The million-dollar club isn’t so exclusive in Greater Vancouver, where the average price for single-family detached houses sold has soared to a record high of more than $1.36-million.

Prices surged as total residential sales climbed to 2,530 last month for detached homes, condos and townhouses, up 40.8 per cent from volume of 1,797 properties changing hands in February 2013, according to data released Tuesday by the Real Estate Board of Greater Vancouver.

Detached properties have soared in value, rising to an average of $1,361,023 last month, an increase of $139,986, or 11.4 per cent higher than $1,221,037 a year earlier and smashing the previous high of $1,287,213 in January of this year.

But the board cautions that average prices give a skewed picture of the market because sales of many high-end homes boost the figures to well above other transactions that are considered more typical.

The board prefers to focus on the benchmark index price, which strips out the most expensive properties. On that measure, detached index prices reached $932,900 last month, up 3.5 per cent from February, 2013. On Vancouver’s West Side, the detached index price jumped 7.2 per cent to more than $2.14-million.

Over all, the index price hit $609,100 for Greater Vancouver detached houses, condos and townhomes sold on the Multiple Listing Service last month, or a hike of 3.2 per cent over the past year.

Sales volume last month was slightly lower than the 10-year average in what is shaping up to be a balanced market for sales and active listings in 2014, said board president Sandra Wyant.

The B.C. Real Estate Association noted that Ottawa’s shutdown of the federal immigrant investor program last month could reduce sales volume for the most expensive detached homes.

Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., said he doesn’t think prices will change dramatically over the next several months, as long as interest rates stay low. If there is any slide in the housing market, it will be slow because prices are “sticky on the downside” due to the lack of major economic setbacks such as a huge spike in unemployment to force people to sell, he said.

The attraction of Vancouver remains high, including for wealthy immigrants from China, Mr. Scarrow said.

Greater Vancouver includes the City of Vancouver, the municipalities of West Vancouver and North Vancouver, and also suburbs such as Burnaby, Richmond, Coquitlam, Port Coquitlam, Port Moody and New Westminster.

In the Fraser Valley, which includes the sprawling and less-expensive Vancouver suburb of Surrey, residential sales climbed to 1,102, up 20.7 per cent from February, 2013. The index price for detached homes reached $558,100, up 3.2 per cent from year earlier. Average prices for detached properties rose 9.7 per cent to $644,574 in the Fraser Valley.

The index price for detached houses, condos and townhouses was $428,100 in the Fraser Valley last month, or 1.3 per cent higher than in February, 2013. The average price for those three categories reached $519,082 last month, or a 10-per-cent hike from $471,767 a year earlier.

Source: Brent Jang, The Globe and Mail

The world’s wealthiest may look at expanding their real estate portfolio as they may use sub-orbital space travel to reduce travel time, believes Knight Frank.

More than 70 wealthy individuals, with a combined wealth of over $200 billion, are investing in space research projects, which includes asteroid mining to sub-orbital space travel, the global real estate consultancy said ahead of the March 5 release of its Wealth Report 2014.

“By travelling outside the Earth’s atmosphere, gravitational forces will allow spacecraft to travel at over 4,000 miles per hour, so breakfast in Mayfair could easily be followed by lunch overlooking Sydney Opera House,” says Knight Frank’s Head of Research Liam Bailey.

The consultancy believes that space travel will have impact on global luxury property markets, with ultra high net worth individuals (UHNWIs) will grow their luxury property portfolio.

Though the Wealth Report’s Global Cities Survey confirms, London currently wins over New York as a global wealth hub because it is more convenient for African, Middle Eastern, Russian and European UHNWIs.

But this convenience premium could be noticeably reduced if Richard Branson’s Virgin Galactic succeeds in making his vision for sub-orbital travel a reality.

Transcontinental travel – London to Sydney – a distance of 10,553 miles will be completed in 2.2 hours from the current 21 hours. Dubai to Vancouver, a distance of 7285 miles that currently takes a flight time of 14.5 hours, will be cut short to just 1.5 hours, says Knight Frank.

Talking to The Wealth Report, entrepreneur Richard Branson said: “New commercial space will be one of the most exciting investment sectors in the next 20 years, driven by the initial successes of companies like Virgin Galactic.

“There is already some good evidence that the leading players are receiving high levels of interest from the mainstream investment community and attracting valuations that reflect confidence in future growth and opportunity.”

In 2013, Virgin Galactic spokesperson told Emirates 24|7 that it expects thousands will take the suborbital spaceflight from Abu Dhabi.

“If approved, Virgin Galactic intends for the UAE spaceport to be the first international commercial spaceport, contingent on US regulatory approvals. The UAE spaceport will be a very desirable destination attracting people from all over the world to experience the unique view of earth from above the UAE,” a spokesperson said.

Currently, over 600 people from more than 50 countries have placed reservations. Celebs including Angelina Jolie, Brad Pitt and Ashton Kutcher are among those said to have bought $200,000 tickets.

Ticket price will play a critical role in defining the impact on real estate.

“If this is a technology for billionaires only, then property market disruption might be limited to a wider choice of global lunch options. But if the price drops to allow the merely very wealthy to access sub-orbital flights, then every assumption about current property prices will have to be reconsidered,” Bailey said.

Knight Frank has rated Dubai among the most sought after real estate destination in the world. In 2013, over 140 foreign nationalities, which includes Americans, Canadians and Europeans, invested Dh116 billion in the Dubai real estate market.

Source: Parag Deulgaonkar, Emirates 24/7 News

The average cost of a Canadian home hit a record high of $388,553 in January. This price is 9.5 per cent higher than last year. The average cost of a home in cities such as Toronto and Vancouver rose to $526,528 and $606,800. Over the last ten years Canadian real estate prices have soared 84 per cent. With prices sky-high in some cities, the following tactics could help make buying your first home just a little bit easer.

Get a mortgage pre-approval before you start house hunting.

Before you start visiting open houses or checking out properties with a real estate agent, it’s important to visit your bank to see which houses you can afford. This ensures you’re shopping within the correct price range. Many people will need to take out a mortgage to buy property, but the amount you are eligible for is based on multiple factors including credit rating, household income and monthly expenses. Before you begin property hunting, visit a financial institution. This way you’re able to hold a competitive rate for between 30 to 120 days.

Buy a home with your parents or a buddy.

Young adults are increasingly relying on help from family members to buy a home. About 27 per cent now expect it. In a hot housing market, real estate agents have seen ‘gift letters,’ which detail the money a family member will contribute to assist them with mortgage approval, or simply thousands of dollars in hard cash. If a family member decides to loan the money rather than give it as a gift, parents should establish payment requirements in a legal document to ensure that everyone is satisfied.

Buy a home in a more affordable city.

House prices in Vancouver and Toronto are climbing to unaffordable levels for many people, but this doesn’t mean you have to live in these cities. Near Toronto, the housing markets in Ajax, Brampton, Milton and Mississauga are heating up. These are popular placees to buy a bigger lot, but potential homebuyers need to account for other costs (like gas and car insurance), as well as commuting times should their work remain in Toronto.

Buy a home that you can use as an income property.

You could buy a property you can live in but also split into a rental unit. The best outcome is if your renter’s payment covers your mortgage costs, but there are some important points to consider. First, you need to determine how comfortable you are living in close proximity with your tenants. For example, are you comfortable having a boarder live down the hall, or would you prefer to live on separate floors and use different entrances? Many people would prefer a semi-detached home with a separate entrance, bathroom and kitchen. If these don’t figure in the property you’re eyeing, you’ll need to budget for renovation costs.

Negotiate your house price and insurance.

Some people don’t feel comfortable negotiating, but it can save you a lot of money. First, the more information the better. Research the value of other houses. Chances are an identical house has been sold in the neighbourhood and you should check that property’s value against the one you’re considering. Understand why the seller is selling and shape your bid towards his or her plans. Also, understand that while the size of your bid is important, it isn’t always the deciding factor because some homeowners care how the new owner will treat the property.

When you purchase insurance, there are three types to consider: basic, standard and comprehensive. An independent broker can help you get the best rate and if you bundle your auto and home insurance with the same company you could receive up to a 15 per cent discount.

Tap into your RRSP for first-time home buyers.

First-time homebuyers can withdraw $25,000 from their RRSP as a part of the federal government’s homebuyers plan. If you’re buying a home with a partner, you can both take out $25,000 from your individual plans. If this equals a 20 per cent down payment, you can avoid mortgage default insurance, which tacks on several more thousands of dollars to your mortgage. If you do tap your RRSP, there is a tax loophole that lets you receive up to $20,000 in tax refunds. But one drawback with using your RRSP is that you must repay the amount you withdraw within 15 years or you will face a penalty based on your personal income tax rate.

Buy a smaller space.

One in eight households lives in a condominium. With the gap between the price of a house and a condo hitting record highs in Toronto, more families are becoming condo dwellers. The average size of a home in Canada was 2,300 square feet during the mid-2000’s. But that number has now dropped to 1,900 square feet and will probably keep shrinking. The size of your family will determine the size of your home. While you may have grown up in a single detached home with a backyard, in housing markets such as Vancouver and Toronto it’s important to manage your expectations.

Budget for your closing costs.

Tapping into a mortgage offers homeowners leeway in paying off their property, but along with your down payment there are other upfront closing costs you need to budget for. The Canada Mortgage and Housing Corporation suggests that you set aside an additional 1.5 to 4 per cent of your property’s purchase price to account for closing costs. Closing costs include a land survey that ranges from $1,000 to $2,000, an independent home inspection costing from $350 to $600, legal fees for a title search and paperwork that run to about $1,000, and a land transfer tax that varies based on your city and GST/HST.

Source: Josephine Lim, MSN Money

Real estate is making British Columbian families richer, according to Statistics Canada’s latest report on financial security, though that is not necessarily making them better off.

British Columbia saw the median family net worth, which measures total assets minus total debts, rise 128 per cent between 1999 and 2012 to $344,000 from $150,700 13 years previously — the highest among provinces in Canada compared with the national average of 78 per cent to $243,800 from $137,000 over the same time period.

“From a financial planning perspective, that (gain) is irrelevant,” said Ian Black, a registered financial planner and principal with Vancouver firm Macdonald Shymko & Co., “unless you’re looking to get out of the market and (move) to another jurisdiction to release some of that equity.”

Black said the difficulty, particularly in the Lower Mainland, is that even if homeowners sell to downsize, they will still be looking to buy in an already expensive market.

“You’ve got to live somewhere,” he added, and “that (increase in property value) isn’t going to generate any higher income.”

The report did not contain a demographic breakdown for B.C., but on a national basis found that the families with older income earners saw bigger gains in net worth than those where the top income earner was younger.

However, those family units have also accumulated more debt: a total of $1.34 trillion in 2012, up from $864.6 billion in 2005. Most of the debt — about $1 trillion — has been used to finance home purchases. All figures are in inflation-adjusted dollars.

“That is a very significant increase … after-tax disposable income has increased by 10 per cent across all income brackets,” said federal Employment Minister Jason Kenney.

However, the high prices are also a potential problem, according to economist Andrew Jackson of the Broadbent Institute, because prices are widely projected to moderate or even fall in the next few years.

“The big question is if and when we get a housing price correction, individuals will still be holding the debt and that is a cause for concern,” he said.

High prices are also a concern in B.C., particularly the Lower Mainland, because the rising value of real estate assets can come at the expense of other savings, said James Cripps, a chartered financial analyst and certified financial planner with Vancouver Financial Planning Consultants Inc.

“What I’m seeing, actually, is more of people taking on mortgages so big they’ve finally figured out they won’t pay them off in their lifetime,” Cripps said.

So they focus on paying down their mortgage so that they can eventually downsize without debt, “and they’re not saving in RRSPs or (tax-free savings accounts) as a result.”

“From a risk diversification point of view, it’s not a great thing, especially when you consider that affordability or real estate relative to median income is right off the charts,” Cripps said.

North Vancouver realtor Helen Grant said her clients looking to downsize base their decisions on “the margin,” meaning whether or not they are able to move to a smaller home and bank some money.

“They may have purchased their home for $200,000, they turn around and sell for $1 million, then they’re sitting in a market that’s already elevated, where do they put their money?” Grant said.

Many choose to “follow grandchildren” or move to slower-paced communities on the Sunshine Coast, Vancouver Island or Okanagan, she added.

To others, depending on age and circumstance, Grant says she advises to sell and rent, because they are unlikely to see the same gains in condominium price increases that they’ve experienced in single family homes.

The average single family home price rose 221 per cent between 1999 and 2012 in the region of Metro Vancouver covered by the Real Estate Board of Vancouver, compared with 148 per cent for the average condominium.

However, Cameron Muir, chief economist for the B.C. Real Estate Association, said Metro Vancouver condominium prices have seen almost no gains since 2010.

Source: Derrick Penner, Vancouver Sun

Canada’s luxury housing markets are booming. Like, ridiculously booming, at least in some places.

According to a recent RE/MAX report, luxury home sales in Toronto (defined as $1.5 million plus) jumped 18 per cent in 2013, while Vancouver saw luxury ($2 million plus) home sales jump 38 per cent and luxury condo sales jump 18 per cent.

But with average detached home prices approaching $900,000 in Toronto and $1 million in Vancouver, a $1.5-million house in Toronto or a $2-million house in Vancouver might not actually be “luxury” properties.

Sotheby’s International Realty, in a report earlier this year, hinted at what may be happening.

“As the average cost of a single family home in Canada rises, the gap between conventional housing costs and the [luxury] threshold grows closer,” the Sotheby’s report says.

So sales of luxury homes are being driven up, apparently, by the fact that prices of non-luxury homes are now entering “luxury” territory. Put another way, normal suburban homes are now selling at rich people’s prices. Put yet another way, middle class isn’t going to buy you much of a house going forward in the country’s most expensive markets.

But at the top end of the market, the houses really are “luxury” — and some of them are pretty over-the-top. Check out this list of the most expensive houses for sale in Canada, by province.

Source: The Huffington Post Canada

The five-year fixed mortgage at an advertised rate below three per cent has returned to Canada for the first time since last year.

Meridian Credit Union, the largest credit union in Ontario, announced this week it had lowered its benchmark five-year fixed-rate mortgage to 2.99 per cent.

According to market surveys carried out by RateSpy.com and Cannex.com, that is the lowest advertised rate for the popular mortgage term in Canada.

Meridian’s mortgage special is available just in Ontario, but it appears to have few other restrictions.

Earlier this month, MortgageBrokerNews.ca reported that two mortgage brokers — Verico Butler and Advent Mortgage Services — were also offering 2.99 per cent five-year fixed mortgages.

Brokers are often able to get mortgage rates for their clients that are lower than what big lenders offer. But sometimes, super-cheap mortgages have severe restrictions on such things as rate holds and prepayment privileges.

Fixed mortgage rates have been creeping down in the last month at most lenders as Canadian bond yields have been falling. Fixed mortgage rates tend to track bond yields.

The yield on Canada’s five-year government bonds has fallen 33 basis points so far this year to 1.62 per cent.

Last year, some big banks attracted the ire of Finance Minister Jim Flaherty for aggressively pushing 2.99 per cent five-year mortgages. He was worried that cheap financing would stoke a housing market that some economists were calling overheated and overvalued.

Since credit unions are provincially regulated, Flaherty has no formal power to pressure Meridian over its current promotion.

Source: CBC News

Almost a quarter of Canadians say they are planning on using their homes as their primary source of income once they are out of the workforce, according to a survey from Sun Life Financial.

“It’s not something we would recommend per se, it is a bit of a surprise,” says Sadiq Adatia, chief investment officer of Sun Life Global Investments, about the retirement strategy being considered by 24% of Canadians. “People should be counting on their retirement savings and not really looking at their home. A home is something you can have and carry forward with you.”

Any retirement strategy involving accessing the equity of the home could mean selling it or at the very least getting a new mortgage on the property or a reverse mortgage.

Mr. Adatia thinks the downturn in the stock market in 2008 may have affected people’s retirement plans and has them turning to their homes to pick up the slack.

Rising home values have helped many Canadians approaching retirement feel like they have created a pretty big nest egg. The Canadian Real Estate Association said last month the average home in the country sold for $388,553 in January, a new high and a 9.5% increase from a year earlier.

On average, Canadians expect 10% of their retirement income to come from their home. Government pension plans on average are expected to supply 30% of retirement income, 27% is to come from personal savings, 23% from employer plans, 5% from inheritance and 6% from what is called other sources.

Even with their optimism over accessing their home equity, only 28% of Canadians expected to be retired by 66. Another 56% of Canadians expect to work past retirement age with 65% of those people saying they will need to.

“The average expected retirement age in Canada has hit its lowest level in four years – it’s 66 this year down from a high of age 69 in 2011,” said Kevin Dougherty, president of Sun Life Financial Canada. “With people living longer and more Canadians expecting to retire sooner, it’s important to look at what savings you will need to be fully prepared.”

Mr. Adatia thinks a retirement plan involving selling your home might work for people who bought a few years ago, it might not work for people buying today.

“I know my own parents bought their home 30 years ago and at an extremely dirt cheap price,” he said, adding the older people can afford to absorb a downtown in the market if it happens. “If you’re 40 and bought your home five years ago, you can’t afford that hit.”

Sun Life’s view on real estate is the market is inflated and there might be a significant decline in prices, making renting a viable option. The company says homes are selling for on average six times personal income, compared to a historical average of four times.

“Do you want to overextend yourself at the peak of the market?” said Mr. Adatia.

The survey was conducted by Ipsos Reid between Nov. 12 to Nov. 20 and is considered accurate to within two percentage points.

Source: Garry Marr, Financial Post

The fourth quarter of 2013 saw a slight improvement in housing affordability in Metro Vancouver, once again due to slight drops in interest rates at some banks, statistical analysis provided to The Vancouver Sun shows.

During the whole of 2013, affordability has become slightly worse for single family houses, particularly in the city of Vancouver and its inner suburbs. In the outer suburbs, affordability levels for all types of housing have remained consistent for the year.

“The numbers are showing that we’re not seeing huge swings up and down, we’re not seeing a bubble and a burst. It’s very stable,” said Anne McMullin, president and CEO of the Urban Development Institute. “Developers are coming up with creative ways to make their homes affordable to people who may not necessarily be able to get into the market.”

She said developers are responding to the stable market with innovative projects, such as a new project by Adera, known as “mingles,” which are condominiums designed for people who want to share a mortgage, but not a bathroom or a bedroom. The first of these projects, called Prodigy, will be launched this spring at the University of B.C.’s Wesbrook Village.

Construction will start this summer on BosaSPACE, homes that adapt with movable furniture built into the suite. For example, some homes have a floating TV panel that slides out of the way to open up a guest bed area, or a kitchen island that slides out to become a desk or a dining room table.

“I think we will see more and more innovation that allows people to live in a smaller place, with all of the amenities of a larger space,” McMullin said. “The designs are starting to change to address the issue of affordability.”

The other change that McMullin noted is the transformation of shopping malls from stores surrounded with large concrete parking lots into gathering places that include shopping, public spaces, restaurants, housing, office space and access to public transit.

New concrete condominiums in Vancouver are slightly more affordable than they were last year, due to an increase in the number of concrete condominiums available for sale, the data shows.

At the same time, new condominiums in the inner suburbs are slightly less affordable than they were a year ago.

Many of the major banks have dropped their best five-year fixed rates down to 3.69 per cent — the average five-year, fixed-rate interest rate from the largest banks for the purposes of this index is now at 3.67 per cent, down from last quarter’s 3.79 per cent.

The data also shows that new home prices have remained relatively steady across the board, while both concrete and wood-frame condominium prices are down slightly for all areas, while townhouse and resale single family home prices increased slightly throughout the region.

The index defines “affordable” as the percentage of households living in a region with the income required to qualify for the mortgage needed to own the property. Typically, a bank wants to see no more than 32 per cent of income going to housing if it is to provide a mortgage.

In Vancouver’s suburbs, more than half of the population can afford to buy either a house, a townhouse or a condo and stay in the same community, the UDI/FortisBC Housing Affordability Index for the fourth quarter of 2013 shows.

The UDI/FortisBC Housing Affordability Index breaks Metro Vancouver into three areas: the city of Vancouver, Inner Metro (West Vancouver, North Vancouver, Burnaby, New Westminster, Richmond, South Delta, Coquitlam, Port Moody, Port Coquitlam) and Outer Metro (Surrey, Langley, North Delta, White Rock, Pitt Meadows and Maple Ridge).

In Vancouver proper, the minimum annual income required to purchase a new unit is $68,636 for a wood-frame condominium. For a single-family home, the minimum required annual income is $163,867.

For resale properties, the numbers are a bit more encouraging: the minimum required income for a resale property is $50,078, which would qualify a buyer for a wood-frame condo.

In Inner Metro, the minimum income required to buy a re-sale wood-frame condo is $37,716, while it is $108,130 for a single family home in the same area.

In Outer Metro, the minimum income required to buy a resale townhouse is just $28,263, while a family earning $64,655 could afford to purchase a detached home.

Source: Tracy Sherlock, Vancouver Sun

Real estate agents in Vancouver say property prices could take a hit, after Canada scrapped a program which allowed wealthy immigrants to fast-track the visa process.

The Immigrant Investor Program, launched in 1986, offered visas to business people with a net worth of at least $1.6 million who were willing to lend $800,000 to the Canadian government — for investment across Canada — for a term of five years.

By 2012, the scheme had to be temporarily frozen due to a huge backlog of applications from wealthy mainland Chinese hoping to come to B.C. Now, the government has announced it will end the program for good and scrap all 59,000 applications backlogged worldwide.

The decision came less than a week after the South China Morning Post published a series of exclusive investigative reports into the controversial scheme.

In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but he’s concerned the end of the investor program will have an impact on the local economy and the high-end housing market.

“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.

“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”

Immigration lawyer Richard Kurland agrees.

“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.

Others aren’t so sure. Even with the investor program frozen, housing prices continued to rise.

Tom Davidoff with UBC’s Sauder School of Business says the market is driven by other things like low interest rates and the local and global economies.

“Given that in the last couple of years, we haven’t seen the market cool off, it’s hard to believe that freezing the investor market is going to kill even the high-end in Vancouver,” said Davidoff.

The government has also announced the end of the Entrepreneur Program, a smaller scheme for business people who plan to own and manage a business in Canada.

However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups.

Source: CBC News

U.S. millionaires see real estate as the top alternative-asset class to own this year, according to Morgan Stanley.

About 77 percent of investors with at least $1 million in assets own real estate, according to a survey released today by the New York-based investment bank’s wealth-management unit. Direct ownership of residential and commercial properties was the No. 1 alternative-investment pick for 2014, with a third of millionaires surveyed saying they plan to buy this year. Twenty-three percent said they expect to invest in real estate investment trusts, the second-most popular choice.

Wealthy investors are turning to a rebounding real estate market as fixed-income yields remain historically low and equities surge. U.S. commercial-property values rose 8 percent in the 12 months ended Jan. 31, and have jumped 71 percent since hitting their post-recession bottom in 2009, research firm Green Street Advisors Inc. reported today. The S&P/Case-Shiller index of home prices in 20 cities is up 24 percent from its 2012 low.

“After a year where the Standard & Poor’s Index rose 30 percent, some millionaires are moving money out of traditional, long-term strategies and turning toward alternatives such as real estate and private equity,” said Gary Kaminsky, a vice chairman at Morgan Stanley Wealth Management in New York. “Sophisticated, high-net-worth investors are much more concerned about losses.”

Wealthy investors see stocks getting expensive and interest rates staying stable or even declining over the next couple of years, Kaminsky said in an interview at a conference for Tiger 21 investors last week in Scottsdale, Arizona. That’s why they are looking more closely at alternatives including real estate for returns and income, he said.

Source: Margaret Collins and David M. Levitt, Bloomberg