the property transfer tax to offset the HST. “We pay more in property transfer tax than any other province,” said Tillie. “Now you put HST on this. It is totally unfair.”

Tsur Somerville, of the University of B.C.‘s Sauder School of Business, said the tax will also raise the price for used homes, which won’t be taxed under the HST but will see a surge in demand as a result.

“It’s a tax-shift to consumers, away from business,” said Helmut Pastrick, chief economist with Central 1 Credit Union. However, he added that the HST should start paying back within a few years, as business will invest more, which should create economic growth and more jobs.

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You don

Urban escape route with edgy appeal

Suzanne Morphet
Sun

Black Rock Oceanfront Resort

Project location: Ucluelet

Project size: 133 suites

Prices: from $260,000

Telephone: 1-877-762-5011

E-mail: [email protected]

Web: blackrockresort.com

Developer: Black Rock Oceanfront Resort Inc.

Architects: VIA Architecture

Occupancy: January 2009

– – –

On the first days of selling the Black Rock Oceanfront Resort suites on Vancouver Island, developer Mike Duggan first turned away 100 prospective customers at the door and then sold all 133 units in three hours. That was in 2005.

Last December, the resort finally up, but the economy down, all those people who had rushed to put a deposit on a unit now have to come up with the remainder of the purchase price — which ranged from $260,000 to $795,000.

Of the original 133 buyers, 106 closed.

Black Rock represents both the highs and lows of the B.C.

Black Rock represents both the highs and lows of the B.C.

resort-real-estate market, a market Duggan has been intimately involved in as president and founder of Boutique Hotels and Resorts of British Columbia.

Among the hotels Boutique Hotels manages are L’Hermitage in Vancouver, The Oswego Hotel in Victoria and Watermark Beach Resort in Osoyoos.

Sometimes referred to as the ”Whistler model,” all Duggan’s properties are developed as strata hotels, where units are sold to individuals who can use them part of the year, while the rest of the year they’re part of the rental pool.

Duggan says Black Rock, in Ucluelet, was the first of his properties that hasn’t had a good “closing ratio” but he prefers to look at the bright side.

“The good news is when we were closing in December 2008, which was arguably the peak of recessionary woes and thinking that 106 people did close.”

Ucluelet is the former fishing and forestry town 40 kilometres from Tofino and at the opposite end of Long Beach. While Tofino embraced tourism at least a decade before Ucluelet, Ukee – as the locals call it – is catching up.

The architect of the Black Rock Resort believes the community of 1,652 permanent residents has the opportunity not just to match its early-bird neighbour, but to do even better.

Ron Lea points to Ucluelet’s well thought out Master Plan and its nine-kilometre Wild Pacific Trail — a pedestrian pathway that hugs the coastline on either side of Black Rock Resort and offers spectacular vistas.

And he points to Black Rock Resort itself, which he says is to Ucluelet what the renowned Wickaninnish Inn is to Tofino.

The two properties are strikingly similar, as well as polar opposites.

Each sits on a rocky promontory of land that is whiplashed by wind and waves in winter and can be bathed in rain, fog or sunshine at any time of the year.

Both have restaurants that sit as far out on their respective promontories as possible without falling off the edge.

And the interiors of both were designed by award-winning BBA Design Consultants of Vancouver.

But that’s pretty much where the similarities end.

In fact, Sharon Bortolotto, Principal of BBA Design Consultants, cringes at the thought that anyone might see parallels between the two resorts.

“We tried very, very hard to make them unsimilar,” she says, while explaining the challenge

“We tried very, very hard to make them unsimilar,” she says, while explaining the challenge of designing something original where others share the same ocean, rock and trees. “Because everything is natural West Coast, how do you tweak it so that they’re not copies of each other and are unique?” she asks.

The answer in this case: “Modern Ocean“, her nickname for Black Rock. “It’s a little more sparse and aggressive to some degree, and it’s a little more edgy” than the Wickaninnish, she says, describing the overall look and feel created by rock, water, glass, steel and wood.

The lobby of Black Rock is nothing if not dramatic, with a curved glass wall two stories high overlooking a surge channel that cuts into the middle of the rocky promontory. Overhead, row upon row of cedar beams line the ceiling, suggesting perhaps the bottom of a first nations cedar basket.

Architect Lea says he was constrained by the size of the promontory, but wanted to preserve the surge channel and use it as a focal point. “So we wrapped the hotel around the surge channel and in doing so it created rooms which were viewing to the west, the sunset, and rooms which were viewing onto the bay and to the sunrise, in effect.”

Lea also got permission to relax the usual 7.5 metre setback from the high water mark in order to build closer to the surge channel.

In the grotto beneath the main floor and looking directly into the channel, where winter storms will throw up waves, logs and seaweed, is the resort’s wine cellar, for parties of up to 140 people. “It’s a pretty nice space,” says Lea modestly of the room covered in slate tiles and furnished with cedar plank tables.

The resort’s executive chef, Andrew Springett, is more expressive, describing the wine cellar as “the most beautiful room” he has ever seen. (Springett was at one time chef de duisine at the Wickaninnish Inn; another point in common between the two resorts).

The other rooms at Black Rock – the ones you buy – are also impressive. Maximizing the views was of paramount consideration.

“The notion was that every bed should face the view,” says interior designer Bortolotto, so that when you wake up in the morning, the first thing you see is ocean or forest. Even bathrooms feature spectacular views, courtesy of a ‘window’ that can be opened between bathroom and bedroom, to take advantage of the view from the latter.

The main lodge has 71 rooms, and there are 62 beach suites in fourplex-style cottages.

Owners can stay for 30 contiguous days and up to 150 days a year. The suites come with kitchens and Miele appliances.

Black Rock manager Carly Hall says the majority of buyers are from B.C. with a dozen or so from Alberta and three or four from California.

Sara Ratner was one of the people in line to purchase a unit at Black Rock Resort back in 2005.

Living in Vancouver at the time, she figured a place on the less developed West Coast would be a counterpoint to urban life.

And she liked the area as a place to invest money as well as time. “In 2005, Long Beach, etc, was as much on the map, if not more so, than Whistler and Victoria,” she said. “So I knew it would be a good bet as an income producer/real estate investment.”

Ratner considered walking away from her deposit when the economy took a tumble in December, but she’s glad she didn’t.

“It may not churn as in income producer this year or next but it can’t help but be a winner in the long run. And in the meantime I really enjoy using it. The hotel has an uplifting atmosphere; I love the open feeling.”

The turmoil in the real estate market hasn’t dampened developer Mike Duggan’s enthusiasm either. He has a second phase of 46 villas designed and ready to be marketed as soon as the remaining units in the original project are re-sold.

© Copyright (c) The Vancouver Sun

Despite challenging economic times, developer hasn’t had to lower prices to entice buyers

Michael Sasges
Sun

MACPHERSON WALK

Project location: Burnaby, MacPherson and Irmin

Project size: 49 townhouses, 296 apartments

Residence Size: 1 bed, 514 sq. ft. – 665 sq. ft.; 2 bed, 2 bath, 782 sq. ft. – 893 sq. ft.; 3 bed, 2 1/2 bath townhouse, 1291 sq. ft. – 1,355 sq. ft.

Prices: 1 bed, from $259,900; 2 bed, from $334,900; 3-bed townhouses, from $559,900

Sales centre: 14 – 5883 Irmin St.

Hours: noon – 5 p.m. Sat – Sun

Telephone: 604-456-8883

E-mail: [email protected]

Developer: Hungerford Group

Web: macphersonwalk.com

Architecture: Robert Ciccozzi Architecture

Interior Design: BYU Design

Occupancy: phase 1, fall, winter; phase 2, spring

– – –

An architect and interior designer whose mastery of space is proclaimed by their success in professional competitions and the width and depth of their commissions.

Two attached-residency types. Four acres of landscaped grounds. Six buildings, robustly detailed in timber and brick. A seven-acre property.

MacPherson Walk is big, memorably big: it is a departure for the family-owned real estate company responsible for its development, the Hungerford Group, and it is intended by the family as a profession of its abilities.

”Our family has been around,” Michael Hungerford says. ”I’m the fifth generation in Vancouver, my kids are the sixth.

”We’ve been developing property for over 30 years. I would say we are a new face to large-scale multi-family. In terms of understanding development, understanding service, we’ve been doing it for a long time and we have a reputation that’s been earned over the generations….

”We are here to stay and we want this to be the measure of what we will do in the future.”

“We” are Michael and brother Andrew and their father, George.

“They” are not necessarily saying that MacPherson Walk, wood-frame attached residential, is their definite future.

”…this is a good measure of the standard we want to set for this market. We will be servicing other markets with our products. It could be high-end communities; it could be industrial parks, retail. We’re a developer that’s not afraid to go into different asset-classes.”

All but 25 of the MacPherson Walk homes have been sold. The sales and marketing campaign started in October 2007; construction, in early 2008.

Father and sons, in other words, are completing the sale and construction of a new-to-them product in challenging economic times.

”Obviously no one could have predicted the market conditions and the difficulty purchasers have had with employment,” Hungerford says to the question, what do you know in the summer of 2009 that you didn’t in the summer of 2007?

”I think you have to be flexible; you have add some value to hold value. I think everyone anticipates value goes up. I think in this market that’s changed for people; prices have come down.

”We’re really fortunate that prices have held up here. We’ve never lowered our price. And I think that the general south Burnaby market is one of the stronger markets in metro Vancouver.

”There are fewer large-scale communities like this. I think people see quality and they see a different experience living here. And that’s something that has allowed us to maintain prices.”

The first six months of the Westcoast Homes reporting year, of course, has been a chronicle of declining prices: Concord Pacific, the Cosmo tower in downtown Vancouver; Francesco Aquilini, the Richards tower downtown; Amacon, the Beasley, again downtown: a “bulk,” or liquidation, campaign by one of the big organizers of sales and marketing campaigns and on behalf of developers with unsold homes around here and in the Okanagan.

”Our pricing at the beginning was realistic and value-based,” Hungerford says. “We set prices that we thought were reasonable to begin with. So we didn’t need to drop prices.”

Hungerford says the family has also tried to increase value for their customers during the wait for their homes.

Heavier carpet underlay. Cement board, not waterproof drywall, behind bathroom tiles. Booster fans to accelerate laundry-room venting and improve dryer efficiency. Outside, retaining walls of stone, not wood.

He says he has not priced out the cost to Hungerford of these after-sale upgrades.

”These things are going to see this project last a lot longer. We haven’t priced them out. But they were certainly the right decision. Throughout the development of a project you have to constantly make decisions about product selection and issues that come up. We have always tried to do the right thing, which is for the long term.”

© Copyright (c) The Vancouver Sun

Derrick Penner
Sun

British Columbia recorded an upswing in applications for building permits in June, according to Statistics Canada, giving the construction sector hope that it has reached the bottom of its downturn.

Builders in the province took out almost $632 million in permits for new construction in June, Statistics Canada reported Thursday, a 30-per-cent increase from May and the province’s best month of the year, driven largely by a jump in non-residential jobs.

The level is still 41 per cent below the $1.065 billion worth of permits builders took out in June 2008; the $3.037 billion in permits issued for the first half of 2009 is also down 41 per cent from the first six months of 2008.

However, the jump, including a small increase in residential permit applications, is encouraging to Philip Hochstein, president of the Independent Contractors and Business Association of B.C.

“A saying is that once you’re in a hole the first thing you do is stop digging,” Hochstein said in an interview. “I think we’ve stopped digging.”

B.C.’s increase in building permits helped lift national figures to an unexpected gain in June, Statistics Canada said, with $5.2 billion in new building permits issued during the month.

B.C.’s gain came in every component except commercial and industrial building permits.

Economists had expected permits to decline by about three per cent in June. The May increase in permit values was revised to 17.5 per cent from the agency’s previous estimate of 14.8 per cent.

The news wasn’t so good in Metro Vancouver, though, where permits dipped by a small margin, 1.1 per cent, to $245 million in June.

The biggest gains across the country came in Montreal (up 36.9 per cent) and Hamilton, Ont. (up 289.3 per cent). The value of permits declined in Calgary by 33 per cent.

However, industry representatives took note of an increase in residential building permits within the entire Metro region, which was a welcome sign.

Across B.C., builders took out almost $298 million in permits for new-home construction. That is nowhere near the $619 million issued in June 2008, but is a marked improvement on May, when municipalities handed out almost $263 million in permits.

“We were very pleased with the figures on the residential [side],” Keith Sashaw, president of the Vancouver Regional Construction Association, said. “That’s usually the first sector that comes out of a downturn.”

His association compiles its own report based on the Statistics Canada figures, which indicate a large part of the increase in residential permits, some $178 million, were issued in the region it covers, the Lower Mainland and southwest of the province, a 29-per-cent increase from May.

Hochstein said new-housing construction is key in jump-starting the commercial and institutional sectors.

“You don’t build the new Costco until there is a new [residential] subdivision,” Hochstein said.

In the meantime, he added that the construction industry is enduring the uncomfortable adjustment of paring back some of the increased building capacity that it had established during the boom.

He said a quirk of the federal infrastructure stimulus program, which requires all projects to be completed by 2011, has sped up the process.

Hochstein said the timetable precludes governments from rolling out large projects, in the $20 million-to-$30 million range, which leaves bigger construction firms chasing smaller contracts that they normally wouldn’t bid on, and the smaller contractors facing unusual competition.

The competition, Hochstein said, means “taxpayers are getting far greater value for their dollars than they did a year or two ago.”

Sashaw said his members are optimistic that some larger-scale projects, such as a new RCMP facility and health centres, will help buoy the sector in 2010.

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Apartment owners and managers hope to explain impact of HST to provincial government

Marke Andrews
Sun

If the provincial government goes ahead with plans to apply the 12-per-cent harmonized sales tax to landlords next year, property owners will be hamstrung to improve or build rental units, says a housing executive.

Marg Gordon, CEO of the B.C. Apartment Owners and Managers Association, said Wednesday her organization is concerned about what this will mean not only for landlords, but tenants as well.

“This will severely affect any plans we had to try to encourage purpose-built rentals,” Gordon said.

Currently, tenants do not pay the five-per-cent goods and services tax, but rental property owners must pay GST on their input costs — which include materials and labour costs that go into renovating a property — and residential owners do not get input tax credits.

Gordon’s association holds that to offset the 12-per-cent HST, members would need to receive input tax credits. They could also raise rents, but are limited to do so by provincial rent control legislation which, in 2009, set a 3.7-per-cent ceiling.

Gordon said the HST will compound landlords costs, such as an 11-per-cent increase in natural gas in the past year.

“We can only raise our revenues by 3.7 per cent, but our expenses keep climbing,” said Gordon. “This is a huge disincentive to wanting to be a landlord, and to developing communities of new rental housing.

“There has to be some ability to be eligible for input credits, or a flow-through cost.”

On Tuesday, Gordon sent letters to Premier Gordon Campbell and government ministers requesting a meeting to discuss what the HST will mean to both landlords and tenants.

The association has 1,200 members representing 100,000 rental units.

Tom Durning of the Tenants Resource & Advisory Centre (TRAC), supports the group’s bid for a break, if it means stability.

“I would support them going to the government and see if they can get a break if they upgrade their units, but if they do get a break, I would hope they would pass it on to keep the rents stable,” Durning said.

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‘Too early to say’ if sector is out of the woods

Province

B.C. posted Canada‘s largest jump in the value of building permits in June, but a local player warns it’s too early to say the construction sector has turned the corner.

The value of permits issued across the province surged by $146.8 million, or 30.3 per cent, between May and June, Statistics Canada said yesterday.

The value of non-residential permits in B.C. surged by 49.7 per cent, while residential jumped 13.7 per cent, StatsCan said.

Total building permit values in the Lower Mainland-Southwest region climbed two per cent to $305.8 million between May and June, fuelled by a 29-per-cent rise in residential permits. Non-residential permits fell by 21 per cent during this period.

Keith Sashaw, president of the Vancouver Regional Construction Association, saw hopeful signs in the latest numbers but cautioned that the market will likely remain volatile.

“The June permit values are encouraging but it is too early to tell if the worst is over for the construction industry,” Sashaw said.

Year-to-date permit values in the Lower Mainland-Southwest region are down 57 per cent from the same period last year, led by a 63-per-cent decline in residential permits.

Nationally, building permits rose unexpectedly in June, climbing one per cent to $5.2 billion. Economists had expected permits to decline by about three per cent in June.

Among major Canadian centres, the biggest gains came in Montreal (up 36.9 per cent) and Hamilton (up 289.3 per cent).

The value of permits declined in Calgary by 33 per cent.

“Since the beginning of 2009, the value of permits has fallen by 26.2 per cent compared with the same period a year earlier,” the agency said.

“The institutional component of the non-residential sector was the only component that posted a gain compared with the first six months of 2008.”

The value of residential permits rose 0.5 per cent to $2.7 billion in June –the fourth straight monthly increase in the sector — led by Quebec.

Non-residential-sector permits increased 1.5 per cent to $2.5 billion during the month.

Charmaine Buskas, senior economics strategist at TD Securities, said the “the continued strength of the building permit data bodes well for the Canadian construction market.”

“It is clear that domestic considerations will remain a key driver for the economy, as the external sector remains under pressure,” she said.

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Sun

OTTAWA — Building permits rose unexpectedly in June, rising one per cent to $5.2 billion, Statistics Canada said Thursday.

The sharpest increases in the value of building permits issued in June were in British Columbia (+30.3%, for a total value of $632 million), which had gains in every component except commercial and industrial building permits.

“The increase was attributable to gains in both residential and non-residential construction intentions,” the federal agency said.

Economists had expected permits to decline by about three per cent in June.

Statistics Canada said gains were recorded in seven provinces, with the biggest increases coming in B.C. and Quebec, where permits were issued across all sectors.

Among major centres, Montreal and Hamilton posted the biggest gains. The value of permits declined in Calgary.

“Since the beginning of 2009, the value of permits has fallen by 26.2 per cent compared with the same period a year earlier,” the agency said. “The institutional component of the non-residential sector was the only component that posted a gain compared with the first six months of 2008.”=

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