When it comes down to it, many British Columbia home buyers just aren’t willing to battle for their dream home, according to a BMO Home Buying Report released today.

The report said Canadian respondents in the Prairies, Ontario and Alberta are more willing to enter into a bidding war than those in B.C., Quebec and Atlantic Canada.

In the survey, 22 per cent of Canadians said they were willing to enter into a bidding war when making an offer on a home.

“Of those prepared to fight, half would pay up to 110 per cent of the asking price, while a quarter would be willing to bid up to 120 per cent,” the report said.

Those surveyed in Manitoba/Saskatchewan ranked first in eagerness to enter into a mortgage bidding war (32 per cent). They were followed by respondents in: Ontario (28 per cent), Alberta (25 per cent), B.C. (23 per cent), Atlantic Canada (13 per cent) and Quebec (10 per cent).

The study also noted that 52 per cent of Canadians surveyed said they’re willing to pay between 100 and 110 per cent of the asking price, with Quebec ranking first at 62 per cent. It was followed by: Alberta and B.C. (53 per cent), Ontario (51 per cent), Manitoba/Saskatchewan (48 per cent) and Atlantic Canada (44 per cent).

Meanwhile, 27 per cent of Canadians said they would pay between 100 to 120 per cent, with the highest in Atlantic Canada (33 per cent), then Ontario and B.C. (30 per cent), Quebec (25 per cent), Manitoba/Saskatchewan (22 per cent) and Alberta (17 per cent).

John Pasalis, broker owner of Realosophy Realty Inc., a Toronto-area real estate brokerage, cautioned that the bidding wars may not be as lucrative as they seem.

“One thing to keep in mind is the houses that are getting pretty crazy bidding wars are underpriced anywhere from five to 10 per cent,” he said. “The list prices aren’t always an indication of what they’re actually worth.”

Pasalis said his company has seen “multiple offers almost non-stop for years now,” including as much as 10 or more buyers bidding on a house.

“You just get these spikes and valleys in the market where things get a little bit more heated and demand starts outstripping supply as things get faster,” he explained.

However, the mortgage wars may backfire on owners if the bank’s appraisal of the home is lower than what a buyer pays for the home, he said.

To avoid this, Pasalis cautioned that homeowners need to know the actual market value of the property they want to buy as opposed to its listing price.

Nationally, the average home sale price is $369,677, the report said. The average home prices across Canada are “rising modestly,” it said, except in Toronto ($504,117) and Vancouver ($761,742).

“Toronto prices have risen 11 per cent over the past year, while Vancouver’s have fallen 3 per cent,” said Doug Porter, deputy chief economist for BMO Capital Markets.

Source: Sheila Dabu Nonato, Postmedia News

Concrete condo sales are heating up in Metro Vancouver, but only for the right projects in the right location – near rapid transit.

That’s the word from Jeff Hancock, a senior manager with real estate market firm MPC Intelligence, who said presales of concrete condos in the right location and at the right price point continue to escalate with Asian investors largely driving the market.

“It’s not market-wide,” he said. “It’s more spotty. If you are 10 out of 10, you’ll do well. That means a great location, welldesigned, priced appropriately and definitely [served] by transit. Other projects are having to struggle a bit.”

Hancock said an MPC forecast earlier this year that 8,000 new units in concrete towers would be launched in the first six months of 2012 has been down-graded to about 7,800.

He said about 3,800 new concrete condominiums across 19 projects have started presales since Jan. 1 and that 60 to 65 per cent have been sold, “an impressive metric.”

Hancock cited last month’s sellout of 415 homes at Marine Gateway and the Telus Garden’s 428 condos as examples of strong sales in the sector. Two other condo towers in Burnaby – Silver by Intracorp and The Met by Concord Pacific – also sold extremely well in presales over the past two weeks, he added.

Hancock noted that the market has been driven by Asian investment segments, most for long-term investments but also for family use. “End user groups have also been active, specifically in North Vancouver, New Westminster, Burnaby North and downtown Vancouver.”

He said the resale market for concrete condos has not been as strong as the market for new units, possibly because investors buying a presale unit like the idea of having a year or two to complete the purchase.

Cameron Muir, chief economist for the B.C. Real Estate Association, characterized overall condo sales in Metro Vancouver as “moderate,” with no significant change in activity over last year and little pressure on prices.

He said some areas are under-supplied, while some areas, like Langley and Surrey, have a significant amount of inventory.

“In certain areas, particularly close to downtown, the inventory has been drawn down. And condo projects well located to transit are doing well to date.

“But that’s the exception rather than the rule. We’re still facing headwinds due to the overall economy.”

Source: Brian Morton, Vancouver Sun

Trafalgar, they used to call it. A patch of urban plain between West 16th Avenue and King Edward in Arbutus Ridge on Vancouver’s West Side. Prime real estate in a beautiful city. And ground zero of the investor invasion.

A stroll through Trafalgar begins innocently. Rows of parallel streets. White sidewalks. Green lawns. Blue sky, if you’re lucky. Far enough from downtown, the neighbourhood rests in quiet. Too quiet. You soon notice you’re alone among rows of big-box homes, all peaks and eaves, with ornamental hedges stirring in the wind. It’s like a giant film set for a Hollywood blockbuster about a deadly strain of bacteria. Only the goldfish survived.

According to the Real Estate Board of Greater Vancouver, last year the average price of a detached home on the West Side rose 20.7 per cent to $1.99 million, continuing a trend of yearly spikes.

Several factors contribute to the boom including foreign investment from China. Unlike other precincts around the world, British Columbia has no restrictions on foreign ownership of real estate. Anyone from anywhere can buy on your street and mothball their investment in perpetuity.

Look no further than the Trafalgar area, perhaps the most striking example of investor decay in the city. It’s no longer a community, it’s a commodity. A pocket of land bought and tilled by speculators. Down went the old stucco bungalows, once the neighbourhood’s signature home, up went dozens of “developer specials” — two and three-storey monstrosities that often sit empty, windows shuttered, for months. Sometimes years.

It didn’t used to be this way.

Colin grew up in the neighbourhood, at Trafalgar elementary and Prince of Wales secondary. He remembers streets bustling with life. Kids on bikes. Barbecues and burning leaves. Now a 38-year-old investment adviser, he lives in a rented bungalow not far from his childhood home. While the street names remain the same, the neighbourhood is unrecognizable. “It’s really unbelievable. It’s eerie, I just shake my head.”

Last Friday, Colin took me on a Trafalgar tour. Street after street with many vacant homes. He pointed as we walked. “That’s empty. That one. That one. The whole side of this street almost.”

Colin, not his real name, wishes to remain anonymous, fearing backlash and smears.

You see, as illustrated two weeks ago in the Courier, if you dare note the ethnicity intrinsic to foreign real estate investment in Vancouver, you court charges of bigotry from industry benefactors.

Of course, local realtors and developers have no problem racially profiling potential buyers. For example. Sutton West Coast Realty orchestrates Vancouver home auctions in Shanghai and West Side bus tours for Chinese investors.

Yet Larry Beasley, retired Vancouver city planner and former vice-president of Aquilini Developments, a major industry player, says it’s “racist” to suggest Chinese foreign buyers drive up prices. Politically correct moralizing from Beasley, who also served as “special planning adviser” for royal dictators in the United Arab Emirates, a country that jails homosexuals for being gay.

Back in Trafalgar, bilingual “For Sale” signs in English and Mandarin dot front lawns. During our afternoon stroll, we happened upon a grey, two-storey with white-trimmed peaks. The front door was wide open. A young Asian man appeared in the foyer.

“Yes?”

“Is this an open house?”

“No,” he said, in limited English. “We show to private buyers.”

“How much? What’s the price?”

“Three point eight nine million.”

That’s typical of Trafalgar and other sections of Arbutus Ridge, probably the most overpriced neighbourhood in the city. It’s a market within a market with baffling trends. According to Colin, several Trafalgar homes seem to exist solely for “sale” yet never get occupied. “These three places in a row,” he says, near West 21st and Yew. “No one’s ever lived there but [For Sale] signs go up for a few weeks then go away for few weeks. It just doesn’t make any sense.”

It’s a murky Monopoly game. Thanks to strict regulation in China, Chinese real estate investors look off-shore for capital gains. Our wild open market attracts investors from everywhere, warping the local supply and demand equation, helping push middle class residents out to the suburbs or into crushing debt.

Christy “Families First” Clark, a committed globalist, won’t restrict foreign ownership in B.C.. Mayor Gregor Robertson, who slobbered over Beijing during a 2010 “trade mission” to China, won’t reform the tax code to accommodate the new normal. Which means foreign real estate investors pay the same rate (4.2 per cent) as local homeowners, not the business rate (18 per cent) they should.

Two weeks ago, Eugen Klein, president of the Vancouver Real Estate Board, told the Courier that off-shore buyers account for only three per cent of house sales. Rubbish. Because foreigners often use local addresses (their lawyer’s office, for example) when registering with the provincial land title office, no one knows how many off-shore investors own homes in Vancouver. Yet Klein’s “three per cent” defence raises questions he’d likely rather avoid.

What percentage. Mr. Klein, of foreign investment is acceptable in Vancouver’s real estate market? Ten per cent? Twenty per cent? If 50 per cent of Vancouver was owned by foreigners, would that be OK with you? Where do the interests of your global industry and our city diverge? How deep doth thy zeal for globalization run?

No, they want this conversation to go away. Shut it up before folks get wise. If you’re troubled by dead neighbourhoods shuttered by foreign investment, you’re a racist dog stuck in 1923. Get back to your rented bungalow. You’ll be hearing from us soon.

Source: Mark Hasiuk, Vancouver Courier

Interesting perspectives on Toronto’s condo market – and some comparisons to Vancouver’s housing market – by industry experts.

A big jump in home construction last month has re-heated concerns by some analysts over the prospect of an overheated housing market. But the problem is highly localized, specifically among Toronto condominiums.

That’s because the March data on housing starts showed a sharp divide between Toronto condos and the rest of the market. While the number of starts jumped by an unexpected five per cent across Canada in a market that was expected to be roughly unchanged, “this was pretty well entirely Toronto condos,” said economist Robert Kavcic at BMO Capital Markets.

Construction of Ontario multiple-unit buildings – mainly condos in Toronto – shot up by more than 50 per cent between February and March, while the rest of the nationwide market remained little changed from its average pace over the past 12 months.

“Canada’s condo craze kicked into even higher gear during March, and this is bound to feed concerns about over-building,” said Scotia Capital economists Derek Holt and Dov Zigler in a note to clients.

Holt and Zigler expressed concern that the number of unsold new condominium units has been rising sharply.

Other analysts noted that the condo boom isn’t evident in other big markets, so there’s little reason to see a widespread problem in the housing market. Montreal condo starts, for example, have trended down in recent months.

In Toronto, however, there are lots of anecdotal reports of international investment money flowing into Toronto’s condo market as a refuge from the low investment returns and economic uncertainties recently dogging many other countries, noted economist David Onyett-Jeffries at the Royal Bank.

On top of this, the huge jump in March construction is likely the result of exceptionally good weather and the fact that condo construction activity can move sharply up in any month that sees a single big new project.

The recent level of condo starts in Toronto is creating strains in the market, believes Craig Alexander, chief economist at the TD Bank. Although he doesn’t see it as the kind of speculative mania that would foreshadow a serious meltdown, there does seem to be a surge of supply that will be hard to absorb.

Alexander agrees with Onyett-Jeffries that international investors look like a large factor, but he thinks they’re mostly looking for long-term rental income in a world where gains on financial markets have been uncertain at best, not the overnight capital gains one seeks by flipping units in a speculative market.

Still, Alexander believes, the vigour of Toronto condo construction has turned this market, along with the painfully high-priced Vancouver housing market, into the high-risk neighbourhoods of Canadian real estate.

The problem with having a skyrocketing, investor-driven condo market, he notes, is that all the units now being built could flood the market, leaving some investors unable to find tenants and inclined to sell. If many sell at once, it could easily trigger a decline in all condo prices.

That probably won’t be catastrophic, since Toronto’s demand for housing is strong enough to mop up the excess units over the coming decade, but it could lead to bigger-than-average price declines over the next few years. Alexander estimates that the national home market is already overpriced by an average of 10 to 15 per cent.

His forecast, though, is that most of Canada will be able to back off from today’s high home prices with minimal damage. Across the country, he thinks prices will be roughly flat this year, then drop perhaps eight to 10 per cent, perhaps a bit less, over the following two years as rising mortgage interest rates squeeze demand.

The big exceptions are likely to be in the Toronto condo market and the Vancouver market for both condos and single-family homes. Vancouver has actually cooled recently, but remains the highest-priced market in the country.

Source: Jay Bryan, Montreal Gazette

Low rates and high temperatures conspired to increase Canadian home prices in the first quarter of 2012, according to new numbers from one of the largest real estate organizations, but few sales likely involved investors.

The Royal LePage House Price Survey showed the average price of a home in Canada increased between 2.2 and five per cent in the first quarter of 2012, compared to the previous year.

In the first quarter, standard two-storey homes rose five per cent year-over-year to $398,282, while detached bungalows increased 4.4 per cent to $356,306. Average prices for standard condominiums increased 2.2 per cent to $243,153.

Market activity in the first quarter of 2012 was unusually high resulting in tight inventories and strong price appreciation in most major cities, said the survey.

Investors, grappling with new tighter lending guidelines at the banks, didn’t significantly contribute to that climate, whereas homebuyers, with greater access to lending options, drove the market, using historically low mortgage rates. For their part, sellers brought listing inventory to market earlier than normal, encouraged by unseasonably warm weather.

“Our housing market is being pulled in opposite directions by opposing economic forces,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “On one hand, there is the rapidly strengthening U.S. economy, increasing Canadian consumer confidence and what can only be called a national mortgage sale encouraging activity and bidding up home prices. On the other, we have signs of over-shooting values and strained affordability in our largest cities. We are likely to see much more modest price appreciation as the year unfolds.”

Soper commented that the effect of low mortgage rates, which fell below three per cent for a five-year fixed-mortgage, is more pronounced in cities that are affordable such as Winnipeg, Ottawa and St. John’s.

“In Vancouver, the average price of a standard two-storey home is now $1,182,250,” he said. “Although the city posted strong year-over-year price gains in the first quarter, we expect to see Vancouver’s housing market to reach a level of price resistance. Although desirability is high, many potential buyers have simply been pushed out of the market and cannot take advantage of low mortgage rates, which will ease demand and should bring price relief.”

In comparison, Soper commented that he did not expect price resistance to affect Toronto’s housing market where a standard two-storey home would sell for $645,467.

Another notable exception was Calgary whose flat year-over-year house price appreciation masked a very active housing market that witnessed double digit growth in unit sales compared to the same period in 2011.

Source: Canadian Real Estate Magazine

Much of Canadians’ rising household indebtedness is being fuelled by cheap foreign capital, Mark Carney, governor of the Bank of Canada, said yesterday.

Mr. Carney has repeatedly warned over the past year about excessive consumer borrowing – particularly around mortgages – but Monday fleshed out his concerns, noting that the phenomenon is being enabled partly by buyers from “abroad” and that the trend is “unsustainable.”

Speaking to a business group in Waterloo, Ont., Mr. Carney said the growth in domestic demand and household spending has helped boost Canada’s economy, but “the limits to this growth model are becoming clear.”

Ballooning household debt levels represent the biggest single risk facing the Canadian economy, according to the Bank of Canada.

In the financial crisis that began in 2008, the central bank lowered interest rates to encourage borrowing and revive the economy. But much of the lending that followed was not to businesses but to consumers focused on buying homes.

Even after the economy revived, the low interest rates remained in place, continuing to spur the spending spree.

Canada’s banks mostly emerged from the crisis unscathed, which helped burnish their international reputation. It’s also why foreign investors – especially in the United States – are so keen to buy bonds issued by Canadian banks.

A primary reason for the strong demand is that many of the bonds are backed by mortgages that are guaranteed by the Canada Mortgage and Housing Corp.

In 2011 the big six Canadian banks issued a total of $74-billion of term bonds, of which 64% was sold to foreigners, according to George Lazarevski, an analyst at BMO Capital Markets. They raised “a lot of term funding outside of Canada,” said Mr. Lazarevski. He said buyers were mostly in the United States, Australia and Switzerland.

A significant chunk of that funding, or about $25-billion – was in the form of bonds backed by mortgages insured by the CMHC, a Crown corporation.

“The Canadian dollar is consistently strong, our fiscal situation is still attractive relative to much of the developed world, and even at the provincial level – there’s still plenty of fiscal capacity to raise deficits if backs are against the wall,” said BMO economist Robert Kavcic.

Mr. Carney’s comments on household indebtedness were within the context of the main theme of his speech: the need for Canadian companies to “refocus, retool and retrain” if the country is to compete in emerging markets.

Mr. Carney said the growth in domestic demand and housing-driven spending has helped boost Canada’s economy, but “the limits to this growth model are becoming clear.”

Mr. Carney also pointed to ongoing uncertainty over Europe’s debt crisis – despite some recent signs of improvement – and a modest recovery in the United States, both regions where Canada is dependent for the bulk of its exports.

“Emerging markets represent the greater opportunity for Canadian exporters. Since the recession, these economies have accounted for roughly two-thirds of global economic growth and one-half of the growth in global imports.”

Business must develop new markets but also and new products, Carney said. As well, companies should “further exploit the tremendous opportunities in mobile computing and customer-focused applications. In addition, they need to invest in new plants and equipment.

“Innovation is critical to our success and Canada’s record is only average,” Mr. Carney said.

Source: John Greenwood, Financial Post

Telus has sold out the first condo development it has ever built, before a planned formal launch in mid-April, making it the second large Vancouver project to sell out almost instantly in the past month.

But industry experts say that doesn’t necessarily mean that condo or general real-estate boom times are back.

Instead, they say, it is projects that are close to transit that are winning out.

“Transportation is the new green,” said Tracie McTavish, president of Rennie Marketing, which sold the PCI Marine Gateway project’s 415 units in a public launch mid-March.

That’s why projects like Marine Gateway, a tower that will be part of an office and entertainment complex at the foot of Cambie next to a Canada Line station, and Telus Garden, with 428 units in a 53-storey tower a block from Vancouver’s key downtown intersection, are being gobbled up at a rate not matched elsewhere in the region.

“Some of the more outlying developments aren’t seeing that kind of interest,” said Don Forsgren, president of the Urban Development Institute, which represents large builders in the region. “The single-family suburban house market is pretty flat.”

Also flat are sales in Surrey and the northeast Tri-Cities area and lower-rise wood-frame buildings, said development consultant Bob Ransford.

“It’s all geographic who’s doing well.”

Recent figures from the Real Estate Board of Greater Vancouver compiled by various real-estate analysts indicate higher numbers for unsold inventory than past years at the same time.

Local sellers all say that it’s not foreign investors driving the market for the successful projects, but local investors and people planning to live in the condos themselves.

Ms. Goertz said Telus offered its employees priority in sales at Telus Gardens and 150 of them bought, even though the price discount was a modest one per cent.

The project’s developers, Telus and Westbank Projects, also didn’t allow anyone to buy more than two units.

Mr. Forsgren, whose company Intracorp sold out a tower instantly at Metrotown in May of last year, said the company has to track buyers closely because of requirements from FINTRAC, the agency that monitors money laundering and criminal organizations.

The personal information that had to be submitted for those units showed there were only four offshore buyers.

He said he expects Intracorp’s newest tower, Silver, to get about 50 to 60 per cent investors among the 3,000 buyers lined up for it. That’s similar to what Mr. McTavish said was the ratio for Marine Gateway.

But those investors tend to be local investors, people who are buying something for their children to move into some day and renting it in the meantime, or people who are looking for an investment that’s more stable than the stock market appears to be right now.

Affordability doesn’t seem to be necessarily at the top of the list for buyers, either. Mr. McTavish said that half of the 40 high-end units in Canada House West, at the former Olympic village in Vancouver, have already sold in the first two and a half weeks at “very attractive rates” of more than $1,000 a square foot.

That may push the city of Vancouver, which took over the project from the private developer in late 2010, into putting the other 20 units in Canada House East onto the market.

Source: Frances Bula, Globe and Mail