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Tuesday, 12 June 2007 |
Heated housing market eases ever so slightly
Lower Mainland real estate markets continued simmering rather than boiling in May with enough heat to push Greater Vancouver's so-called benchmark price for a single-family home to a record $711,245.
A higher number of unsold homes on the market is moderating conditions.
The benchmark refers to a typical property, and Greater Vancouver's new typical price represents a 12-per-cent increase in price from the same month a year ago.
Multiple Listing Service-recorded sales in Greater Vancouver did edge up 2.3 per cent to 4,331 compared with May 2006. The inventory of unsold homes, however, was up 23.4 per cent over the same month a year ago.
In the Fraser Valley, MLS sales declined four per cent to 2,152 units compared with May a year ago. Valley inventory, now at 8,381 units, is up 52 per cent compared with the same month last year.
The Fraser Valley's average single-family home was $521,444 in May, a 12.6-per-cent increase from a year ago.
That prices keep rising is no surprise to Tsur Somerville, a real estate expert at the University of British Columbia, since "we know whenever markets slow down, activity slows down before prices slow down."
Somerville, director of the centre for urban economics and real estate at the Sauder School of Business, added that a year ago, real estate prices were rising at a 16- to 20-per-cent clip, so 12-per-cent price growth "suggests the market has simmered down a little bit."
Robyn Adamache, a market analyst for Canada Mortgage and Housing Corp. said her forecast still calls for sales to slow through the rest of the year, along with price growth.
"Prices tend to be sticky on the way down," she added.
However, from the perspective of buyers who jumped into the market in May, Ian Webb and his wife Carleen Jurincic, the slowdown wasn't as evident.
"The pace, I use frantic to describe it to other people," said Webb, a local lawyer.
Webb added that they got back into the market to trade up from their condominium at Granville and 11th Avenue because his parents sold their house to downsize and passed substantial cash gifts to their three children.
However, it was a stressful five-month search to find the $990,000 coach house they've purchased. Houses they liked were listed on a Wednesday and sold by Saturday or Sunday night, he said.
The couple eventually sold their condo first so that they wouldn't have to make offers conditional on selling their existing property.
"We're very relieved to be out of that search for a place where you're having to drop everything to go look at a listing and consider making an offer on the spur of the moment for massive amounts of money," Webb said.
Lorne Goldman, the couple's realtor at MacDonald Realty, said a lot of buyers are coming to the market with help from parents, with inheritances or with equity from property they own.
He added that rental income is becoming a more important consideration and a lot of new east-side Vancouver houses are being built with two basement suites.
"The price-point has not yet had a significant impact on sales," Goldman added.
Somerville said in a high-priced market, there will always be a certain number of buyers who can pay top dollar. At the lower end of the market, buyers re-adjust their sights.
Greater Vancouver recorded 1,789 condominium sales in May, up 1.6 per cent from a year ago, with a benchmark price of $358,428.
The condo price represented an 11.5-per-cent gain.
"When you look at affordability [measures], especially on condominiums, [Vancouver] doesn't look that horribly overpriced," Somerville added. "People make adjustments in high-priced markets."
(prepared by Derrick Penner/Vancouver Sun)
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Monday, 14 May 2007 |
Costly Misunderstanding
Dear Condo Smarts: We purchased a townhouse in Langley before Christmas in a phased development. We seriously misunderstood what we were getting, and what our costs were going to be. As it turns out, the strata is almost 15 years old. We never considered we were part of the older section, so under new warranties we thought we were safe.
In March, we received an engineering report that shows the first 50 units built in the '90s are leaky condos -- and we have to pay for the special assessments of the leaky townhomes as well. Our inspectors didn't investigate the older units, and no one advised us of the risks. Yes, we'll qualify for a no-interest loan, but considering the payments, we may have to sell and take our losses. Please let people know the risks in a phased strata.
-- Carol and Kevin
Dear Carol & Kevin:
It's important to understand what phasing is and it's important for buyers to read disclosure statements and get their questions answered before the deal is closed.
A phased development is a strata plan that's built, developed and sold in groups over a period of time set out by the developer as part of its master plan.
It can be a few homes -- 10 units divided into two phases, building and selling five at a time -- or 500 homes with 10 or more phases.
Each phase sets out the proposed number of units to be built and when they are projected to be built and completed. Once each phase is ready for sale, the developer files the strata plan for that phase, which in turn creates the titles for each of the units.
Once the phase is registered and the strata plan is filed, it becomes a functioning part of the strata corporation. Strata fees are due on each lot, and each lot exercises voting rights.
(Bylaws regarding pets, rentals or age restrictions can only be amended once the final phase has been conveyed to the strata through its AGM, or if the developer grants permission in writing to adopt such bylaws and the strata votes in favour by 3/4 vote. In a strata with many phases being built over years, it could be a long time before restrictive bylaws can be imposed.)
When purchasing in a phased development, ask how many are still to be built and when they will be finished. You may be in a development that will be under construction for a long time, or at the end of a phase with an already well-developed community.
Once the final phase is complete, all units from all phases are one strata and share all the common expenses, liabilities and use of facilities.
Review the history of the strata, minutes and financials to ensure it is well maintained and serviced and there are no scary surprises, or you may pay for years of use, neglect and dispute.
(Tony Gioventu/Vancouver Province)
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Saturday, 28 April 2007 |
Real estate collapse not looming, after all
An analysis by one of the country's best-informed watchers of household financial trends concludes that Canadian housing prices will probably double over the coming 20 years.
This bit of intelligence, from Benjamin Tal, an economist with CIBC World Markets, is happy news for those who are still worried by the idea that an aging population necessarily leads to a real estate collapse.
It's hardly a good reason to consider housing a hot investment, of course. For an investment to double over 20 years, it need rise by only about 3.5 per cent per year. This means Tal is predicting a smaller average return on a home than on the stodgiest of government bonds -- and a much less certain one.
Still, it's helpful for Tal to remind us that our most valuable possession is not nearly as vulnerable to collapse as some would suggest.
He says he's been a little surprised recently by the number of acquaintances and CIBC clients who ask if they risk serious losses as baby boomers retire and sell their homes. This scenario was set out several years ago in a bestselling book by University of Toronto economist David Foot and even earlier by a couple of U.S. academics.
Now, for whatever reason, it seems to have come back. One reason could be the distress we see in the U.S. housing market, although this is a very different phenomenon.
And Tal guesses the worry has to do with some people thinking that prices today seem much less affordable than when they bought many years ago, so they could be headed for a bust. From there, it's only a short step to seeing the latest headlines about an aging population as the trigger.
On the surface, this seems a reasonable fear. It's true that, over the coming two decades, the population will age as fewer youngsters under 25 set up households and the huge boomer generation moves into retirement.
So couldn't this point to a housing meltdown?
Nope. Analysts have looked carefully at the demographic bust theory over the past decade and they've driven several stakes through its heart.
One is that people don't immediately sell their homes and move into a nursing facility at the age of 65. The opposite is true.
The home ownership rate among those older than 65 is in fact higher than among younger people, found John Krainer, an economist with the Federal Reserve Bank of San Francisco. And it's been rising, perhaps because geezers are healthier and more active than ever before.
Tal finds that while some retirees move into smaller homes, retirees also have the highest rate of ownership of vacation cabins and other second homes.
As well, the biggest influence on housing prices is real incomes, not demographics, according to a study by economists Mario Fortin at the Universite de Sherbrooke and Andre Leclerc at the Universite de Moncton. Real incomes have been rising and this is very likely to continue.
Fortin and Leclerc did find one demographic influence, however. The number of those between 25 and 54 has some influence on home prices.
But this group will shrink only marginally over the next 20 years, according to a federal demographic projection. And Tal suspects that this projection underestimates the likely positive impact of immigration.
Add it all up, and Tal calculates that demand for housing will drop only a little over the coming two decades. And he adds a crucial point that the demographic determinists apparently forgot: Price depends on supply as well as demand.
Homebuilders are very quick to adjust to any slackening of demand. In this case, Tal estimates that over the coming two decades, they'll keep the market balanced if they merely build about six per cent fewer homes on average than they did from 1987 through 2006.
That very small correction should be "no problem," he says.
And this means that the big influences on the housing market will remain similar to what they've been in the past.
Prices will go mostly up and occasionally down. But the long-term trend should be gently upward.
(prepared by Jay Bryan, CanWest News Service/Vancouver Sun)
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