Property speculation continues in Vancouver and Toronto

When the United States saw a vast housing bubble inflate and burst during the 2000s, many Canadians felt smug about the purported prudence of their financial and property markets. During the crash, Canadian house prices fell by just 8%, compared with more than 30% in America. They hit new record highs by 2010. “Canada was not a part of the problem,” Stephen Harper, the prime minister, boasted in 2010.

Today the consensus is growing on Bay Street, Toronto’s answer to Wall Street, that Mr Harper may have to eat his words. In response to America’s slow economic recovery and uncertainty in Europe, the Bank of Canada has kept interest rates at record lows. Five-year fixed-rate mortgages now charge interest of just 2.99%. In response, Canadians have sought ever-bigger loans for ever-costlier homes. The country’s house prices have doubled since 2002.

Speculators are pouring into the property markets in Toronto and Vancouver. “We have foreign investors who are purchasing two, three, four, five properties,” says Michael Thompson, who heads Toronto’s economic-development committee. Last month a modest Toronto home put on the market for C$380,000 ($381,500) sold for C$570,000, following a bidding war among 31 prospective buyers. According to Demographia, a consultancy, Vancouver’s ratio of home prices to incomes is the highest in the English-speaking world.

Bankers are becoming alarmed. Mark Carney, the governor of the central bank, has been warning for years that Canadians are consuming beyond their means. The bosses of banks with big mortgage businesses, including CIBC, Royal Bank of Canada and the Bank of Montreal, have all said the housing market is at or near its peak. Canada’s ratio of household debt to disposable income has risen by 40% in the past decade, recently surpassing America’s (see chart). And its ratio of house prices to income is now 30% above its historical average—less than, say, Ireland’s excesses (which reached 70%), but high enough to expect a drop. A recent report from Bank of America said Canada was “showing many of the signs of a classic bubble”.

The consequences of such a bubble bursting are hard to predict. On the one hand, high demand for Canada’s commodity exports could cushion the blow from a housing bust. And since banks have recourse to all of a borrower’s assets, and Canadian lending standards are stricter than America’s were, a decline in house prices would probably not wreck the banks as it did in the United States.

However, the Canadian economy is still dependent on the consumer. Fears about the global economy have slowed business investment, and all levels of government are bent on austerity. The Conservative government’s next budget is expected to put forward a plan to close the federal deficit, now 2% of GDP, by 2015—modest austerity compared to Europe’s, but still a drag on the economy. Few new jobs are being created. Assuming there is no setback in Europe’s debt crunch, slowdown in America or drop in commodity prices, GDP is forecast to grow by a meagre 2% this year. If consumers start feeling less well off, Canada could slip back into recession.

The inevitable landing will probably be soft. Increases in house prices and sales volumes are slowing, and the 2015 Pan American Games in Toronto should prop up builders. “The national housing market is more like a balloon than a bubble,” says a report by the Bank of Montreal. “While bubbles always burst, a balloon often deflates slowly in the absence of a ‘pin’.”

Moreover, the government is trying to cool the market. The banking regulator is increasing its scrutiny of housing in response to concerns about speculators. The Canada Mortgage and Housing Corporation, a government mortgage-insurance agency, says it will have to start reducing its new coverage because of legal limits. And the finance ministry has cut the maximum term of publicly insured mortgages from 35 years to 30. Some bank managers are calling for it to be reduced to 25, the historical norm. Canada’s reputation for financial sobriety is not entirely unwarranted.

However, the state has refused to use its most powerful tool. To protect business investment, the central bank has made clear that it plans to keep interest rates low. As long as money stays cheap, the balloon could get bigger—perhaps big enough to become a fully fledged bubble after all.

Source: The Economist

Vancouver Island home sales are up

A total of 62 units sold in the city last month, a 13% increase from a year ago, with the average selling price up 6% to $360,799, according to the latest sales summary from Vancouver Island Real Estate Board.

As the largest city in the region, which spans Vancouver Island north of the Malahat, Nanaimo outperformed the regional average in January, based on VIREB sales data.

On average, properties sold for 3% more region-wide in January than in the same period in 2010, while unit sales rose 5%.

The average prices paid for homes that sold last month was 93% of list price, down 1% from a year ago.

“There’s activity in the market,” said VIREB past-president Jim Stewart.

“There’s not urgency. People seem to really want to look at things.”

All but one of six VIREB zones saw year-over-year selling price increases last month.

The increase ranged from 2% in Campbell River to 9% in Cowichan Valley.

Comox Valley and Port-Alberni both saw 4% changes from 2011.

The single price drop happened in Parksville-Qualicum Beach, down 12% to $341,696.

The supply of single-family homes rose 6% from a year ago, to 640 units in the VIREB region last month.

Days to sell increased 2%, with the average home staying on the market 89 days.

Condominiums are taking longer to sell, especially apartment condos.

Townhouse condos are fetching 96% of list price after an average listing period of 102 days, while patio condos are taking 151 days to sell, also at 96% of list price.

On average, apartment condos sitting on the market 191 days before closing, with the average unit fetching just 89% of list price.

More of the same is in store for the year ahead.

“While the market is not going to be sexy this year, it’s performance looks pretty average,” said Cameron Muir, the B.C. Real Estate Association’s chief economist.

Source: Darrell Bellaart, Nanaimo Daily News

Vancouver's house prices may rise some more in 2012

“Expect the housing boom to cool rather than crash,” BMO’s chief economist Sherry Cooper and senior economist Sal Guatieri said in a report published Monday.

“While the housing boom is unlikely to continue unless mortgage rates drop much further, neither is it likely to bust.”

The bank says home values are indeed rising at a faster pace than they used to, but the signs are pointing to a soft landing where prices stabilize — not a hard correction where prices drop quickly by 20 per cent or more.

“In our view, the national housing market is more like a balloon than a bubble,” the bank said. “While bubbles always burst, a balloon often deflates slowly in the absence of a pin.”

But demographic factors, consistently low interest rates, low construction costs and an influx of foreign buyers make it likely that no such pin will materialize for the foreseeable future, the bank said.

Average prices have grown more than twice as fast as family incomes since 2001, but BMO’s report argues there’s no reason to panic yet.

Nationally, home prices are 4.9 times higher than the average household income. A decade ago, that ratio was at 3.2.

Some cities are hotter than others. Vancouver’s home prices ratio currently sits at 10 times higher than average household income, Toronto’s is at 6.7, Montreal’s is at 4.5 while Halifax is at 3.8. Those are all on the high side, but if the market cools, that will allow incomes to catch up and move the price-to-income ratio lower, the bank argues.

The latest data from the Canadian Real Estate Association shows the national average price was $347,801 in December, a 0.9 per cent increase over the previous 12 months. That was the lowest level of growth since October 2010 and well below inflation, a possible sign that the market is already cooling.

The bank does note, however, three risks to the outlook. A sudden hike in interest rates, a widespread Canadian recession, or an economic slowdown in Asia reducing the number of foreign buyers would all take the air out of Canada’s housing market.

“But barring one of these triggers, however, a dramatic correction is unlikely,” the bank said.

Canadian house prices fell in November 2011

Canadian house prices dropped in November for the first time in nearly a year, according to the monthly Teranet-National Bank house price index released Wednesday.

The 0.2 per cent drop followed two months of flat prices, and was the first decline in the index since a “brief correction during the three months ending November 2010,” said National Bank senior economist Marc Pinsonneault.

The national composite index, which tracks registered prices of homes sold at least twice, shows prices fell in eight of the 11 metropolitan markets tracked — one more than in October.

“Calgary and Victoria stood out with declines of 1.6 per cent and 0.9 per cent respectively,” said Pinsonneault, noting the declines were much smaller in the other six markets, though declines in Toronto, Hamilton and Winnipeg “are noteworthy in that these three markets are considered tight.”

December data released by the Canadian Real Estate Association suggested most real estate markets in the country are balanced, with the exception of those three cities, and Victoria, which is considered to be a buyer’s market.

November’s prices were higher than October’s in Edmonton (0.1 per cent), Montreal (0.4 per cent) and Halifax (0.5 per cent).

Year over year, the composite index has gained 7.1 per cent, up slightly from 7.0 per cent the previous month because of a bigger drop in prices between October and November in 2010.

“Since prices began rising again in December 2010, the recent acceleration trend in 12-month changes could come to an end with next month’s report on December 2011 prices,” Pinsonneault said.

Source: Postmedia News

November housing prices (% change m/m | % change y/y):

Calgary -1.6 | 0.5

Edmonton 0.1 | 1.0

Halifax 0.5 | 2.8

Hamilton -0.3 | 4.4

Montreal 0.4 | 7.2

Ottawa -0.2 | 4.2

Quebec -0.2 | 6.0

Toronto -0.2 | 10.8

Vancouver -0.2 | 9.1

Victoria -0.9 | -0.3

Winnipeg -0.1 | 7.5

National Composite -0.2 | 7.1

Source: Teranet-National Bank

Edmonton has Canada's most affordable housing

The International Housing Affordability Survey looks at housing in cities in the United States, the United Kingdom, Canada, Australia, Ireland, and New Zealand along with Hong Kong. It found that among Canadian cities with populations above one million, Edmonton has the most affordable housing.

Windsor was the most affordable market of any size, while Vancouver was by far the priciest market in the country. In fact, Vancouver outranked every city in the survey except Hong Kong, topping markets like New York City, San Francisco, Sydney and London, England.

Conducted by the public policy website Demographia and based on data from the third quarter of 2011, the study ranks cities by their “median multiple” — the median house price in an area divided by gross median household income. The survey labels any median multiple score over 3.0 as “unaffordable,” and a score above 5.0 as “severely unaffordable.”

Of the six biggest markets in Canada, Edmonton, Calgary and Ottawa-Gatineau earned the designation “moderately unaffordable,” and housing markets in Vancouver, Montreal, and Toronto scored as “severely unaffordable.”

The study, co-authored by American public policy consultant Wendell Cox and Kiwi real estate developer Hugh Pavletich, describes a sharp decrease in housing affordability over the last decade in the markets surveyed. It argues that median multiple scores should lie between two and three, but restrictive land-use regulations boost the price of housing, particularly in the U.K., New Zealand and Australia. The report classed all five of Australia’s major metropolitan areas as “severely unaffordable.”

Cox and Pavletich specially denounce urban growth boundaries, which restrict the amount of land available for new housing development in places like Auckland, New Zealand and Portland, Ore. The authors advocate repealing such legislation where it exists to restore housing affordability.

Cities in America, where the housing market plummeted in 2008, earned the most affordable scores. Detroit led all major cities with a score of 1.4, followed by Atlanta at 1.9 and then cities like Las Vegas, Cleveland and Phoenix.

Hong Kong, at 12.6, scored highest, followed by Vancouver at 10.6 and Sydney at 9.2. Melbourne, which scored 8.4, and the British district of Plymouth & Devon, at seven, rounded out the five least-affordable major markets surveyed.

Source: Lewis Kelly, Edmonton Journal

Lower Mainland property prices increased in 2011

Of course, Vancouver’s real estate market played a significant role.

The gain was bigger in the western half of the region, with the Real Estate Board of Greater Vancouver reporting detached house prices typically rose 11.2 per cent for the year to $887,000.

Of interest is that the hottest gain was a 34 per cent jump in Port Moody home prices, where the Evergreen Line is now assured to pass through after funding for the SkyTrain extension was secured in recent months.

House prices on the west side of Vancouver also gained 20 per cent, while the east side, West Vancouver, North Vancouver, Burnaby and South Delta all saw benchmark house prices gain 13 to 16 per cent.

Attached homes and condos gained more modestly, up roughly four per cent on average.

The Fraser Valley Real Estate Board (FVREB), which covers Surrey, White Rock and North Delta, reported benchmark house prices gained 3.3 per cent in 2011 to $523,000.

Townhouses and condos dipped, however, declining 2.1 per cent (to $315,000) and 1.2 per cent (to $237,000) respectively.

“One trend from 2011 that is clear was the preference for single family homes,” FVREB president Sukh Sidhu said. “For the most part in our region, both sales and prices of townhomes and condos either stayed on par with 2010 or decreased.”

The hottest area was White Rock and South Surrey, where sales were strong and prices of benchmark detached houses climbed 10.8 per cent to $818,000.

The most expensive cities in which to buy property across the Lower Mainland remained the west side of Vancouver with benchmark detached houses nearing the $2 million level, West Vancouver houses at nearly $1.7 million and Richmond, at $1.07 million.

Benchmark houses can still be found for under $600,000 in areas like Maple Ridge, Pitt Meadows, North Delta, Surrey, Port Coquitlam and Langley in Metro Vancouver. In the Fraser Valley, equivalent prices are $424,000 in Abbotsford and $344,000 in Mission.

The Greater Vancouver statistics show the average residential property bought five years ago has gained almost 30 per cent since then.

Detached houses performed slightly better (up 38 per cent) than condos or townhouses (both up just over 20 per cent) over the five years.

Median prices of detached houses in the Fraser Valley are up 26 per cent over five years.

Source: Jeff Nagel, Surrey North Delta Leader

Here are a couple of graphs to show price movement since 2000, and also the difference in house prices between cities over the 2010/11 period.

Average Canadian house prices

The company’s Global House Price Index rose by just 1.5% in the year to September 2011 – the worst level recorded since the second quarter of 2009 with house prices falling in more than half of the countries monitored in the third quarter.

Not surprisingly, Greece was one of the worst-performing countries, with prices falling 4.1% year-on-year. Hong Kong was the strongest, with prices rising 19% over the same period. However the city-state saw its prices drop 1.1% in the third quarter.

“The third quarter saw mounting pressures on the global economy with politicians seemingly helpless to get to grips with the eurozone debt crisis,” said Knight Frank. “This has reawakened fears of a double-dip recession, not just in Europe but around the world. Unsurprisingly, this economic uncertainty has been reflected in the performance of the world’s housing markets.”

At a regional level Europe was the worst performer, being the only area to record a negative growth (-0.5%) while luxury markets continued to hold strong.

“Luxury housing markets appear to be better insulated from this new weaker phase than mainstream markets,” added Knight Frank. “This is due in part to the scale of global wealth generation, the ongoing search for ‘safe-haven’ investments and the growing divide between prime markets in the West and the rest of the world.”

Other notable countries include China, 6th in the table with a 8.9 per cent rise, Germany, 20th with a 2.8 per cent rise, the US, 39th with a -3.9 per cent loss and troubled Greece, which came 40th, with the average house losing -4.1 per cent of its value.

Canada’s housing market fared well with prices up 4 per cent in 2011 compared to the year before. Rising property prices in Vancouver’s housing market have certainly contributed to this.

Global House Price Index

Recent condo sale in Chinatown

Vancouver Sun January 14th, 2012

1704 – 550 Taylor Street, Vancouver

Type: 2-bedroom, 2-bathroom apartment
Size: 785 sq. ft.
B.C. Assessment, 2012: $498,000
Listed for: $499,000
Sold for: $490,000
Sold on: Nov. 30
Days on market: 42
Listing agent: Natalia Antosh at HomeLife Benchmark Realty
Buyers agent: Seth Baker at Royal LePage Westside

The big sell: Chinatown, with its unique Vancouver heritage, has a growing interest among buyers who enjoy the eclectic neighbourhood and access to downtown. Buyer’s agent Seth Baker reports that his clients grew up in the area, and having witnessed its ongoing evolution, were looking to return. This corner unit in the Taylor building impressed them with its 17th-floor panoramic vistas over Chinatown, the docks and the North Shore. In fact, every window has a view. Since its construction in 2005, the home had been totally redone with an upscale kitchen, track lighting and concrete floors. The dining room was built to entertain, with 7-by-17-foot dimensions that will accommodate “house-sized” furniture. There is a den, separate storage both inside and outside the apartment, and parking. The SkyTrain, Costco, Andy Livingstone Park, and Tinseltown are all within walking distance.

305 — 1425 Cypress Street, Vancouver

Type: 1-bedroom, 1-bathroom apartment
Size: 700 sq. ft.
B.C. Assessment, 2012: $392,500
Listed for: $409,000
Sold for: $410,000
Sold on: Dec. 5
Days on market: 6
Listing agent: Pamela Smith at Macdonald Realty
Buyers agent: Amanda Crosby at RE/MAX Select Properties

The big sell: Properties that come on the market in the Kits point neighbourhood usually attract attention because of their proximity to the beach, downtown and the amenities on Fourth Avenue. Listing agent Pamela Smith reports that the first — and only — open house that she held for this loft-style condo was packed with potential purchasers. A multiple-offer situation resulted in an accepted, subject-free bid slightly over the asking price. In addition to the location of the home, the main attraction was in the renovated interior. It has wall-to-wall California closets in the 14-by-17-foot mezzanine bedroom, two skylights, a remodelled bathroom with an extra-large soaker tub, undermount sinks, granite countertops, an open-plan kitchen with a centre island that also houses an electric fireplace built into the end-facing living room, a walk-in pantry, and new hardwood flooring and carpet throughout. The building is pet- and rental-friendly.

1159 West Keith Road, North Vancouver

Type: 5-bedroom, 5-bathroom detached
Size: 4,587 sq. ft.
BC Assessment, 2012: $1.123 million
Listed for: $1.188 million
Sold for: $1.125 million
Sold on: Dec. 14
Days on market: 78
Listing agent: Karim Virani at Virani Real Estate Advisors
Buyers agent: Carole Yang at Sutton Group – West Coast Realty

The big sell: This impressive Pemberton Heights view property was built in 1983 and renovated in 2007, presenting the owners with accommodation that can suit any living situation. The four levels hold a plethora of bedrooms and bathrooms, as well as two kitchens, a family room, office, storage room and separate living and dining areas, all finished to exacting standards. The uppermost floor has a modern open-concept kitchen with stainless steel appliances and custom cabinetry. The southern exposure and multiple decks ensure that all occupants can enjoy the views and the garden on the 50-by-126-foot lot. With a potential rental income of $5,000-plus per month, this could be a good investment opportunity. Pemberton Heights is an area of North Vancouver east of Capilano Road and south of the Trans-Canada Highway, with easy access to Lions Gate Bridge and numerous schools, parks and trails.

For the full story, please click on Real estate sales in downtown Vancouver, Kitsilano and North Vancouver.

Compiled by Nicola Way of BestHomesBC.com and AssignmentsCanada.ca.

Realtors – send your recent sales to nicola@besthomesbc.com
© Copyright (c) The Vancouver Sun

Recent property sale in Port Moody

Vancouver Sun January 7th, 2012

430 Carlsen Place, Port Moody

Type: 3-bedroom, 3-bathroom townhouse
Size: 1,749 sq. ft.
B.C. Assessment, 2011: $370,000
Listed for: $399,800
Sold for: $389,000
Sold on: Nov. 28
Days on market: 7
Listing agent: Terry Osti at RE/MAX Crest Realty Westside
Buyers agent: Nick Parente at Prudential United Realty

The big sell: One of the reasons this three-bedroom townhome in Port Moody’s Eagle Point complex sold in seven days can be attributed to simple math: With a sale price of $389,000, the cost per square foot for the three-level property works out to $222.41 — about half the cost of a similar-sized townhouse in Vancouver. Other attractions are its comprehensive renovations: there’s a gourmet kitchen with dark wood cabinets accented by a glass tile backsplash; a designer colour scheme throughout; new flooring that’s a mix of laminate, tile and carpet; three new bathrooms; and custom-made blinds. As well, there is a private detached garage, and green space to the front and rear of the home. The building has recently benefited from updated windows and a new roof, deck and paintwork, and the communal amenities include an outdoor swimming pool and playgrounds. The property is close to shops, restaurants, Eagle Ridge Hospital, Port Moody’s Civic Centre, the Inlet Theatre and Galleria, and schools and transportation.

6984 Rupert St., Vancouver

Type: 5-bedroom, 2-bathroom detached
Size: 2,250 sq. ft.
B.C. Assessment, 2011: $875,100
Listed for: $974,800
Sold for: $976,000
Sold on: Dec. 5
Days on market: 8
Listing agent: Joanne Taylor at Sutton Group – West Coast Realty
Buyers agent: John Lee at Royal Pacific Realty

The big sell: According to agent Joanne Taylor, there are specific reasons why this 50-year-old rancher achieved multiple offers the day after its first — and only — open house, offers that resulted in a winning bid over the asking price. Vancouver’s Killarney area is of particular interest to property purchasers due to its proximity to Fraserview Golf Course, Champlain Mall, and other community amenities. The fact that it is one of the last areas in the city that is yet to be fully developed also increases its appeal to buyers and investors. This home had been well maintained. It has an updated kitchen, a fully finished basement with a 1,125-square-foot suite, original hardwood flooring protected under the carpet, a two-year-old roof, two gas fireplaces, and a fully fenced 143-foot-deep back yard with room for a fish pond, patio, storage shed and two-car garage.

4 — 3160 West 4th Ave., Vancouver

Type: 2-bedroom, 1-bathroom townhouse
Size: 832 sq. ft.
B.C. Assessment, 2011: $516,000
Listed for: $514,800
Sold for: $500,000
Sold on: Dec. 4
Days on market: 29
Listing agent: Colette Gerber at RE/MAX Select Properties
Buyers agent: Ruthie Shugarman at Dexter Associates Realty

The big sell: This townhouse in the Avanti complex on Vancouver’s West Fourth Avenue is accessed via an inner courtyard, and according to agent Colette Gerber, that acts as a buffer against the traffic noise and creates a much quieter interior. Since it was built in 2000, the seller has upgraded the unit and installed some mirror arrangements that give the illusion of a much larger space. The home has a gas fireplace, engineered hardwood flooring, and has been painted in designer hues. The rear patio — with its south-facing exposure — ensures that maximum light enters the home. Both bedrooms are upstairs; the front one has been transformed into an office/guest room through the addition of a Murphy bed and a built-in desk and shelving. There is a large in-suite storage area, underground parking, and the building is pet- and rental-friendly.

For the full story, please click on Real estate sales in Vancouver and Port Moody.

Compiled by Nicola Way of BestHomesBC.com and AssignmentsCanada.ca.

Realtors – send your recent sales to nicola@besthomesbc.com
© Copyright (c) The Vancouver Sun