Kit Kadlec
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Following record deal and volume highs in British Columbia’s commercial real estate market last year, investment returned to more typical levels in the first half of 2011, according to Avison Young’s mid-year report.

In the first half of 2010 there was $1 billion invested in British Columbia’s commercial sales within 36 transactions above $5 million, compared $594 million at the halfway point this year within 45 transactions. But Avison Young attributed that 42% drop in volume mostly to a lack of available product due to the strong demand already experienced in 2010. And while volume is down, vendors are finding 2011 to be very favourable thus far. “It is a perfect storm for vendors in the marketplace right now,” said Michael Keenan, senior vice president and managing director of Avison Young’s Vancouver office. He pointed to factors including a the stable economy and banking system inspiring investor confidence, historic low interest rates, a lack of available quality commercial real estate, and high demand for commercial product. The combination of these factors has created an aggressive pricing environment and downward pressure on yields. “Vendors, should they choose to dispose of assets, will find buyers of all types working to meet their pricing expectations,” said Keenan. The top selling asset class in British Columbia was the office market, with 12 transactions totalling $270 million in the first half of 2011, compared to 12 transactions at $189 million in the first half of 2010. The lack of available office options continues to drive the price, said the Avison Young report. The downtown Vancouver office rate dropped to 5% and is expected to remain tight going forwards. Cap rates are believed to be below 6% and could compress further. “Canada is viewed as a safe haven for investment,” said Keenan. “We are sought after as a destination, and Vancouver more so than any other city in Canada.” But while the office market remained hot, retail in British Columbia dropped significantly from last year’s whopping $711 invested in 21 deals in the first half. This year, it was $138 million invested in 11 transactions. Avison Young said 2010 was a more favourable time to transact, but ongoing economic turmoil in the U.S. and Europe could push more retail activity to British Columbia later this year. Copyright ©2009 KMI Pty Ltd

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LUXURY SALES RISE: Realtors are seeing an increase in demand for luxury homes, with a record 792 homes projected to sell for more than $3million this year, according to a MacDonald Realty survey. There have also been 66 homes over $5 million sold so far. A total of 40 condos worth more than $3 million have been sold, including seven over $5 million. Shown is a luxury house at Highpoint, an equestrian-focused community in Langley. Photo: Highpoint

Nearly 60 per cent of new condominiums being built in the Lower Mainland are sold before they are complete, according to a survey by market research firm MPC Intelligence Inc. The Lower Mainland survey showed that during the first half of 2011, a total of 87 multi-family projects or project phases started marketing in Metro Vancouver. These projects added a total of 6,410 units to the market. By the end of June, 57 per cent of these units were reported sold. “Vancouver developers are sensing that the market is on the upswing. Total marketing starts are up by about 18 per cent from the second half of 2010,” MPC reports. Total apartment and townhome condo sales in new projects in 2011 are expected to be up by about 10 per cent from 2010 and a whopping 73 per cent higher than in 2009, MPC forecasts. “We believe that the gains made over the past 12 to 18 months will be temporary. Recent improvement in new condo sales have benefitted from the release of pent-up demand from the 2008 – 2009 period. Further gains in sales will depend on household growth in Metro Vancouver, and the latest net migration figures show growth is slowing,” cautions MPC. According to MPC, the real threat to a sustained recovery of the new condo market will be an oversupply of new product, especially in areas of the Fraser Valley. “We expect a “push” of new product in the fall of 2011 as developers look to capitalize on current market conditions,” MPC states. Among the challenging markets for condo developers are North Surrey, South Surrey and Langley, all of which are facing a possible oversupply of new condos, MPC says. Condos, townhomes lead construction curve A rise in multi-family construction – primarily condominiums – pushed housing starts in B.C. higher in July, reports the BC Central One Credit Union. Total housing starts in the province rose to a seasonally-adjusted annualized rate of 30,000 units, up 29 per cent from June and 33 per cent above July 2010. Despite the large month-to-month gain, new home activity has been highly volatile since early 2010, fluctuating around an average of 26,400 units. Housing starts in Metro Vancouver lagged the provincial performance in July, rising 16 per cent to an annualized rate of 18,200 units. In all B.C.’s urban areas, multi-family starts rose 48 per cent from June to reach an annualized rate of 20,800 units, while single-detached starts increased just 4 per cent to 7,400 units. Copyright Real Estate Weekly

Steve Ladurantaye
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Low interest rates and tight inventories have pushed Vancouver house prices into uncharted territory, even as affordability across the rest of the country remains near historical levels. The Royal Bank of Canada said yesterday it would take 92 per cent of the median household’s pretax income to own a bungalow in the city at current prices – the highest reading yet in its quarterly national survey on affordability. “Vancouver really stands alone in its extremes across all housing types,” said Craig Wright, the bank’s chief economist. “It is no doubt the most stressed market in Canada and the one facing the highest risk of a downturn. With the bar set so high, owning a home is a dream that only the area’s highest-earning households can contemplate.” The bank said most Canadian cities offered “reasonably affordable” housing options in the second quarter compared to the first. Nationally, a condo required 29.2 per cent of pretax household income (a 0.8 per cent increase), a bungalow 43.3 per cent (1.7 per cent) and a detached home 49.3 per cent (1.8 per cent). “Despite the erosion so far this year, most local housing markets in Canada continue to be reasonably affordable at this juncture or, at worst, just slightly unaffordable,” the bank stated in its release. “Affordability measures generally continue to stand near their respective long-term averages.” The bank’s affordability index looks at the proportion of pre-tax household income needed to service the costs of owning different categories of homes at current market values. Its standard measure is a 1,200-square-foot bungalow, and the carrying costs include mortgage payments (principal and interest), property taxes and utilities. It assumes a 25-per-cent down payment, a 25-year mortgage and a five-year fixed rate mortgage. The higher the reading, the more costly it is to own a home based on current market values. The numbers are still high by its own standards, however, and that’s with low interest rates keeping mortgage payments low. The bank said that “typically” no more than 32 per cent of a borrower’s gross annual income should go toward servicing a home. That has some questioning just how affordable the Canadian market actually is, especially if interest rates begin to rise and mortgages become more expensive. “We’ll get people who ask how much they can afford and we quite often tell them that they just can’t afford what they want to pay,” said Ted Rechtshaffen, president of financial planning company TriDelta Financial in Toronto. “They have agents saying that prices are only going up, and the banks are willing to give them loans for more than they can afford. They don’t like what we say sometimes, but it has to be said.” RBC said it would take an income of $157,800 to buy a Vancouver bungalow in the second quarter, and that the average house price in the city was $822,300 – 19 per cent higher than a year ago. Mr. Wright said part of the problem is that there aren’t that many bungalows in Vancouver. To find something more affordable, he said, most people turn to condos which carry a lower carrying cost. “Vancouver has always been a bit of an outlier and it still is in this report,” said Mr. Wright, adding the city’s affordability readings were also affected by a downward revision to income growth in Vancouver going back to 2009. “What those numbers tell you is that it’s basically impossible for someone making a median income to buy a bungalow in the city.” High prices have put home ownership out of the reach for many, at least if they want to stay in the city and live in a standalone house instead of a condo tower. Financial planner Adrian Mastracci has one standard piece of advice for young families who walk through the door of his Vancouver office looking for advice on how to buy a house. “I tell them they need to go to the Bank of Mom and Dad and see how much money they can withdraw for a giant down payment,” says Mr. Mastracci, president of KCM Wealth Management Inc. “Otherwise, I tell them to consider a condo or to look outside of the city.” Copyright GlobeandMail

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ECO HOMES ON TOUR: A series of EQuilibrium display houses are open this year as a national demonstration project of super energy efficient houses continues. Homes such as Green Dream in Kamloops shown here, and the nearly complete Harmony House in Burnaby demonstrate how effective solar energy and zero greenhouse gas emissions are possible in new houses. For complete information and tour information, see www.cmhc.ca Photo: Canada Mortgage and Housing Corp.

The price of a typical detached house in South Delta was up 12.8 per cent in July, compared to a year earlier, at $749,720. In Richmond, the typical detached house sold last month for $1,064,446, up 20.3 per cent from July 2010, reports the Real Estate Board of Greater Vancouver. The price variance makes it more important to use the services of a local Realtor – when either buying or selling homes. The Real Estate Board reports that overall residential sales in July across the entire region dropped 21.2 per cent to 2,571 properties compared to a month earlier. Sales were up 14 per cent compared to July 2010. Listings of properties for sales fell in July from a month earlier, with just over 5,000 new listings on the MLS, down 12 per cent from a month earlier, but up 23 per cent from July 2010. “The number of homes listed for sale in the region has increased each month since the start of the year,” said Board president Rosario Setticasi. According to Setticasi, it takes an average of 41 days to sell a property in Greater Vancouver, unchanged from a month earlier. She noted that there are less multiple offer situations but “that homes priced competitively continue to sell at a relatively swift pace.” The price for all residential properties across the region was up 9.2 per cent to $630,2151 in July, compared to a year earlier. Sales of detached houses are up 21 per cent from a year ago to 1,099 houses. The benchmark detached house price is up 23.3 per cent to $898,886. In the local condominium apartment market, a typical Richmond condo sold last month for $362,281, compared to $383.195 in South Delta. See your local Realtor for complete market details, and advice on setting the price for a quick sale. Variable rates popular Canadian homebuyers are taking variable rate mortgages in increasing numbers, betting that mortgage interest rates will not see an increase in the short term, according to a report in Canadian Mortgage Trends. It may be a good bet. An August survey of money managers found that 60 per cent believe the Bank of Canada will cut its key lending rate, or at least keep it in the current 1.25 per cent range through to May of 2012. Copyright Real Estate Weekly

City council will provide $42 million for 38,000 new housing units

Andrew Fleming
Van. Courier

The Vancouver Heritage Foundation is hoping to showcase older laneway homes. Photograph by: Dan Toulgoet, Vancouver Courier

The Vancouver Heritage Foundation is hoping to find older laneway homes to showcase to help sell the idea that building homes on the same lots as existing houses isn’t as radical an idea as many think. Last month, city council approved a 10-year affordable housing plan that will provide $42 million in land and capital grants to create 38,000 new housing units, including laneway homes. Laneway housing was already part of the EcoDensity initiative helped brought in by former mayor Sam Sullivan. Adopted in 2009 and the first of its kind in North America, the housing plan allows backyard cottages, typically between 500 and 1,000 square feet, to be built on about 94 per cent, or roughly 60,000, of the city’s single-family lots. However, in a quite literal example of NIMBYism, some residents don’t want to see new homes built in backyards in their neighbourhoods due in part to the added congestion. Jessica Kuan, a program and administrative assistant for the foundation, said the foundation hopes to find old-fashioned examples of how smaller homes can cohabitate with larger ones. “We’re going with the term laneway because that’s the city’s terminology, but really it’s not just about the laneway as the city defines them,” Kuan told the Courier. “Many old coach houses and infills really do constitute the same idea of having another living space on the same property whether it is divided or one ownership.” While the term “laneway” itself is relatively new, secondary homes (also known as coach or carriage homes) built on the same residential lots as other houses have been around for decades. The trick is to find one that’s still standing and whose owner is willing to open its doors to the public. The foundation held its first laneway tour, which saw a few hundred curious people squeezing into 10 newly constructed laneway homes, last December. “We’re trying to find one that really is historic to Vancouver, one that wasn’t built later or was infill. The goal is to find one that would constitute an original laneway and we’re trying to broaden the term as well since the city started this program.” Laneway homes are typically detached dwellings located in the backyard or garage area and are limited to rental or family use only with no separate legal or strata title. At least one parking space must be provided, which could include an enclosed garage. Both contemporary and traditional designs are permitted and homes can be single-storey or have upper-storeys. “What we’re trying to do is find an existing home with a laneway that might help show how you can build your laneway to go with it instead of building some big modern laneway that might even eclipse the original house. Clearly there have been coach houses that have been transformed into housing, so it’s not entirely new.” The Vancouver Heritage Foundation is accepting suggestions for possible candidates to be included in the upcoming Oct. 1 tour at 604-264-9642 or email [email protected]. © Copyright (c) Vancouver Courier

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