Steve Randall
Other

The economist who predicted a yet-to-happen price crash of 25 per cent for Canada’s housing markets back in 2011 now says he expects the correction to be even larger. 

David Madani, an economist with Capital Economics, says that low mortgage rates could lead to a correction of 30 per cent in Vancouver and Toronto as the labour market softens and mortgage rates rise due to higher bond yields.

In a client note Tuesday Madani wrote: “Lower mortgage rates have enabled Canada’s key housing markets to defy gravity for the past few years.

“But with prices rising dangerously high relative to household incomes, there is the potential for a large correction down the road.”

He notes that in the short term mortgage rates could be lower but the longer-term outlook is for a reversal in rates, boosting the chance of a housing correction.

Copyright © 2015 Key Media Pty Ltd

Toby Welch
Other

No matter what their age, buyers fall into one of three groups: those who won’t consider homes without a pool, those who won’t consider homes with a pool and those who have never considered buying a house with a pool.

Jim Chen, a representative with Re/Max Masters Realty in Vancouver, says, “It is interesting that there are people who construct a new pool after many years living in a house that never had a pool in it. There are also people trying to cover the pool or fill it with sand and putting a floor or a cover on the top. It is indeed more challenging when selling to a person who doesn’t want a pool.”

Young parents typically don’t see a backyard pool as a positive. They look at the body of water and see a death trap for their precious babies. Seniors, in general, see a pool as money-sucking expense that will eat away at their investment.

When selling a house with a pool, target the buyers between those two age groups.

When the buyers haven’t thought about purchasing a home with a backyard pool, point out the positives to them:

• The lifestyle – especially during our hot Canadian summers, lounging by the pool is hard to beat.
• Kids love them and can spend hours a day splashing in the water.
• They are a great hub for rockin’ parties.
• They can add resale value to your home.
• They are a convenient way to add fitness to your life; the health benefits are potentially high.
• They offer a handy way to cool down on hot days.

Bryan Alan Masse, an agent with Royal LePage Prime Real Estate in Winnipeg, sold a home with a pool recently. He offers a suggestion on how to market such a home: “Host a pool party open house with a tropical theme on a hot weekend. Incorporate music, drinks, leis, fresh fruit, fake palm trees and Tiki torches. People will not only remember the home, they’ll remember you as the Realtor, and it will give them an idea of what it will be like when they host parties in their backyard once they purchase the home.”

Masse offers more marketing ideas:  “Sell the pool lifestyle. Rather than just saying ‘massive pool’ in ads, you can write something like, ‘Live like you’re in a beer commercial,’ or ‘Your own tropical oasis,’ or ‘Who needs to go to Mexico when it’s in your own backyard?’ or ‘Avoid long drives to the lake or beach.’ I try and focus more on the experience you’re going to have when enjoying your pool rather than the pool itself.”

Chen offers these four tips for selling a house with a pool:

1. Do any needed pool maintenance before you list the house.
2. Sell the home as a package or separately. Know your client really well. If he likes the pool, it is a bonus. Demonstrate that it is harmony to have the pool with the house. On the other hand, if the buyer doesn’t like it, tell them the swimming pool is free with the purchase.
3. Advise or assist a buyer to hire professionals that are able to inspect the pool fully before purchasing.
4. Know the true value of the swimming pool. It is important to gain knowledge about your clients and demonstrate the right lifestyles with pools.

Stage the pool and the surrounding landscaping before taking pictures. Give the entire space a thorough scrub-down if necessary. Tuck away all the pool clutter such as float toys and noodles. If the owner of the home is a guy who only wears thong swim trunks, get him out of the pool before taking the photos!

If a house with a pool isn’t moving at all, collect a couple of quotes on the cost of removing it and consider offering that as a condition if a buyer loves everything but the pool.

“To some foreign home buyers, it is a very strong selling point that the swimming pool makes the feng shui better,” says Chen. “Better feng shui means better energy in the house, and many home buyers are willing to pay for that premium.”

Ultimately it’s all about how a buyer views the pool. The pool itself may not affect the value of a home; the value is in how the buyers perceive the massive tub in the backyard.

Quick facts about backyard pools in Canada:

• The biggest market is middle-aged buyers who have teenage children.
• For homeowners who install a backyard pool, when it comes time to sell the house, they typically recoup between 40 and 50 per cent of their initial investment.
• Above-ground pools add no value to a home. If they are in poor condition, they can decrease a home’s value.
• If there is a community pool in the neighbourhood, having a backyard pool can be a tougher sell.
• The greater percentage of the backyard that the pool takes up, the harder it can be to sell the home.
• Quebec has over 300,000 backyard pools, more than anywhere else in North America per capita (including California!) Most of those pools are in average working-class suburban yards.
• According to Pool and Spa Marketing, Montreal and surrounding area add an average of 3,500 backyard pools per year. Toronto and surrounding area add an average of 840 backyard pools per year.

© 2015 REM Real Estate Magazine

Jordan Maxwell
Other

Sony and Yahoo are teaming up to introduce a new real estate website that will match property buyers and sellers, the announcement coming on the heels of Zoocasa’s controversial relaunch.

Sony has engaged in property management through its new financial division, as well as renovation and consulting services, and expects the new service to complement its existing financing and insurance arm, Kazuo Nishiyama told Bloomberg.

“We can’t be caught in the way we used to do business in the past,” Nishiyama said in recent interview. “Even though this is new to us, it will enable us to pursue profit.”

While the site will launch in Japan, it is expected that Sony will rapidly expand operations to global and North American markets.

Japanese typically buy property for the value of the land, according to industry analysts, and tears down existing buildings to construct new ones because home values in Japan tend to decline over time. The government has introduced policies to encourage construction of longer-lasting buildings and to stimulate the resale and renovation market.

Even as residential investment rose to an accumulated 893.3 trillion yen in 2013, the value of the assets fell to 349.8 trillion yen, land ministry data showed.

Copyright © 2015 Key Media Pty Ltd

Steve Randall
Other

An American developer that is creating a new assisted living development aimed at Chinese seniors could be looking at Vancouver next.

Washington-based Aegis Living is building the 110-unit project in Newcastle, just outside Seattle, targeting Chinese-Americans living in the Pacific Northwest. The company has successfully created the first of these kinds of development in California in 2001.

Aegis CEO Dwayne Clark told the Vancouver Sun that the firm is looking at bringing the concept to the Lower Mainland: “Vancouver is on our radar screen to expand this concept.

“But we have so much on our plate right now that we haven’t aggressively gone after it. We will eventually, just because of the vast numbers of Chinese residents in the market. It just makes sense.”

Copyright © 2015 Key Media Pty Ltd

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If you’re OK with owning a home but not the land, a leasehold property could be a great affordability solution, says local Realtor Alyssa Dotson

Alyssa Dotson
Other

Situated in some of the most affluent neighbourhoods in the City, a condo, townhome or even a detached property awaits your purchase for a significantly lower price than that a similar home in the same area.  In the West End, False Creek, Kitsilano, Fairview Slopes and Point Grey in Vancouver and popular South Arm and Brighouse in Richmond, this option is frequently available for the house hunter. Does that sound too good to be true?  Depends who you ask.

A renter who is looking to get into the real estate game but can’t afford a freehold property in their desire area may find buying a leasehold home a great compromise, enabling them to keep payments low without having to downgrade their location.  After all, a lease is just another term for renting, right? As in a leasehold property? Yes.

So how does it work? In Canada, land administration is generally divided into two categories: fee simple (freehold) land and leasehold land.

Freehold vs. Leasehold

Freehold land is held by the majority of residential purchasers.  This type of land is owned by the registered owner including all the properties rights that are associated with the lands.  There can be restrictions on the title for instance a restrictive covenant, easement, statutory right of way or a building scheme but the owner owns the land and the restrictions that come with it.

Leasehold land is land in which the rights to the land are limited since it is leased to the purchaser by another party: “the landlord” The “landlord” is usually the federal government, the City where the land is located or a First Nations band. Long-term leases can be up to 99 years.  Within the lease specifications, the “tenant” owns the right to use the property for a specified amount of time.  Within this time frame, the owner/tenant can resell the property and profit from market appreciation.  Although leasehold land tends to appreciate on a smaller scale in comparison to freehold land, it does appreciate with the market.

Leasehold is Cheaper – Up Front

The total purchase price of leasehold land is considerably lower than a freehold purchase, as the land is not yours. As such monthly payments will be lower than those on a similar freehold property, based on mortgage amount.

How much cheaper? For example, a search on REW.ca in July 2015 showed a three-bed, 1325-square-foot leasehold townhome in Vancouver’s Champlain Heights (see neighbourhoods, below) listed for $379,000 – much cheaper than the 1,300-square-foot three-bed freehold townhouse listed for $505,000, just a few streets away.

However, do keep in mind that leasehold payments are required on top of monthly mortgage payments if the payments have not been pre-paid. 

When buying a leasehold strata, the strata fees are also not included in the additional leasehold payments and would have to be paid to the strata separately. Of course, that’s true for freehold strata homes too.

It’s also important to remember that when making a residential real estate purchase, you are investing in a depreciating asset – the building – and in an appreciating asset – the land. Where land is leased you are not maximizing market appreciation.

Getting a Mortgage on a Leasehold Property

Although mortgage lenders vary with guidelines and financing options, most tend to require a minimum of 30 per cent down on a leasehold property, although a few will consider a lower down payment. 

Another key component in financing is the duration of the time remaining on a lease at the time of the mortgage application.  A lease with 15 years or less remaining may be a deal breaker for some mortgage suppliers as the amount of the lease payments can drastically increase when the lease comes up for renewal putting the mortgage applicant in danger of keeping up with their monthly payments especially if their mortgage is amortized over 25 years. Also, the marketability of a lease coming up for renewal relatively quick is diminished significantly in terms of attractiveness to potential buyers as future terms and interest rates are unknown.

Education Is Key

As with any financial or life endeavour, education is key.  The way to change that is to research and gain knowledge so that you can be aware of the possible complications and hiccups that can arise.  Educate yourself regarding renewal procedures, terms, interest rates, resale value and consult legal advice before moving forward if purchasing leasehold land has presented itself as an option.  

Where to Find Leasehold Homes

So where can you find these leasehold gems? Start by doing a search on REW.ca in your preferred neighbourhood, then filter the results with the keyword “leasehold.” Here are a few areas to get you started.

Burnaby

• SFU UniverCity: a sustainable urban community of multifamily townhouses and condos. Prepaid 99-year leases means that prices are closer to those of freehold units.

Chilliwack

• Cultus Lake is a municipality lease from the provincial government.
• Residential leased land is predominantly First Nations. Chilliwack and District Real Estate Board president Steve Lerigny says, “We’re not only surrounded by leased land, but interlaced with it. You’ll see pockets of it within regular subdivisions. And the different bands handle their leases differently.”

Coquitlam/Langley/Surrey

• Non-prepaid lease parks for mobile or manufactured homes.

North Vancouver

• Roche Point near Dollarton / Deep Cove. A gated development owned by Tsleil-Waututh First Nation.
• Lynnmour marina and float homes.

Richmond

• South Arm condos.
• Granville Richmond condos.
• Bridgeport float homes.
• Brighouse condos.
• West Cambie Richmond float homes.

Vancouver

• City-owned False Creek South neighbourhood between the Cambie and Granville bridges with condos and townhouses nestled beside Burrard Inlet. Note that some leases start expiring as soon as 2036.
• City-owned Champlain Heights near Boundary and East 54th Avenue in East Vancouver.
• University-owned UBC endowment lands. Prepaid 99-year leases with prices mostly on par with similar freehold properties.
• Musqueam-owned area close to Pacific Spirit Park, UBC and shopping districts. Mix of prepaid and non-prepaid.
• City-owned West End apartments and condos, many with ocean views, near the heart of downtown Vancouver.
• Dotted throughout the city, including in Kitsilano, Fairview and Mount Pleasant.

West Vancouver

• Park Royal area: City-owned and Squamish-Nation-owned land featuring everything from condos to the Capilano Mobile Home Park, an adult-oriented retirement community tucked away beside the Capilano River.

© 2015 Real Estate Weekly

BCREA
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Consider this: Cable companies, the gatekeepers of home entertainment (with the worst customer service records of most industries) have seen their business model turned on its head.

“Streaming this” and “downloading that” has changed the way people access their entertainment choices and the once-powerful (and single product) cable companies are being forcefully shifted to a new model of not only delivering content but also being the delivery pipeline of content they do not control.

Now consider this: Realtors, once the gatekeepers of home listing and pricing information through their publications and closely held MLS data, (with consumer opinions that hover around that of a stereotypical used-car salesman) are being confronted by the same winds of change.

“Googling this” and “social sharing that” is replacing the exclusive sales information that was once the cornerstone of a real estate agent’s business. The similarities of the forced changes to business models are astounding when put under this light.

Cable companies have embraced the role of the “entertainment delivery supplier”. They have evolved along with their delivery systems to maintain their evolving business model, raising their customer service standards in an effort to not be pushed out of relevance.

Real estate professionals, in the same way, must change their business model to embrace much more than listing and sales data. They need to evolve into a model that is more readily accessible and is more relevant to the consumer than simply processing the home purchase transaction. By becoming a larger part of the home ownership lifespan of the consumer and providing excellent customer service throughout that lifespan, a real estate professional’s future relevance may not be an issue.

In order to find the value of a real estate agent, as seen in the eyes of the consumer, we must first identify the aspects of being an agent that tarnishes the profession:

• Real estate agents make an exorbitant commission for a minimum of work.
• Real estate agents force consumers to pay more by causing bidding wars and inferring competing offers.
• Real estate agents have a minimum education, which casts the profession as a “last choice” career option for those other-wise unemployable or not motivated to find “real work”.

These issues (among others) must be confronted and discussed in public, and the conclusions need to show that the professionals who call themselves Realtors do work hard, always put the interest of their clients first and are educated and experienced within the real estate industry standards so they are capable of providing the expertise and excellent customer service consumers demand.

Should the pay structure shift away from the commission model to a “pay-per-service” model that accountants use? Would a menu board offering “a la carte” service options shine a light on the value of real estate professional’s services to be ordered?

The competition would certainly heat up for listings as consumers shop around for prices and services to compare. The number of people in the industry would decline as many would not survive the scrutiny that a standardized and competitive pricing structure would create.

Should the real estate sales profession have additional certifications to help set the “better professional” apart from the part-timer or new salespeople?

When professionalism and experience are easier to identify in a real estate person’s title, it will allow for a greater understanding of a person’s capabilities in the industry that goes beyond the usual “No. 1” or “Highest selling” marketing testaments many real estate brokers use to set themselves above the larger pool of licensed agents.

Is it possible to open up the home seller/buyer processes so the general public has a better understanding of the complexities involved with each transaction?

The average homeowner will purchase five houses in their lifetime and their experience will vary with each transaction. How can they possibly understand about the intricacies of the transaction when they do not deal with it more often? It is precisely this reason why great auto mechanics and lawyers earn a good living: the average person just expects it to work and for the professional to get them the outcome they desire. We can draw a straight line within these comparisons that anyone can understand.

Real estate professionals must work as a cohesive group to elevate the stature of the profession in the eyes of the consumer, not only in the practice of real estate but in the ways the information is held, to which the consumer now expects greater access.

We can no longer be regarded as gatekeepers but as advocates who work for the better interest of our clients at all times.

Professionalism and dedication to customer service is what will rebuild confidence in the profession, but only if it becomes an industry-wide standard.

© 2015 REM Real Estate Magazine

Sales dollar volume across province rises nearly 43 per cent in second busiest June on record, says association

Joannah Connolly
Other

Like the summer weather, the real estate market across the province was hot even for June, according to the latest figures released July 14 by the British Columbia Real Estate Association (BCREA).

A total of 11,294 residential unit sales across BC were recorded in June, up 25.6 per cent compared with the same month last year.

The average MLS resale price in the province rose to $631,962, a 13.5 per cent increase since last June.

This double rise pushed the province’s total sales dollar volume to $7.1 billion last month, a 42.6 per cent increase compared with the previous year.

“BC home sales posted the second strongest June on record,” said Brendon Ogmundson, BCREA economist. “A growing provincial economy and record low borrowing rates continue to push demand higher, particularly in the Lower Mainland.”

“While consumer demand is surging, the supply of homes for sale has not kept pace. The resulting imbalance of supply and demand has put upward pressure on prices in many areas of the province, most notably with respect to single detached homes.”

In the first half of 2015, BC residential unit sales climbed by 23.1 per cent to 51,559 units, while the average MLS resale price rose 11.2 per cent to $631,946.

UPDATE: Across Canada, home sales set a record for June, standing 11 per cent above June 2014 and 14 per cent above the 10-year national average for the month, according to Canadian Real Estate Association (CREA) figures released July 15.

The national average sale price rose 9.6 per cent on a year-over-year basis in June, but was again greatly skewed upwards by high price rises in Greater Vancouver and Greater Toronto. Excluding those markets, it increased by 3.1 per cent.

Two-storey detached homes again recorded the biggest year-over-year price increases (up 7.65 per cent), with more modest increases for bungalows (up 4.43 per cent), townhouse/row units (up 4 per cent) and condos(up 2.64 per cent).

The report added that year-over-year price growth varied among housing markets. Greater Vancouver (up 10.26 per cent) continued to post the country’s biggest year-over-year price increases. By comparison, Fraser Valley, Victoria and Vancouver Island prices all recorded year-over-year gains of about 4 per cent in June.

“Low interest rates are unquestionably helping boost consumer confidence and home sales activity this summer,” said CREA president Pauline Aunger. “But low interest rates are benefiting sales in some areas more than others. All real estate is local, with trends affected by a combination of local and national factors.”

© 2015 Real Estate Weekly