Resort style living in Langley

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REW.ca asked consumers for their thoughts on the current Vancouver real estate market.

We asked because expert opinion is easy to find — consumer opinion, not so much. Government, banks, real estate  boards and other industry heavyweights weigh in regularly with predictions based on what consumers have done. So we like to ask consumers what they think they will do in hopes of getting a crystal-ball glimpse of the near-future.

We asked only two questions in our March 2012 Consumer Confidence Survey:

• Do you think it’s a good time to BUY a house/condo in the next three months?
• Do  you think it’s a good time to SELL a house condo in the next three months?

Then we had them tell us their reasons. We didn’t give them a list of choices. Instead we let them give their own answers and then we grouped them.

Good time to buy?

On the “good time to buy” question, our 278 respondents were almost evenly split, and the answers were consistent across the region and across all demographics. Renters — 22 per cent of the respondents — were just as split as owners on whether or not to buy in the current real estate market.

High prices were the largest deterrent to buying: 49 per cent of the No side said prices were too high to encourage buying now.

On the Yes side, 28 per cent of the respondents were encouraged by the lowest interest rates ever seen, and 17 per cent believed there was a lot to choose from on the market. 

But all sorts of other factors emerged in the spontaneous answers people gave to “Is it a good time to buy in the next three months?“

Good time to sell?

A clear, but small majority said it is a good time to sell, but there was no single reason given. Those who thought the time is right to sell cited five main factors that showed they were paying attention to the real estate market.

There was a range of opinion on house prices on the Yes side. While 17 per cent think a price correction is coming (making now a good time to cash out), 7 per cent think prices have stabilized and 8 per cent think prices will continue to rise. (So far this year, Greater Vancouver prices have risen by only 0.1 per cent.)

The respondents who wouldn’t sell expressed concern about the economy in general and about a possible market correction in the coming months, which would make a home purchase immediately lose value.

Looks like the crystal ball is still cloudy.

© 2011 REW. All rights reserved.

Peter Mitham
Other

Pundits say the Year of the Dragon, perhaps one of the Chinese zodiac’s most auspicious signs, will strengthen the wave of Mainland Chinese investment flooding into Metro Vancouver.

But the pundits didn’t need to tell that to Edith Chan (see photo), an agent with Re/Max Masters Realty in West Vancouver who has become familiar with the lengthy dragon’s dance of buyers coming through the properties she shows.

“Nowadays, I tell you, when you open the door selling a house, 99% it’s Chinese,” she said, doing her best to summarize the situation between calls on her cellphone.

“That’s why I have to talk fast – my schedule is so busy! ”

It’s a similar story elsewhere in the Lower Mainland, where the demographics of whole streets have shifted in recent years to young families of Mainland Chinese who have come for the property and stayed for the schools and Vancouver’s vaunted quality of life.

The impact plays out in rapidly rising property values that have outstripped the rest of the country, giving Vancouver – already expensive relative to the rest of Canada – even higher average valuations.

It’s a phenomenon that’s become the stuff of legend.

“You know by the realtor,” said Paul Sullivan, a senior partner and property tax expert at Burgess, Cawley, Sullivan & Associates in Vancouver. “The selling broker is an agent out of a small little shop out of Richmond, and they don’t speak English. They bring in these buyers for $3 million, $4 million, $5 million houses. They pick them up at the airport, bring ‘em through and buy a few houses.”

Sometimes, the buyers take the papers back home to China and sell the properties to friends, all keen to have a slice of Vancouver real estate.

Show us the numbers

But while everyone loves anecdotes about the latest record sale, the truth is more elusive. What everyone acknowledges is happening, and distorting the market, is much more difficult to support with solid numbers.

To date, efforts to identify foreign buyers have pegged their participation in the B.C. market at anywhere from less than 1% regionally to upward of 75% in select neighbourhoods (some brokers even claim 95% or higher in some markets).

Condo marketer Bob Rennie’s presentation to the Urban Development Institute last spring was typical.

He pegged the percentage of $2 million-plus homes on Vancouver’s West Side being sold to buyers from Mainland China at 90%.

But a few minutes later, when he looked at the actual presence of foreign buyers in the Greater Vancouver market, the percentage slipped to just 0.09% for single-family homes and 0.7% for condos.

A similar spread was presented during the Canada Mortgage and Housing Corp.’s (CMHC) annual housing outlook conference this past November.

CMHC senior market analyst Robyn Adamache presented figures from the Real Estate Board of Greater Vancouver that estimated foreign buyer participation in the market at 9% through 2011.

But she also pointed to Landcor Data Corp. figures indicating the percentage was as much as 74% at the top end of markets in Vancouver and Richmond.

But there was a catch.

“This is based solely on name analysis, and it does not say whether these are Chinese people who are living here, whether they are landed immigrants or whether they’re offshore buyers,” Adamache said. “We just know that there are indeed Chinese buyers in these niche markets.”

An hour later, Mark Belling of Fifth Avenue Real Estate Marketing observed that a presale opportunity in Coquitlam the previous weekend attracted an overnight queue for what many considered a bargain offering.

“They were all Chinese (or Asian),” he said.

All of which adds up to perhaps the most unassailable statement Adamache made that morning: “There’s not a lot of really hard data out there.”

Part of the numbers problem stems from the fact there’s no single definition of a foreign buyer.

“The purest way of defining offshore money is somebody who is not landed here. Their mailing address is offshore, and they don’t file Canadian tax and they don’t qualify for Canadian residency,” said George Wong, principal of project marketing firm Magnum Projects Ltd.

But this narrow definition doesn’t capture what’s going on.

Wong pegs Chinese buyer participation at Quintet in central Richmond at 99% and at the River Green development adjacent to the Richmond speedskating oval at about 90%, but then qualifies those numbers.

“Most of them are here. They’re landed immigrants, and they have an interest in setting up roots here,” he said.

But regardless of how “foreign buyer” is defined – whether as a non-resident, or a buyer new to the country, many point to the source of the cash as the key distinction.

It’s not the buyer that’s important, but his or her money.

The run-up in home values – 14.3%, according to the latest report from RBC Economics – that put Vancouver at the top of the country for home price increases last year and solidified its status as “unaffordable” to the average buyer – was driven largely by purchases that weren’t dependent on local incomes.

Or so the conventional wisdom holds.

Yet there’s no process in place that tracks where the cash is coming from.

Fintrac, the Financial Transactions and Reports Analysis Centre of Canada, requires disclosure of all cash transactions above $10,000, but the documentation merely establishes a paper trail. It doesn’t map it. The cash can be tracked back to an individual, but the process doesn’t care where the individual is (unless there are grounds to believe the individual is a suspected fraudster, criminal or terrorist – investors don’t count).

“A lot of people don’t talk about it, even us as a service industry: We don’t ask, ‘Where is your money originating? ’” Wong explained. “We have a Fintrac thing where they’ve got to sign something. But we don’t ask those questions. … [Also] there’s exchange control coming out of Mainland China, so a lot of people, not even bankers, talk about Mainland Chinese money coming out. It’s kind of hush-hush. … It’s like, how do we measure the black market GNP? It’s pretty tough. It’s just unofficial.”

Many deals are done through agents in Richmond who have strong connections to Mainland China. The deposits are handled, paperwork is done, but it’s virtually invisible.

Still, Jeff Hancock of market research firm MPC Intelligence Inc., said it’s clear that Chinese money is what’s driving sales. “You start asking them where their deposit cheques are coming from, and you start seeing a huge proportion of their deposit cheques are coming straight from China,” Hancock said.

The legend of “Hongcouver”

The fact that so much attention is being paid to the question underscores how offshore participation in Vancouver’s real estate market is provoking a debate not unlike when Hong Kong money began flowing into Vancouver following Expo 86.

The term “Hongcouver” captured both a cultural shift in the city and fears that Vancouver was losing its identity.

Today, Edith Chan believes the cash is driven less by fear than desire.

True, Beijing limited domestic real estate investment to one property per family in 2009, sending wealth created during the country’s economic boom overseas. Properties in Canada, with its stable banking and political system, were attractive.

Gold Mountain, as British Columbia was known among the Chinese workers who had come here a century earlier, became a place to bury treasure rather than find it.

Then, last summer, Chan began seeing a different kind of buyer.

Tourist visas for travel to Canada became easier to obtain – her sources estimate the approval rate at 80% – giving Vancouver a busier real estate market than New York. The buyers have also done their homework.

“This group is probably more scary.… So many buyers,” Chan said. “They have done their research, and they know Vancouver offers a better lifestyle, and that’s why a lot of those people come over.”

And who’s to say that’s a bad thing?

Many of the points raised about the influx of buyers seeking property – or a better life – could easily be levelled against long- time Vancouver residents who cash out and retire to smaller communities.

The wealth isn’t linked to the local economy, and the demand from the newcomers pushes up property values in the most popular areas.

The phenomenon may be amplified by the size of the city, but if Vancouver wants to be world-class, it also has to be receptive to the demands that status imposes.

Chan expects this year to be one of record activity in West Vancouver, as some of the newcomers use their knowledge of the market to move to more desirable locales – she’s worked with buyers from White Rock – or to simply trade up.

She notes that the influx has helped keep retailers busy, giving Vancouver a more robust economy than it might otherwise have.

“Our economy could be really stuck,” she said.

Whether a robust economy is worth broad sacrifices to general housing affordability is another question. Does the city want to be known for expensive homes for the rich and progressively smaller units that keep housing affordable for the rest?

Or is it time to acknowledge that capital flows internationally and accept that not everyone is able to live in the heart of the city?

© 2011 REW. All rights reserved.

Peter Mitham
Other

Recent conversation around the Kitsilano dinner table turned to — as it almost always seems to do — real estate and the role of foreign buyers in Vancouver.

The older guests decried the run-up in prices that makes it almost impossible for their children to buy on the West Side, while the kids (also at the table), looked to their parents as the lender of first resort to help them get into the market.

But what to do about the oft-discussed “foreign buyer” typically tagged as a leading contributor to the pressures that make housing unaffordable?

Charge a special tax on offshore buyers, asked one person?

Charge a surtax on properties above a certain value, asked another?

Or, as this writer chimed in, perhaps we want to introduce the equivalent of a head-tax on foreign investors simply because they’re coming to invest in properties. (Dirty looks all ’round ensued.)

Or just suck it up?

Land ownership angst

Tsur Somerville, associate professor with the UBC Centre for Urban Economics and Real Estate, noted that upward pressure on the price of local properties is a standard problem in desirable places to live — especially places that attract short-term residents, such as vacationers. Just ask the folks in Whistler, the Gulf Islands and other areas.

“This is historically our biggest issue in places that are resorts: vacation homes drive up prices,” Somerville said.

The truth is, Canada is a nation of immigrants and each wave of newcomers has raised anxieties and concerns about land ownership. First Nations land claims are one example; restrictions the Islands Trust enforces on land uses in the sensitive Gulf Islands are another.

Indeed, the fight for domestic control of land is as fundamental to Canada’s history as the story of settlement.

Opposition to absentee landlords drove Prince Edward Island to join Canada in 1873, and provincial law still prevents non-residents from owning “in excess of five acres or having a shore frontage in excess of 165 feet unless he/she first receives permission to do so from the Lieutenant Governor in Council.”

Most of the Prairie provinces, where rights to real property are rooted in homesteading and distrust of bankers, also have restrictions on non-resident ownership of land.

Canada isn’t alone in restricting foreign ownership: Iceland, Denmark and Australia, all members of the Organization for Economic Cooperation and Development, limit ownership of real estate to those resident in the country and prohibit renting by foreign owners.

Switzerland, a traditional haven for foreign capital, limits transactions by foreign buyers to a set amount per year, and cities such as Zurich and Geneva are off-limits.

Poland and Greece have restrictions on land purchases; in Mexico — a popular vacation destination — a local bank holds property in trust for foreign owners. The foreigner has all the privileges and obligations of ownership, but not ownership itself.

But globalization, and the international flow of capital that’s followed, has put the issue of foreign ownership on the front burner in many countries.

The tide of capital seeking a safe haven following the 2001 terrorist attacks on New York and Washington, D.C., made countries take a hard look at how much cash they wanted in their jurisdictions and how much ownership they were willing to give away.

Concern accelerated only after the real estate boom — and bust — that followed.

Iceland has linked control of local assets to national sovereignty. And even Prime Minister Stephen Harper has invited comparisons by moving to block foreign ownership of strategic assets.

Australia recognized the challenges following a loosening of foreign ownership restrictions in late 2008.

The following year saw a wave of foreign investment 30% above historical norms. The dramatic shift in a country where first-time homebuyers were already finding some cities unaffordable called for action.

A six-month consultation period culminated in changes to Australia’s investment regulations in April 2010. All purchases by temporary residents and foreign non-residents became subject to approval by Australia’s Foreign Investment Review Board; temporary residents are limited to properties for their own use or development sites that would increase the housing stock.

Vacant land must be developed within two years, and foreign owners of residential properties must sell the properties when they leave the country or the government will confiscate and sell them instead. Australia’s introduction of tougher criteria for foreign real estate investment had an immediate effect. Approvals for purchases of residential real estate, typically the primary target of foreign investment applications, dropped from 2,450 to 647 — a 75% decline.

Foreign restriction complications

But could similar measures succeed in Vancouver?

During last fall’s civic election, independent council candidate Sandy Garossino called for restrictions on foreign ownership to address affordability.

Affordability was being eroded by the foreign buyers. RBC Economics reported that a standard two-storey home in Vancouver required approximately 95.5% of the average household’s monthly income, while a detached bungalow required 92.5%. (A residence is considered affordable when it requires just 32% of household income.)

Modest declines in recent months have done little to bring home prices within the reach of locals. The bank’s most recent analysis declared, “unaffordability has long been a fact of life in the Vancouver housing market… and this will continue to drive local buyers away.”

Vancouver is a seller’s market relative to the rest of the country; RBC all but confirms that it’s a non-resident’s buyer’s market.

Garossino — who didn’t respond to a request to comment for this article — suggested that Vancouver address the situation by adopting a model similar to Singapore, where investors are limited to select areas of the city, leaving the rest of town to locals. But other observers are less confident such restrictions would work; they point out that, with no way of determining the extent of foreign investment in the local market, it’s difficult to impose restrictions.

Nicola Way, owner of upscale listings site BestHomesBC.com, said the lack of clear evidence for a foreign buying binge makes it hard to argue for investment restrictions. (See “Is China Really Buying up Metro Vancouver”)

“Until Canada can produce figures that definitively state the volume of properties bought by non-residents, I can’t see any restrictions placed on foreign ownership,” said Way.

Moreover, housing affordability is more than a function of who is buying properties. Basic land economics are at play, as well as financing regimes. “There are other factors at play when it comes to Canada’s rising house prices, namely consistently low interest rates that have served to underpin housing demand,” she said. “For the City of Vancouver itself, there is also the question of land supply. We are hemmed in by geography, so when supply becomes limited, demand — and therefore prices — increase.”

Somerville goes even further. He noted that without consensus on what a foreign buyer is, it’s tough to target the restrictions.

And if the flow of cash can’t be tracked, what gets taxed?

“How many people are we actually talking about who are truly non-resident, non-immigrant buyers? How many people are not renting their units out but keeping them vacant?” Somerville asked. “Before we have policies to address a problem, it’d be really good to know how big a problem it actually is.”

Unfortunately, there’s no way of knowing. The statistics being thrown around are nice, but none of them have conclusively answered the question.

“We don’t have the mechanisms to be really accurate,” he said. “Realtors telling me that their buyers are from China doesn’t answer it. And certainly where the appraisal chits are sent doesn’t answer it.”

While non-resident purchasers could be subject to a different property tax rate, as happens in Florida, Somerville said it would have to be a province-wide measure rather than targeted to a specific city such as Vancouver or a specific part of the city. “You could always do it,” he said, “but if you put in a sub-area then you just spread the issue to other areas.”

And, hinting at his own skepticism, Somerville said developing a different tax structure or other restriction might not even be worth it relative to the scope of the problem.

“Fundamentally, I don’t want to restrict the market and develop policies to address a critical problem without knowing what the problem is.”

© 2011 REW. All rights reserved.

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Jennifer Harrison
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Despite a strong showing in most of Canada’s major real-estate markets in the first two months of 2012, Vancouver experienced a softening in housing activity.

Re/Max‘s Market Trends Report, which highlights sales, prices, trends and development in 15 markets across the country, found that 12 markets (80%) were reporting year-to-date sales activity ahead of last year’s levels, with more than half reporting double-digit increases.

One of the exceptions was Greater Vancouver, where sales were down 16%.

January and February of 2011 saw sales of 4,921 units in Greater Vancouver, compared with 4,142 in the same period this year.

And average home prices rose only 0.1%, from $786,233 in 2011 to $786,695 in 2012’s first two months.

Across the rest of the country, low interest rates coupled with strong consumer confidence levels and a mild winter played a significant role in the overall upswing in sales, ushering in an early start to the spring real estate market.

“Housing values are escalating at a steady pace in most major markets, said Elton Ash, regional executive vice-president, Re/Max of Western Canada. 

“Yet gains are, as predicted, much more moderate than in years past. We expect this will remain the trend moving forward, in line with the Canadian economy, as GDP growth also moves ahead at a more subdued pace. On the whole, this is a very stable and healthy housing market in line with traditional norms – with a few exceptions.”

Re/Max noted that the First-Time Buyer’s Tax Credit and changes to HST in B.C. are expected to breathe new life into this province’s housing markets this spring.

© 2011 REW. All rights reserved.

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No wrecking ball soon at 63-year-old theatre

Cheryl Rossi
Van. Courier

Leonard Schein’s Festival Cinemas leases The Ridge Theatre space at West 16th and Arbutus. Photograph by: Dan Toulgoet , Courier

Leonard Schein doesn’t sound anxious that he’ll have to close The Ridge Theatre anytime soon.

The president of Festival Cinemas which leases the theatre space, Schein has known since last year that the 63-year-old single-screen theatre would be demolished when property owner Cressey redevelops the northwest corner of West 16th Avenue and Arbutus.

“It could be six months from now. It could be a year from now,” Schein said.

Festival Cinemas had hoped a multiplex could be constructed on the second storey of the proposed commercial and residential redevelopment.

Hani Lammam, vice-president of development and acquisitions for the development company Cressey, said plans that included a theatre were drawn up after it purchased the property in June 2011, but the concept was swiftly rejected. He said a multiplex meant more parking, more traffic and a need for more height than permitted in the zoning. There were also costly acoustical soundproofing considerations.

“It’s too bad” Schein said. “It’s nice to have an intimate theatre where not only people can see movies in the neighbourhood, but high school students and university students can work there close to where they live, so it’s a lost opportunity for a first job for a lot of people.”

Tom Lightburn, co-owner of Festival Cinemas, told the Courier two years ago that it would be lights out permanently at The Ridge at the end of 2010. The company wasn’t going to renew its lease. Lightburn said the company that also runs the Park Theatre on Cambie Street and Fifth Avenue Cinemas on Burrard, had lost money three years running at The Ridge.

But Schein said the previous landlord gave Festival Cinemas a break on the rent, so the theatre has made money since. “It’s extremely difficult to make money with a single-screen theatre,” he added.

The difficulties facing singlescreen theatres were borne out in recent years with the closing of the Hollywood Theatre on West Broadway, Van East Cinemas on Commercial Drive and the struggles of the nearby Rio Theatre.

Cressey’s $60-million plan calls for 55 one-to three-bedroom condos and a 22,000-square-foot commercial space the company hopes will be filled by a grocery store. Cressey expects to submit a development application to the city within weeks.

Lammam couldn’t say when the theatre, bowling alley, restaurants, book, insurance, yoga and hardware businesses would receive notices to vacate. “It’s really all subject to municipal approvals and market conditions,” he said.

Lammam expect construction to take 20 months. Cressey is building the James development near the former Olympic Village, and has constructed hundreds of projects throughout the Lower Mainland, including Mantra at West Fourth and Pine.

© Copyright (c) Vancouver Courier

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Lift elevates value for owners and investors

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