Increase is small, but it may show developers are responding to the city’s demographic needs, market analyst says

Derrick Penner
Sun

Rental apartments are frustratingly difficult for developers to build in Metro Vancouver’s high-priced real estate markets, but builders have started work on more of them in the first half of 2010 than in similar periods over the past five years.

The total number is quite small, 475 compared with 6,881 housing starts overall in Metro Vancouver, Canada Mortgage and Housing Corp. reported Friday. However, market analyst Robyn Adamache said it reflects that developers may be responding to the city’s demographic needs.

Adamache said the new units are spread across five buildings, which include mixes of market-rental housing, seniors’ housing and other unit types.

“I think it’s mostly population-based demand, whether that be an aging population or a growing population through migration,” Adamache said.

For population growth, Adamache said Metro Vancouver expects to absorb 40,000 new immigrants and migrants from other provinces this year, which should represent some 16,000 to 18,000 new households in need of some form of accommodation.

“[Developers] wouldn’t be starting [rental apartments] if they didn’t think there was demand for them.”

David Goodman, an agent with Macdonald Commercial Realty who specializes in apartment buildings, said new rental buildings are difficult to build profitably in Metro Vancouver, where land prices are very high.

However, they are seen as a solid investment when the financial conditions are right. “I think what’s pushing [developers] is they are really a blue-chip investment,” Goodman said.

Goodman, with his son Mark Goodman, regularly publishes the Goodman Report on activity in the rental apartment market, and in the midyear edition, he calculated increased investor interest in apartments on the resale side.

Some 40 existing apartment buildings worth $133 million traded hands in Metro Vancouver in the first six months of 2010 compared with 35 buildings worth $89 million in the same period last year.

“[The market] is not booming, I don’t want to give that impression,” Goodman said. “But there is certainly a lot of investor interest.”

As far as new rental buildings go, however, Neil Chrystal, president of Polygon Homes Ltd., said they are typically done alongside other projects.

Polygon built a 32-unit apartment building in North Vancouver in 2008 to replace a building it tore down in the redevelopment of a site, but construction of the rental structure was subsidized by the adjoining 135 units of market condominiums. Because of high land prices, “we haven’t found any [building] sites where rental pencils out on its own,” Chrystal said.

As for market housing, the 6,881 new homes Canada Mortgage and Housing counted in the first six months of 2010 amounted to 106 per cent more than the 3,342 homes developers had started in the same period of 2009, the time frame in which developers virtually shut off new construction in response to the recession.

Adamache expects the region will hit 12,000 starts by the end of the year, which will still be well below Metro Vancouver’s 10-year average of 15,000 new units per year.

The increase in construction was led by a big surge in single-family-home starts, with the 2,373 new units started by the end of June representing a 171-per-cent increase from a year ago. Multi-family starts, however, are beginning to catch up. In June, builders started work on 806 multi-family units, a 127-per-cent increase from the same month a year ago.

That brought the total of multi-family units under construction in Metro Vancouver to 4,508 by the end of June, which is up 83 per cent over the first half of 2009.

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But markets slow as buyers wait to see how developers handle HST, analyst says

Derrick Penner
Sun

New-home prices in Metro Vancouver continued to rise in May, according to Statistics Canada’s new-housing price index, but with buyers feeling less urgency to purchase, the pace of the increase slowed.

Statistics Canada reported Thursday that new-home prices in Metro edged up 0.2 per cent from April to May, which was the 10th straight month with an increase, lifting the region’s index score to 5.8 per cent higher than in the same month a year ago.

In April, Metro Vancouver’s index value advanced 0.4 per cent from March, for a year-over-year increase of six per cent.

Metro Vancouver markets are experiencing a bit of a pause, Geoff Dzikowski, a consultant with Urban Analytics said in an interview, but demand is still solid.

“Not that there are any panic buttons [being pushed] or fears of a crash,” Dzikowski said, “but there’s no sense of urgency.”

Dzikowski added that in April, Metro markets saw a surge of activity related to changes in mortgage-qualification rules, effective April 19, that made it tougher for first-time buyers to obtain certain mortgages. There were fears that mortgage rates would rise.

A lot of buyers, he said, locked in mortgage rates and needed to make purchases that closed within 90 to 120 days.

Since then, Dzikowski said, developers have put some 4,000 housing units on Metro Vancouver markets in presale.

Now, he said, some buyers are likely holding back to see how developers respond to the implementation of the harmonized sales tax.

“There’s just no urgency [to buy],” he said.

On an absolute basis, Metro Vancouver’s score on the new-home price index continued to head up, but still has some distance to go to reach the peak it achieved in April 2008.

From April 2008 to its trough in June 2009, Metro Vancouver’s score on the index declined nine per cent. By May, the region’s new-home price index was still 3.3 per cent off its former peak.

On a year-over-year basis, Metro Vancouver showed the third steepest increase among the 21 major markets on Statistics Canada’s index, which helped pull the national average up 0.3 per cent from April, 2.9 per cent higher from the same month a year ago.

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Creekside lot sold for $1 million less than asking price

Darah Hansen
Sun

A valuable chunk of Whistler property, next door to a luxury home owned by Vancouver mining magnate Frank Giustra, is at the centre of a real-estate lawsuit that is before the B.C. Supreme Court.

The civil dispute over the half-acre lot at the base of the Creekside slopes began brewing last fall after realtor Maggi Thornhill and partners purchased the property from businessman Larry Houghton for $1.95 million.

The sale came five months after Thornhill was contracted by Houghton to sell the piece of land for $2.95 million.

Houghton filed a statement of claim last month in Vancouver alleging Thornhill shortchanged him in the deal by failing to provide him with “unbiased, objective advice” that could have resulted in a higher purchase price.

Houghton claims Thornhill neglected to tell him about the continuing interest of two potential buyers, including Giustra, who bought the neighbouring lot from Houghton months earlier.

Thornhill, a Whistler realtor for 22 years, called the lawsuit disappointing and defended her actions in the transaction.

“I didn’t do anything incorrectly,” she said in a telephone interview this week.

She said she was advised by her lawyer to avoid detailed comment on the case, but noted in a prepared statement that “2009 was a very difficult year for real-estate transactions worldwide, and, despite this, I got the seller a deal that he was extremely happy with at the time.”

Among Houghton’s claims, which are only allegations and have not been proven in court, Thornhill allegedly used “confidential information” he had earlier shared with her about his circumstances and desire to sell the property to further her own interests, and those of her business partners.

Four months after the property went on the market for its original list price, Thornhill allegedly telephoned Houghton and inquired whether he would take $2 million from a prospective buyer. He agreed.

She later contacted him to tell him she would be participating in the purchase, the statement of claim alleges.

A contract of purchase was drawn up between the parties on Oct. 21, 2009, with a closing date of Nov. 23, 2009. The final price was $1.95 million.

Houghton claims that one day before the closing, Giustra e-mailed Thornhill to express his “strong dissatisfaction” regarding Thornhill’s failure to contact him when she became aware the property was available below the original asking price. He claims a second buyer in Europe had also expressed continuing interest in the sale.

According to Houghton, Giustra later offered Thornhill $2.4 million for the land, but was told the asking price was $3 million.

Houghton, who could not be reached directly for comment, is suing Thornhill for unspecified damages, including interest, costs and “such further and other relief as this court seems appropriate.”

Thornhill said full disclosure was made and “all appropriate paperwork was used and executed in this transaction.”

“I look forward to our day in court and know that the facts will come out in our favour.”

Thornhill said the property in question is under development and is not for sale.

No trial date has been set and Thornhill has yet to file a statement of defence formally responding to Houghton’s allegations.

Giustra, meanwhile, said he was unaware of the lawsuit until he was contacted by The Vancouver Sun.

He said he was only peripherally mentioned in Houghton’s statement of claim and therefore had no comment.

Giustra made international headlines earlier this year when he joined with former U.S. President Bill Clinton to launch a $20-million fund to help rebuild Haiti’s economy following January’s devastating earthquake.

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Metro Vancouver recorded a 78-per-cent increase over last year, but fears of a fallback remain

Brian Morton
Sun

B.C. has recorded one of the country’s largest increases in the value of building permits over the past year, according to a Statistics Canada report released Tuesday.

The province posted a 53-per-cent increase in May compared with May 2009, to $754 million from $494 million. That included an 11.9-per-cent increase since April 2010.

At the national level, Canada as a whole recorded a 13.9-per-cent increase in values to $5.98 billion from May 2009, as well as a 10.8-percent decrease since April. The decline from April follows two consecutive monthly increases.

All numbers are seasonally adjusted.

Only Prince Edward Island saw a higher percentage increase than B.C. in the value of residential and nonresidential permits since May 2009.

In a separate survey of census metropolitan areas, Metro Vancouver recorded a 78-per-cent increase in building permit values in May over May 2009 to $448 million from $252 million. That included a 28.5-per-cent increase since April.

Abbotsford-Mission recorded a 199-per-cent increase in May compared to May 2009, to $20.8 million from $6.9 million, including a 99-percent increase since April.

Peter Simpson, president and CEO of the Greater Vancouver Home Builders’ Association (GVHBA), said in an interview that the numbers don’t surprise him although builders are giving him mixed signals.

“Every region [in Metro Vancouver] has recorded increases in housing starts in the January to May period over the same period last year.

“Some are finding [activity] has slowed down, while others have a lot of confidence in the market, finishing existing projects and very interested in launching new ones.”

Simpson said that housing activity has increased over the past few months, although it’s set against 2009, a particularly poor year for starts.

“We’re not dancing in the streets with these [housing starts] numbers, but it is an improvement.”

“If both residential and non-residential are improving, that bodes well for job creation and it’s a positive sign for the economy overall.

“One of our builders delivered a record 52 single-family homes in June.”

Keith Sashaw, president of the Vancouver Regional Construction Association, agreed that the increase in building permit values in the Metro Vancouver-Southwest region from April to May looks good.

“May building-permit values reached the second highest monthly total so far this year,” said Sashaw. “Public or institutional-government permits hit their highest level this year and the third highest since March 2006.”

However, Sashaw also said that May’s jump in permits is a spike “and we may see a slight fallback in June.”

“The underlying trend remains level for the local construction sector, though some softness is coming in the residential and government sectors with declining housing sales and the ending of stimulus plans.”

He said total building-permit values in the region are up 63 per cent to $2.1 billion in the first five months of 2010, compared with $1.3 billion in the same period last year.

Despite the positive numbers, a Statistics Canada analyst said B.C.’s results shouldn’t be seen as dramatically better than the rest of the country, because the province’s construction industry was struggling in May 2009 in terms of overall building-permit values.

“In May 2009, B.C. was [near] a low point, while some other provinces had low points at different times,” Nicole Charron said in an interview. “So it’s comparing [B. C.’s building permit values] to one of its lowest points.”

However, Charron also said that B.C.’s non-residential sector has shown considerable strength in recent months, including a 37-per-cent increase in permit values since April 2010 compared with 1.9 per cent on the residential side.

She said that while B.C. recorded a hike in educational building construction, the non-residential sector also includes “hospitals, retirement homes, libraries, any type of government building.”

The residential side reflected particular strength in multi-family construction, she added.

In B.C., residential construction was the stronger of the two sectors from May 2009 to May 2010, recording an 81-per-cent increase in values to $489 million. That compared with an 18.4-per-cent increase in non-residential to $265 million.

While Victoria also saw a 41-percent increase in values from May 2009 to $64 million, including 19.5 per cent since April, it was different in Kelowna, which saw a 16-per-cent drop in the value of permits since May 2009 to $32.3 million. Kelowna also saw a 10-per-cent drop in permit values from April 2010 to May 2010.

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Derrick Penner
Sun

METRO VANCOUVER – Expect a slowing of property sales in an environment with more inventory over the balance of this year to take out some of the price gains sellers experienced in the first part of 2010’s real estate market according to realtor Royal LePage.

Royal LePage, in its second-quarter forecast, said sales in Metro Vancouver were “front loaded” into the first half of 2010, driving prices to new highs.

A rise in inventory, however, should see prices come off those highs, Royal LePage estimates, with the region’s average price across all property types to slip to $650,000 by the end of 2010 from a second-quarter high of $669,000.

That price, however, will still be almost 10 per cent higher than Metro Vancouver’s average price across all types at the end of 2009.

“Inventory is increasing, and that’s what drives prices,” Chris Simmons, broker and owner of Royal LePage Westside said in a news release. “The number of available listings is the most important statistic out there.”

Despite a busy spring, Royal LePage said in the report, Metro Vancouver homes “generally sold below asking price in the second quarter.”

In Metro Vancouver, Royal LePage calculated that the average price for a Metro Vancouver detached bungalow hit $905,000 in the second quarter, up 19 per cent from the same period a year ago.

The average for a basic two-storey house hit $995,250 in the second quarter, Royal LePage found, up 17.6 per cent.

The price for a typical condominium hit $487,250, up 16.6 per cent from the same period a year ago.

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