Property assessments for all B.C. homeowners are arriving this week

Don Cayo
Sun

The 2009 property assessments– the values on which British Columbians’ 2010 municipal tax bills will be based–are on the web and in the mail.

This year–unlike in January of 2009 when the system was turned on its ear by political interference — it’s fairly easy to figure out if you’ll win or lose when your tax bill comes out in July.

Let me illustrate with an example that, on the surface, looks scary: Say your assessment notice shows a 15-percent increase in the value of your home or business. What to do?

First, don’t panic. Take a moment to read this column, check our website and figure out what this really means.

You’ll find a 15-per-cent increase is no big deal if your home is in New Denver, Kitimat or Clearwater, or your business is in Peachland, Sparwood or Smithers. Because in these places the average assessment — not just yours — is up about 15 per cent. So the impact will be nil. Any hit on your tax bill in July will be due solely to increased municipal spending.

If your home is in Lillooet, Salmo or Valemont, or your business is in Castlegar, Sooke or Wells, a 15-per-cent assessment increase actually looks good –because the average is more than 20 per cent. And any property whose value increases less than average can expect a break on the coming tax bill.

However, if this hypothetical 15-percent increase is for property in most urban centres — almost all of the Lower Mainland, the Capital Region or the Okanagan–then now might be a good time to panic. Because the average in these places hovers just a few points above or below zero. And if you have a significantly higher-than-average change in value, you get a bigger tax bill.

It’s how the change in your assessed value compares to the average for other properties in your community — not the absolute value of your assessment –that matters to your tax bill.

My colleague Chris Parry has compiled a chart that shows the average change in every community in B.C. You can access it through my tax blog at the link at the bottom of this column.

The blog also links to a B.C. Assessment page where, if you haven’t received your notice in the mail, you can find the new value of your property. There’s also a link to a B.C. Assessment page with information on appeals. (If you haven’t got a computer, call your regional B.C. Assessment office at the number on your assessment notice.)

Last year, the province enacted a temporary provision to let property owners choose the lower of their last two assessments as the basis for their 2009 tax bills. Perversely, this meant a break — for some office towers, it was a huge one — for properties that increased the most in value, and an increase for under-performing properties.

But this year, it’s “winners” in the real estate market who’ll pay more. Property values were just starting to rebound from a big dip when the assessments were locked in on July 1, and this allows a relatively smooth transition back to the way property tax normally works.

Paul Sullivan, the property tax guru at Burgess Cawley Sullivan, says this may also mean that homeowners are less inclined than usual to appeal their assessments, because most aren’t up very much.

But business appeals may increase, he said. That’s because last year’s tax tinkering meant very few 2008 assessments were appealed — anyone unhappy with their assessment could pay on the 2007 value instead. So there has been an extra year for any inequities to collect and compound, and he thinks this may mean more appeals.

www.vancouversun.com/taxingissues to calculate your personal tax impact

© Copyright (c) The Vancouver Sun

Province

Many people are tempted to take advantage of low mortgage rates before they start rising again, and before housing prices recover completely from the slide they took in 2009.

But those rates aren’t here to stay, warns the Bank of Montreal.

“While today’s ultra-low borrowing costs repre sent a unique opportunity to purchase a property, homebuyers need to proceed with caution and keep in mind that renewal rates will likely be substantially higher in coming years,” says Sal Guatieri, senior economist with BMO Capital Markets.

He adds that mortgage rates will start coming back up when the Bank of Canada’s overnight rate starts climbing in July.

Here are some things homebuyers should consider, the bank says, in order to keep their mortgages affordable:

– Shortening the life of the mortgage cuts down on the amount you pay in interest.

– Making a larger initial down payment cuts the size of the mortgage you need and the amount of interest you’ll have to pay.

– What happens when the mortgage rate goes up? A two per cent rate hike in a $250,000 mortgage financed at 2.25 per cent will mean an extra $260 a month on your payments. A rule of thumb is that total housing costs (mor tgage payments, property taxes, heating costs, etc.) shouldn’t be more than one-third of your income.

– Pre-payments can save you money. Pay weekly or bi-weekly instead of monthly, and take advantage of 20-plus-20 prepayment privileges: Once a year, you can increase your mortgage payment by up to 20 per cent over the current payment without charge. You can also prepay up to 20 per cent of the original mortgage principal each calendar year. BMO says this option can be exercised in minimum amounts of $100 without charge, though some conditions apply.

– Make sure you have some money to save –if you’re maxed out, you’ll have nothing in your pocket when the roof starts leaking.

– Do you want a fixed mortgage, or a variable one? Variable rates could save you money over the long term, but fixed-rate mortgages could give you peace of mind by insulating you against rate increases.

– Get pre-approved for a mortgage so you’ll know what you can spend without overspending, and don’t get caught up in a bidding war that will leave you with mortgage payments you can’t afford.

© Copyright (c) The Province

USA Today

McLEAN, Va. (AP) — Mortgage rates rose for the fourth straight week, ending the year above 5%.

The average fixed rate on a 30-year mortgage was 5.14% this week, up from 5.05% last week, Freddie Mac said Thursday.

Mortgage rates are closely tied to yields on long-term government debt. The average fixed rate on 30-year mortgages has steadily risen since hitting a record low of 4.71% the week of Dec. 3.

The Federal Reserve is pouring $1.25 trillion into mortgage-backed securities to keep rates low this year. The program, aimed at making home buying more affordable, is set to end next spring.

Still, qualifying for a loan is hard because lenders have severely tightened requirements. The best rates are available to those with good credit and a 20% down payment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed mortgage rose to 4.54% from 4.45% last week.

Rates on five-year, adjustable-rate mortgages averaged 4.44%, up from 4.40% last week. However, rates on one-year, adjustable-rate mortgages fell to 4.33% from 4.38%.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans. The fee averaged 0.7 point for 15-year and 0.6 point for five-year loans and for one-year mortgages.

Copyright 2010 The Associated Press. All rights reserved.

Market showed resilience in 2009, and should show solid growth in 2010, says Adera president

Norm Couttie
Sun

Coming on the heels of a worldwide financial meltdown, 2009 did not look promising. Even though it was our company’s 40th anniversary, it did not seem the time to have a big celebration.

In the spring, the real estate market showed some resilience due to several factors: low interest rates, which increased buyer demand; lack of new-home supply caused by developers not starting new projects in 2008; and harder-to-obtain construction financing, often available only to large, well-capitalized developers, further reducing supply. For individual developers, the secrets to success were affordable product, immediate occupancy and a quality brand.

The Canadian banking system proved to be more stable than the U.S. system. Vancouver’s housing supply was fortunately not overbuilt, enabling the market to resume more quickly. And there was a higher level of optimism about British Columbia in general. All this led to a shorter down cycle than anyone had imagined. A typical real estate market cycle usually doesn’t drop so fast or go back up so quickly. We are fortunate to live in this part of the world. This is true both for homebuilders and for homeowners, who saw the value of their housing investment recover quickly.

Another unusual feature of this downturn was that normal cyclical economic patterns were absent during the year. Even some experienced developers, who would usually prepare for this, were left exposed. At Adera, we took measures during the first half of year to get us through the worst part of the downturn and position us for when the economy improved. We reduced both construction costs and time, completing all our projects up to two months early. This showed our lenders that we could stay on budget and ahead of schedule, close the sales of all our presold homes early, and sell our newly completed inventory, building confidence for new financing so we could move ahead on other projects. Starting new projects was the key to keeping our people employed and continuing to move forward even during the worst times.

Because we were in motion during the slow period, it was easier for us to pick up projects and move quickly when the economy revived than if we were starting from scratch. For example, our Pacific project, which had been put on hold, was brought back in the fall of 2009 and quickly sold out. We also used the slower time to revise and improve our customi–

zation program, which enables our homeowners to personalize their homes, and to catch up on some backlogs in our customer care services.

Looking forward, I believe that in 2010, both real estate prices and volume will likely be stable, with upward pressure in some areas where demand outstrips supply. We are back in a long-term rising trend after recovering from the 2008 downturn. The positives far outweigh the negatives. Having lived through an Olympics before, I believe many Vancouverites’ concerns will seem inconsequential afterward, while the positive effect of Olympic exposure will bring even more people who believe that buying real estate in Vancouver is a terrific long-term investment.

Smart growth policies leading to the creation of complete communities and densifying our city around transit nodes is the sustainable way of the future. False Creek and Coal Harbour are good examples of livable high-density development. Slightly lower-density developments at regional town centres like Surrey Central, Metrotown and Richmond also work well. And neighbourhood centres with mixed-use projects — for example, shopping, services and residential such as at Morgan Crossing in Surrey or Wesbrook Village at UBC — are creative uses for valuable serviced urban land. Many traditional shopping centres with parking lots, such as Richmond Centre and Brentwood, will continue to be redeveloped with increased density, parking lots replaced by towers along with shopping, restaurants and other services.

Incorporating sustainable features in multifamily buildings and individual homes is another trend that will continue to grow. As more and more builders get comfortable with green design and construction, and as third-party rating systems adapt to the various housing forms offered in Metro Vancouver, homes will become increasingly sustainable. As leaders in what we call “practical green,” Adera is committed to finding innovative ways to build for a sustainable future, using the best thinking, materials and techniques of today.

Our 40 years of homebuilding experience gives us a basis for concern over increasing pressure to quickly advance green agendas. Industrywide problems like leaking buildings, driven in part by rushed revisions to building and energy codes, taught us that even small changes in building systems may have unintended consequences.

For example, we have recently seen high-efficiency window coatings reflect sunlight onto adjacent buildings at temperatures high enough to melt vinyl siding. When “proven technology” such as better windows can generate unexpected problems, imagine what may result from changing numerous and more complex building elements and practices all at once. The solution is not to avoid high-efficiency windows, or even leading edge green products, but rather to learn how to properly incorporate them into the entire building system.

We believe that a comprehensive program of analysis, research, pilot projects, education and follow-up, led by the building scientists, designers and builders who will ultimately be held responsible for the results, is the best way to build sustainably. Getting things right the first time (likely the No. 1 rule in construction), may actually speed up the greening of our cities.

In the end, 2009 turned out to be a fitting 40th anniversary year for Adera. Worldwide and local events forced us to dig deep for the courage, ingenuity, teamwork and passion that our founders displayed during the early years. As a company, we achieved, and actually eclipsed, every goal that we set through the year thanks to hard work and a willingness to adapt. More than ever before, we recognized how vital it is for all of our employees to remain focused on the principles on which we built 40 years of trust: a profound and deep focus on our customers, the relentless pursuit of innovation, and the nurturing of partnerships with the best trades, suppliers and consultants in the industry.

We believe 2010 will be a year of solid growth, enhanced sustainable living practices and exciting new design.

Norm Couttie is the president of Adera Development Corp. and an architect.

© Copyright (c) The Vancouver Sun

To understand recent industry gains, it’s important to look at often misunderstood real estate dynamics, notes developer

Sun

Greater Vancouver’s real estate market was gripped by confusion a little over a year ago, but values are now nearing their previous peaks, reports James Schouw, principal of James Schouw & Associates.

A little over a year ago Greater Vancouver’s real estate market threatened to grind to a halt, gripped by panic and confusion. After a seven-year boom, many believed the global economic and credit crises were enough to kill our market and that recovery from them was years away. Even after interest rates dropped dramatically, many chose to sidestep the market and wait to ‘‘see what happens.’’

Many did not contemplate the rate at which our population grows, and the resulting pressure on real estate. They may not have realized it, but people who wait out the market typically find themselves competing against almost 1,000more people every week in need of a home in Greater Vancouver.

In early 2009 I advised prospective buyers to beware the peril of waiting for news of the market bottom before buying a home because such statistical feedback tends to materialize too late to be useful.

Fastforwardthrough2009. The Real Estate Board of Greater Vancouver reports that the almost 3,100 transactions in November were an increase of 253 per cent, from the November, 2008 number. Selling prices have been climbing and many buyers have found themselves chasing the market upward. Remarkably, during the eight months from April through November, Greater Vancouver detached, attached and apartment benchmark prices increased by 16.6 per cent, 11.7 percentand13.3percent respectively. Most values are back in the ball park of their previous peaks of about two years ago.

How did the market rebound so quickly, and what lies ahead?

To answer, let’s focus on some often misunderstood dynamics that drive our real estate market. For starters, homes listed for resale are often referenced as inventory, which can be a misleading over simplification because it doesn’t recognize that prospective ‘‘sellers’’ in a stable or growing population are typically also prospective ‘‘buyers.’’ When thousands of homes change hands, keeping spirits high and realtors busy, neither the stock of usable homes nor the number of people needing those homes necessarily changes. Some sellers may choose to become tenants, but each such decision creates a market for one more landlord-owned home, and inventory remains fundamentally unchanged.

The effective inventory in Greater Vancouver, the number of vacant homes seeking residents, was probably highest in mid 2008. When global indicators turned gloomy, developers and speculative investors owned thousands of vacant units. Understandably, developers and their lenders reacted by slowing new residential development to a trickle, diminishing new supply of finished homes.

But what happened to demand? The answer lies behind another often misunderstood market dynamic. Contrary to some conventional wisdom, an individual or family doesn’t have to be thrilled about the economy or the Olympics to participate in the housing market. They just have to be living. People need homes, and they can’t just walk away en masse as they can with other investment vehicles.

Quantitatively, local housing demand, a function of population change, has continued to grow as it has done for years, along with most of Canada.

Recent Statistics Canada data indicates that during the 15monthsto July 1,2009, BC’s population alone grew by 92,593, requiring almost 40,000 additional homes.

That’s a normal rate of population growth for BC, representing the number of births and new arrivals minus deaths and people leaving, and isn’t likely to slow.

But since the middle of 2008 the development industry has fallen well short of meeting demand, and continues to fall short, causing effective inventory to shrink. In Greater Vancouver, certain developers were sitting on hundreds of vacant homes a year ago, but now have none. New housing starts will eventually increase, but major projects can take years to complete, and a restored plentiful inventory is still far off.

Due to a low birth rate and robust immigration, Greater Vancouver’s demographic and ethnic character constantly evolves. To appreciate the city’s growing international appeal, I talk to visitors and immigrants. Understanding Vancouver through their eyes can reveal how many layers of this remarkable city might otherwise be taken for granted.

As the city continues to mature into its world-class role, increasingly desirable to prospective residents from all continents, home ownership and rental will become less affordable, especially in the urban core. Local real estate will likely be increasingly wealth driven, as opposed to income driven. Income sufficient to finance a home is of little concern to wealthy families that don’t need financing. Already, average mortgage leverage is a fraction of that in more perilous markets, notably overbuilt ‘bubble’ markets to the south.

Along with Greater Vancouver, which not insignificantly is the closest major North American commercial centre to Asia, global population is growing too, by the better part of 100 million every year.

With the growth of commercialization, industrialization and wealth strongest in Asia, it’s difficult to ignore the emerging importance of Canada’s immense resources, especially on a per capita basis, including fossil fuels, water, minerals and agriculture (I do care about the environment– I’m just calling a spade a spade).

Net migration between B.C. and other Canadian provinces is currently low, playing only a small part in our population equation, and will likely remain so for some time.

Economically, there will be days of good news and bad, but only if our local economy suffers compared to other population centers, as it did in the 1990s relative to Eastern Canada, are we likely to see our growth curve flatten. I’m often asked where we find jobs for all our new residents. When population grows, so does local demand for goods and services. Most Vancouverites, including grocers, plumbers, doctors and so on, make a living serving other Vancouverites. Exports and tourism are only pieces of our diversifying economy.

What’s in store for local real estate in 2010? Greater Vancouver’s growing population will continue to absorb about 300 additional units of housing every week. Shrinking inventory will make real estate increasingly difficult to buy, with excess demand from the tightest localized markets overflowing into others. More would-be sellers may decide to stay put for fear of getting left out of the market. Accordingly, resale volume may shrink but prices will rise. New properties won’t last for long. Because of tightening inventory, any foreseeable interest rate increases are more likely to dampen real estate sale volume than to dampen value.

What about the Olympics? We’ve already enjoyed the economic stimulus afforded by years of federally and provincially funded infrastructure, and Olympic exposure will indeed help to fuel demand in the long term.

Greater Vancouver’s real estate market will continue to be driven by the growing number of people that simply need homes. Speculation, the catalyst of a ‘bubble’, is largely absent from the market due to lingering fear from the lessons of 2008. A bubble will only materialize if overconfident developers and speculators manage to oversupply demand. For now, if you own Greater Vancouver Real Estate, relax and have a happy new year.

Falling home prices appear to be behind us as Lower Mainland sales gain strength

Derrick Penner
Sun

When condo marketer Cameron McNeill stood to make a speech at his company’s Christmas party, he presided over an upbeat crowd of developers, realtors and industry insiders.

Dressed casually in a Hawaiian shirt, wearing a lei for the Polynesianthemed soiree at Chill Winston in Gastown, McNeill remarked that the brisk sales and project launches that have marked the end of this year are a long way from the dark days of last December.

A year ago, developers were putting projects on ice, and sales in Metro Vancouver’s resale housing market dropped to 924 transactions in December, half of what they were in December 2007.

“It was only a year ago that many in our industry were cancelling Christmas parties just out of principle,” McNeill, president of MAC Marketing Solutions, recalled in an interview.

“[December 2008] was a very sombre mood. There were broad layoffs happening industry-wide, not only [among] developers, but with service providers, architects, interior designers.”

No one was buying real estate, which meant no developer, even if they had the financial wherewithal, was prepared to take the risk and build, Mc-Neill said.

Fast forward 12 months, however, and sales returned to near historic highs.

From January, when sales across Metro Vancouver had slumped to 724 transactions, sales in the city climbed to 1,480 units in February, then peaked at 4,259 units in June. Sales continued at elevated levels in July, August and through the fall.

“The housing market has seen an extremely volatile year,” Cameron Muir, chief economist for the B.C. Real Estate Association, said in an interview.

“We saw home sales in January at levels we hadn’t seen since the 1980s, leading into near record sales in the fall. So it has been a dramatic rebound indeed.”

Sales in Metro Vancouver had started to decline through 2008, but plummeted in the fall with the collapse of Lehman Brothers, which precipitated the world financial crisis.

At the start of the year, B.C. was experiencing job losses in the tens of thousands per month (January alone saw the province shed 35,000 jobs, according to Statistics Canada), with many of the job losses coming in the construction sector as a result of those stalled housing projects.

However, the decline Metro Vancouver experienced in home prices coincided with dropping interest rates that were precipitated by the Bank of Canada slashing its trendsetting rate to its lowest level since the 1950s.

That combination–lower prices and rock-bottom interest rates–sparked a new round of buying activity that pulled in the potential buyers who put off purchase decisions in late 2008, as well as people who hadn’t considered buying before interest rates fell.

Home sales “basically accelerated in tandem with [declining] interest rates,” Helmut Pastrick, chief economist for Central 1 Credit Union said in an interview.

“Despite the broader economy being in recession for the first half of the year, the fact that we had these very low rates really stimulated sales,” Pastrick said.

He added that in previous economic downturns, housing markets have been the first sector of the economy to begin recovering, so a turnaround in sales wasn’t unexpected, though the magnitude of it was surprising.

“To some extent, it is a bit ironic that in the midst of a recession we see this turnaround [in home sales],” Pastrick said. “Bear in mind that is normal. What isn’t normal is the extent of it, the magnitude.”

By mid-year, mortgage rates had fallen so low that with discounts, buyers were able to secure loans with five-year fixed interest rates at 3.75 per cent, helping to fuel a surge of buying that many observers believed would eventually come to an end.

“Normally, whenever you have these sales surges it does borrow from future demand,” Pastrick said. “At some point, we’re going to see lower sales levels than we currently have.”

However, the rebound in sales has put pressure on prices again.

Muir estimated that average prices in Metro Vancouver fell some 15 per cent during the market downturn, but have mostly recovered that ground in recent months.

The average price for a Metro Vancouver single-family home, for example, peaked at $920,000 in February 2008, then fell as low as $745,000 by November 2008.

By November of this year, the average house price had climbed back up to $903,000, which reignites new worries about Metro Vancouver’s high property prices.

“On the [market] fundamentals side, the most worrisome thing would be home prices rebounding and the prospect of higher mortgage rates in the future,” Muir said.

When Bank of Canada Governor Mark Carney cut the bank’s key rate to historic lows earlier this year, he vowed to keep it there until at least the middle of 2010, as a measure to help stimulate the economy.

Raising the key rate, which sits at 0.25 per cent, will begin to put pressure on mortgage rates and in turn increase debt servicing costs for homebuyers.

Nationally, the surge in home buying, and the upward pressure that it has put on home prices, had Carney at the Bank of Canada warning that growing levels of household debt, particularly mortgage debt, and the degree Canadians will be stretched to make their payments because of higher interest rates is becoming the biggest risk to the country’s economic recovery.

Muir said he is forecasting the pace of Metro Vancouver’s real estate sales to tail off to keep pace with what he expects to be a slow and protracted recovery of the overall economy.

Pastrick added that 2010 should see more property sales than 2009, though he also expects the trend of rising sales to taper off.

“This sharp run-up is not going to be duplicated in 2010,” he said.

It is a level of activity, however, that industry players are comfortable with.

“I’d say that [the development sector] has mostly recovered,” McNeill said, “but it is much more of a stable industry-wide environment that we’re living in right now.”

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