Malcolm Parry
Sun

Security specialists will soon have South False Creek’s 15-building, 1.4-million-square-foot Olympic Athletes’ Village complex buttoned up tighter than an ant catcher’s pants. And that could be earlier than expected — or feared. City- appointed project overseer Bruce Tidball was on site Tuesday, along with Vanoc’s villages development director Mark Cutler, and project developer Millennium Properties’ general manager Hank Jasper. Millennium’s co-principal Peter Malek was on-site, too. So was Bob Rennie, who on May 15, 2010, will begin an Avenues Of The World blitz to sell the remaining 472 units of the 737 for which his Rennie Marketing Systems firm is responsible. Their total value, in a project now named Millennium Water, was earlier stated to be $1.1 billion. Ten invited designers will ready units for buyers’ inspection, Rennie said.

Tidball, Cutler and Jasper were present for the purpose of okaying occupancy for the southwesterly village structure known as Parcel Two. Some 80,000 square-feet of commercial space was handed over Aug. 1, two months ahead of schedule. With Tuesday’s doings, and more to follow on the other buildings, it appears that the whole complex will be wrapped before expected, too.

Peter and brother Shahram Malek paid an unprecedented $193 million for the seven-hectare site. Across False Creek, it faces Expo 86’s former 82.5-hectare site which the B.C. government sold to Li Ka-shing for $145 million. The Maleks‘ costs were mitigated, however, by an estimated $60-million worth of seawall and ornamental wall-and-paving work undertaken by the city.

With the recession lifting, one wonders what Rennie will realize for the 66 units, sized 1,800 to 3,900 square feet, in the two buildings designed by the late Arthur Erickson with Larry Doyle and Nick Milkovich. Releasing May 15, a single-floor, north-facing penthouse should top $10 million. The Erickson complex is already unofficially named Canada House. “Or rich peoples’ house,” Rennie salesman Michael Braun said. “And not necessarily Canadian.”

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Pallavi Gogoi
USA Today

Bank stocks have roared back from a near-death experience, which might be diverting attention from a new threat looming for the industry: commercial real estate.

The speed at which loans on commercial properties such as office buildings and malls are souring is “unprecedented,” a recent report from Deutsche Bank said. The delinquency rates on these loans reached 4.1% in June, more than double the March rate. Banks are most vulnerable because they hold about $1 trillion of commercial real estate loans and an additional $530 billion in construction loans.

Job losses have led to rising office vacancies. Tight-fisted consumers have helped close retailers such as Circuit City, forcing mall landlords to default on loans. That is having a tiered effect on the banking industry:

•It is especially noxious for the smallest banks, which have very large portions of their loan portfolios exposed. That’s the chief reason bank failures have hit 89 this year, vs. 25 for all of last year. For instance, one of the latest banks to fail, Affinity Bank, had 46% of its $805 million in loans to commercial properties. That compares with 33% for all banks, says Keefe Bruyette & Woods.

•Regional banks are also highly exposed and are a bigger worry for the economy because many are large. United Commercial of San Francisco is first on the “top potential concerns” list of Barclays Capital research. The bank, with assets of $12.7 billion, missed a regulatory deadline for filing its second-quarter report and is restating its 2008 financial statements. Tuesday, it named a new CEO. United Commercial wouldn’t comment.

•The very largest banks, those with at least $1 trillion in assets, are less exposed. JPMorgan Chase has about 5.4% of such loans, and Citigroup has 3.4%, according to government filings. Among them, Wells Fargo has the largest exposure, with about 16.5%of its $821 billion loan portfolio made up of commercial mortgages or construction loans.

Meanwhile, bank stocks, as measured by the Financial Select Sector SPDR exchange traded fund, which suffered big losses previously, are up about 150% since the March low, more than double the broad market’s gains. Yet the potential danger to the banking industry could grow, because the losses will likely get worse.

The National Association of Realtors projects that retail vacancy rates will increase from 11.7% in the second quarter of 2009 to 12.9% in the same period of 2010, the highest vacancy rates since 1991. And office building vacancy rates are expected to rise from 15.5% to 18.8%. “Who knows how long it will take to fill the building with employees again?” says Fred Cannon, chief equity strategist at Keefe Bruyette & Woods.

 

Builders are seeing more interest in new projects, but recovery is expected to be gradual for the rest of 2009

Derrick Penner
Sun

Residential housing construction activity in Metro Vancouver jumped in August from July’s dismal lows, indicating a continuing trend toward a gradual recovery, Canada Mortgage and Housing Corp. reported Wednesday.

Builders started work on 927 new homes in August, a significant improvement from the 516 started in July, but still some 41 per cent below the 1,561 new homes started in August 2008.

To the end of August, Metro homebuilders had started 4,786 new homes, which is just over one-third the 13,643 started to the end of August 2008. But the numbers appear to heading higher later in the year.

“We’ve seen several very solid months on the resale market with home sales increasing and fewer active listings,” CMHC analyst Robyn Adamache said, “so builders, I guess, are starting to respond by taking a look at starting their next projects now that they’re seeing a bit more demand out there.”

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said the combination of developers lowering prices, low interest rates and renewed consumer confidence have sparked buyer interest, and August’s start numbers reflect improved pre-sale activity.

Construction workers have begun to return to job sites after thousands of job losses in the sector since late last year.

Adamache said she expects to see a gradual return to better numbers. She forecasts that by the end of the year, Metro Vancouver housing starts will be down 50 per cent from the numbers recorded in 2008. To the end of August, starts were 65 per cent below last year’s numbers.

The increased activity has occurred in pockets around the region. Adamache noted that New Westminster and Surrey in particular saw larger projects started in August.

In New Westminster, developers started work on multi-family projects totalling 158 units in August, compared with multi-family construction totalling 56 units for all of the first eight months of 2008.

Surrey saw 177 single-family homes started in August compared with 124 for the same month a year ago.

However, while New Westminster has seen a total of 183 units of housing started, up from 78 in the first eight months of 2008, other communities still show significant declines.

Surrey saw 1,238 units of new housing started to the end of August, a 70-per-cent decline from 4,090 in 2008. Vancouver saw a mere 863 new units started, 79 per cent below the 3,569 stared to the same point in 2008.

Across B.C.’s urban centres, builders started work on 1,414 new homes, which was 37 per cent lower than in August of 2008. To the end of August, builders had 7,433 new homes under construction, 64 per cent below the 20,837 underway to the end of August a year ago.

Nationally, home construction increased by a greater-than-expected 12.1 per cent in August as the country’s housing market continued to show signs of recovery.

The federal agency said the annualized pace of housing construction increased to 150,400 starts in August from 134,200 units the previous month.

Most economists had expected housing starts to increase to about 139,000 units in August.

“Housing starts are trending higher, reflecting improvements in both the single and multiple segments,” said Bob Dugan, CMHC’s chief economist. “The improvement in housing starts is consistent with our expectation of a stronger second half for 2009.”

Robert Kavcic, an economist at BMO Capital Markets, said, that “the rebound in residential construction activity in August is further evidence that the Canadian housing sector is in recovery mode.”

“This was undoubtedly a strong report, and it indicates that some momentum is perhaps beginning to build in the new homes market, thereby complementing the dramatic turnaround seen in the existing homes market recently,” said Millan Mulraine, economics strategist at TD Securities.

“However, while we believe that the recent gains in new residential construction may be sustainable, we are unlikely to see further sharp advances in the pace of construction, particularly given the weak economic backdrop and soft labour market conditions,” he said. “In fact, we expect the level of residential starts to remain in the current range in the coming months.”

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Marke Andrews
Sun

An RBC Economics report on home ownership released Wednesday indicates housing is more affordable than it was a year ago. But the report, which spans the April-to-June second quarter of 2009, may already be dated, as housing prices have edged up during the summer months.

Even the report itself admits its affordability figure may have bottomed out.

“This restorative phase of the affordability cycle is likely running out of steam,” the nine-page report stated in its second paragraph. “The two major contributors to the significant improvement during the past year or so — the decline in mortgage rates and the drift down in prices — appear to have reached turning points.”

In B.C., second-quarter homeownership costs fell in all four areas the survey measures. (RBC Affordability captures the proportion of pre-tax household income required to meet costs of owning a home, including mortgage payments, property taxes and utilities.)

Home ownership costs for a detached bungalow fell 11.3 percentage points from the same period in 2008, to 58.4 per cent. Standard two-storey house costs fell 12.8 points to 64.4 per cent, standard townhouse costs dropped 7.6 points to 45.6 per cent, and standard condominium costs fell 6.2 points to 32.7 per cent.

For the quarter, the drop in B.C. was not as dramatic, falling just 0.7 of a percentage point for detached bungalows, 0.9 point for two-storeys, 1.0 point for townhouses and 0.1 point for condominiums.

“While the cumulative declines in the past five quarters have been the sharpest since 1991, the latest levels are still significantly above long-term averages, suggesting that affordability in the province has yet to be fully restored,” the report said.

And with housing prices rising across the province in late summer, it is unlikely we will see further drops in this measurement. Vancouver house prices today are about seven per cent higher than they were at the most affordable time of the three-month study period.

“We’ve reversed our trend of increasing affordability and we are going the other way,” says Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the University of B.C.’s Sauder School of Business.

Throughout the spring and summer, sales of existing homes were up 125 per cent over the low point early this year in the province. In Vancouver, sales of existing homes through to the end of June are three times what they were at the end of 2008, which marked a 19-year low.

The huge increase in home-buying in the Vancouver area is difficult to fathom, Somerville said.

“The craziness doesn’t make sense, because that happens either when the economy is going gangbusters or when there is a speculative frenzy, and we’re not [experiencing] either of those,” he said.

© Copyright (c) The Vancouver Sun

Recovery emboldens builders

Province

Housing starts in the Vancouver area surged by a nation-leading 84 per cent between July and August as builders were emboldened by the recovering resale market.

Seasonally adjusted annual starts in the area soared from 5,600 in July to 10,300 last month, Canada Mortgage and Housing Corp. said yesterday.

CMHC senior market analyst Robyn Adamache said she expects the trend towards more starts to continue, if not with the same monthly magnitude.

“We’ve seen several very solid months of resale-market activity that sets the tone for any housing market,” Adamache said. “That’s making everybody feel a little more confident about starting that next project.”

Greater Vancouver Home Builders Association CEO Peter Simpson said builders have sold their standing inventory and have been enjoying success with new projects since the early summer.

“That results in higher starts and puts more people back to work,” he said.

Still, actual starts for August in the Vancouver area are down 41 per cent from last year. For the year to date, they’re off 65 per cent. CMHC expects starts for the area in 2009 to be down about 50 per cent from last year’s level.

Urban housing starts in B.C. also led the nation between July and August, jumping 56 per cent at a seasonally adjusted annual rate Nationally, home construction rose by a greater-than-expected 12.1 per cent in August.

Separately, RBC Economics said that owning a home in Canada is getting more affordable but that trend could soon end. “The national home affordability level has been restored to pre-housing boom levels,” said Robert Hogue, RBC senior economist said.

“However, the recuperative phase of the affordability cycle seems to be drawing to a close with housing prices firming up in many parts of the country and mortgage rates no longer trending downward.”

In Vancouver, the proportion of pre-tax income needed to maintain a detached bungalow was 63.4 per cent, the highest among large Canadian cities.

In Toronto, ownership costs worked out to 46.5 per cent, while in Calgary it was 35.7 per cent.

© Copyright (c) The Province

Sun

OTTAWA — Home construction increased more than expected in August, according to Canada Mortgage and Housing Corp., as the country’s housing market continued to rebound.

B.C. led the way with a whopping 56 per cent increase over July.

The federal agency said housing starts increased to 150,400 units in August from 134,200 units the previous month.

Most economists had expected housing starts to increase to about 139,000 units in August.

“Housing starts are trending higher, reflecting improvements in both the single and multiple segments,” said Bob Dugan, CMHC’s chief economist. “The improvement in housing starts is consistent with our expectation of a stronger second half for 2009.”

CMHC said the seasonally adjusted annual rate of urban starts rose 14 per cent to 131,800 units in August. Multiple-unit construction rose 23.8 per cent to 77,600 units, while the single-unit sector gained 2.5 per cent to 54,200 units.

Overall, urban construction was up 56 per cent in British Columbia, 16.1 per cent in the Prairies, 13.8 per cent in Ontario, 9.6 per cent in Atlantic Canada, and 2.5 per cent in Quebec.

Rural starts were unchanged in August at 18,600 units.

“This was undoubtedly a strong report, and it indicates that some momentum is perhaps beginning to build in the new homes market, thereby complementing the dramatic turnaround seen in the existing homes market recently,” said Millan Mulraine, economics strategist at TD Securities.

“However, while we believe that the recent gains in new residential construction may be sustainable, we are unlikely to see further sharp advances in the pace of construction, particularly given the weak economic backdrop and soft labour market conditions,” he said. “In fact, we expect the level of residential starts to remain in the current range in the coming months.”

Housing starts in August:

Total 150,400

British Columbia, urban centres 17,000

Canada, rural areas 18,600

Canada, urban centres 131,800

Canada, singles, urban centres 54,200

Canada, multiples, urban centres 77,600

Atlantic region, urban centres 8,000

Quebec, urban centres 41,000

Ontario, urban centres 42,000

Prairie region, urban centres 23,800

Source: CMHC

 

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Value of building permits in southwestern B.C. jumps 40 per cent from June to July of this year

Derrick Penner
Sun

The value of building permits taken out by contractors in southwestern British Columbia shot up 40 per cent from June to July to $427.5 million, Statistics Canada reported Tuesday.

That represented the glimmer of a silver lining in an otherwise gloomy picture of British Columbia’s construction sector as far as Keith Sashaw, president of the Vancouver Regional Construction Association is concerned.

“We’ve seen a few months now of strong increases in building permit activity, especially on the residential side,” Sashaw said in an interview.

Increased permits, he added, coupled with three months of increased job creation this summer following thousands of job cuts over the previous seven months, “bodes well that we’ve probably seen the worst of the recession and its impact on the construction industry.”

Overall, however, the increases in permit activity seen in the Lower Mainland region represent somewhat of a recovery from lower levels as the building intentions of builders nearly collapsed this year from their levels of 2008.

Sashaw, in a report, noted that total building permits issued in the region to the end of July were only 52 per cent of the value of permits issued during the same period in 2008.

Across British Columbia, the planning activity of builders declined slightly in July from June as contractors took out some $618.6 million worth of building permits in July, Statistics Canada reported Tuesday.

That compares with $634 million in permits that builders took out in June, with Statistics Canada attributing the decline solely to a drop in non-residential permit activity.

“Provincially, Ontario, Alberta and British Columbia reported decreases in all three components [of non-residential construction],” Statistics Canada said in its report.

And planned building activity remains well behind levels of a year ago as July’s total value of permits was still some 30 per cent below the $890.2 million that builders booked in July 2008.

July’s permit values, while almost stable when compared to June, indicate that “by a long shot, the construction industry isn’t out of the woods yet,” according to Philip Hochstein, president of the Independent Contractors and Business Association of B.C.

“As we finish building through the backlog of projects from 2008 and 2009, there’s not a lot coming forward in 2010, so next year will be a very challenging year for B.C. contractors,” he added.

While construction employment edged up in the Lower Mainland during August, according to the latest Statistics Canada labour force survey released last Friday, the sector still lost 1,400 jobs across the province and was down 35,200 positions compared with August a year ago.

On a provincial basis, residential permits saw an almost 20 per cent boost from June applications that were worth almost $374 million in July. That, however, was still 40 per cent lower than their level a year ago.

Non-residential permit applications across the province shrank 24 per cent from June to applications worth $245 million in July. That was almost nine per cent below permit activity in July of 2008.

Tuesday’s report said that municipalities issued about $2.6 billion in residential permits in July, representing a drop of 4.1 per cent. A 19.3 per cent decrease was recorded for non-residential permits, coming in at about $2 billion.

© Copyright (c) The Vancouver Sun

Province

Building permit values in the Vancouver area jumped almost 43 per cent between June and July, Statistics Canada said yesterday.

Permit values for the area climbed 42.8 per cent to $350.6 million in July, StatsCan said.

“The July permit values are extremely encouraging,” said Keith Sashaw, president of the Vancouver Regional Construction Association.

“While there may be some continued volatility ahead, the worst of the recession for the construction industry may be behind us.” Independent Contractors and Businesses Association president Philip Hochstein, however, cautioned that the construction industry is not yet out of the woods.

“As we finish building the backlog of projects from 2008 and 2009, there’s not a lot coming forward in 2010, so next year will be a very challenging year for B.C. contractors,” Hochstein said.

Across B.C., permit values fell 2.5 per cent between June and July.

Residential values in the province rose 19.8 per cent and non-residential dropped 24 per cent.

Nationally, a strike by Toronto civic workers was largely blamed for a surprising drop in building permit values in July, StatsCan said.

Permit values fell 11.4 per cent from June to $4.6 billion, despite economists’ forecasts of a 0.4-per-cent increase. However, excluding Toronto — which experienced a five-week halt to civic services — the national decrease was just 1.8 per cent for July.

Tuesday’s report said that municipalities issued about $2.6 billion in residential permits in July, representing a drop of 4.1 per cent. A 19.3-per-cent decrease was recorded for non-residential permits, coming in at about $2 billion.

Ontario experienced the harshest decline — down 27.5 per cent.

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