While owning a single-family detached bungalow in Vancouver would take up 91 per cent of a typical household’s pre-tax income according to an RBC report, a Vancouver mortgage broker doesn’t expect a huge drop in prices anytime soon.

Mortgage broker Dave Foran said he expects the market to pick up in September, once the normal summer lull is over.

While prices have come down a bit during the lull, those decreases are not reflected in the latest RBC Economics Housing Trends and Affordability Report, released Monday and which covers the second quarter of 2012, said Robert Hogue, senior economist at RBC.

It found that “extreme unaffordability conditions” in the Vancouver housing market are dragging down the provincial and national measures as well.

“Housing affordability in British Columbia remained poor and worsening in the most recent quarter,” said Robert Hogue, senior economist at RBC. “The situation is far less severe in other parts of the province. In Victoria, for instance, the share of income needed to carry the costs of a mortgage at market prices for some housing types is almost half that of Vancouver.”

Hogue said he expects the next quarterly report will show improved affordability due to falling prices, but that an interest rate hike early next year would send the cost of owning a home in Vancouver upward again. RBC expects the Bank of Canada will raise interest rates in the first quarter of 2013, Hogue said.
Foran’s clients seem to be on the same page as RBC.

Foran said he has a higher-than-average number of clients with pre-approved mortgages waiting to see if prices will come down, while many don’t want to wait because they’re concerned about interest rates going up.

“Some are being quite cautious, while others are jumping in to get a good interest rate,” Foran said. “I don’t see a huge drop in prices coming or a huge increase in interest rates.”

While Foran agreed that single family homes in Vancouver are not very affordable, he said there are many other options, such as townhouses or condos, that are still within reach.

“A lot of the builders are getting away from single-family homes,” Foran said. “I think people are going where they can afford.”

Vancouver has the least affordable houses in the country, by far, although resales are falling and the market has cooled. Year-to-date resales have fallen 18 per cent in Vancouver, compared to a year ago, while the Real Estate Board of Greater Vancouver reported that July sales were the lowest total in the region since 2000, with sales 31.2 per cent below the 10-year July sales average.

The new housing price index slipped 0.9 per cent in Vancouver in June 2012, compared with June 2011, Statistics Canada reported earlier this month, while the MLS Home Price Index composite benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 0.6 per cent to $616,000 and declined 0.7 per cent in July 2012 compared to June 2012.

New mortgage rules were brought in last month that shorten the maximum amortization to 25 years from 30, which is also expected to dampen the market.

Despite these factors, affordability declined for all housing categories, with the RBC measures for Vancouver going up between 0.4 percentage points and 2.2 percentage points in the second quarter.
The report says that in Vancouver, home ownership costs, including mortgage payments, utilities and property taxes, take up 91 per cent of a typical household’s monthly pre-tax income. As a comparison, Edmonton’s affordability measure is 32.4 per cent and Toronto’s is 54.5 per cent.

Source: Tracy Sherlock, Vancouver Sun

Canada’s hot housing market showed signs of cooling on Thursday as July housing starts slowed more sharply than expected, but housing prices were still climbing in June and analysts said a real slowdown may not come until late in 2012.

Ground breaking on new homes fell to a seasonally adjusted annual rate of 208,500 units in July, according to the Canadian Mortgage and Housing Corp, a sharp slowdown from the 222,100 units in June and below the forecasts of analysts in a Reuters poll, who had expected 213,300 starts.

It was the first time in seven months that the rate of starts fell below the six-month trend, and a government decision to tighten mortgage lending from July was expected to contribute to further slowing as 2012 draws to a close.

“We do expect that the impact of tighter mortgage regulations announced in late June will slow housing demand, but the impact on the construction and starts data is unlikely to show up until later in the year,” David Tulk, chief Canada macro strategist for TD Securities, said in a research note.

This week, Scotiabank forecast that home prices in Canada will fall 10% over the next two to three years. But other economists have predicted as much as a 25% correction.

The hot market has sparked fears of a bubble, particularly in Toronto, Canada’s largest city, and in Vancouver, as low interest rates fueled condominium building and double-digit annual price increases for existing homes.

The bulk of the pullback in July housing starts came in the multiple unit segment, where starts in the volatile condo market in British Columbia braked. That was in line with earlier data that has shown cooling in the Vancouver real estate market.

Multiple unit starts dropped 7.6% to 123,000 annualized units, the lowest level since February. Single unit starts fell 4.0% to 64,000 annualized units.

The slowdown in July pushed starts below the average for the second quarter and suggested the housing sector may not drive Canadian gross domestic product growth for much longer.

Mindful of the U.S. housing boom that was left unchecked until it burst, the Canadian government in July tightened conditions for homebuyers and mortgage lenders in a bid to deflate a possible bubble before it pops. The changes took effect in July.

This week Bank of Canada Mark Carney also stressed that despite global economic turmoil, interest rate hikes were still on the table in Canada.

Other data showed that prices of new homes in Canada rose by 0.2% in June, the 15th consecutive month-on-month increase, and continued strength in large cities such as Toronto and Calgary, Statistics Canada data showed.

The advance matched market expectations and follows the 0.3% month-on-month-gain in May.

Prices in Toronto, which accounts for 26.6% of the entire market, rose 0.3% in June, while prices in Calgary, where the booming energy industry has fueled demand, were up by 0.5%. New housing prices rose in 13 metropolitan regions, were unchanged in six and fell in two. Prices in June 2012 increased by 2.3% from June 2011 compared to the 2.4% year-on-year advance recorded in May 2012.

Source: Andrea Hopkins, Reuters

The Lower Mainland real-estate market has slowed down over the last two months, compared with recent years, but that hasn’t stopped some large-scale projects from moving through the approval process.

This Monday, James K.M. Cheng Architects will be at the Vancouver development permit board seeking approval of a mixed-use residential and retail development at 8198 Cambie Street.

Intracorp is developing the project across the street from the Marine Gateway project, which is beside the Canada Line’s Marine Drive station. If the permit is awarded, Intracorp plans to build 31- and 25-storey towers on two podium bases of seven and five stories.

The proposal received unanimous support before the Urban Design Panel on June 6. It includes 110 rental units under the city’s Short Term Incentives for Rental Housing program, along with 444 market strata units, two artists’ studios with residential components, and four levels of underground parking.

At the same meeting, Perkins + Will Architects will seek a development permit for Phase 1 of Wall Financial Corp.’s massive redevelopment of Shannon Mews, on the northwest corner of Granville Street and West 57th Avenue. The historic site includes a mansion once owned by sugar baron Ben Rogers, a heritage wall around the grounds, Italianate gardens, and apartments designed by Vancouver’s most famous architect, Arthur Erickson.

The first phase of the project includes three multiple-dwelling buildings with commercial units at grade, according to the development-permit board’s agenda. The architectural firm is also seeking the board’s approval for the restoration of three designated heritage buildings on-site and development of a local energy system.

Wall Financial Corp. obtained city council’s approval last year to increase the number of units on site from 162 to more than 700. As part of the proposal, the company will create a small park, demolish Erickson-designed apartment buildings, and create a hole in the heritage wall.

The third major development of interest is Aquilini Development and Construction’s application to rezone the area around Rogers Arena to allow construction of three towers of 24, 28, and 32 storeys. The company is seeking council’s approval to build 614 market rental units and 20,000 square metres of commercial space.

The west tower would be built just west of the arena, which is owned by the Aquilini family. The east tower would be constructed near the intersection of Abbott Street and Pacific Boulevard. And the south tower would stand on the other side of the Georgia Viaduct from Rogers Arena, facing onto Pacific Boulevard.

The Georgia Viaduct bisects the Aquilini site. Coun. Geoff Meggs has told the Georgia Straight in the past that he favours getting rid of both the Georgia and Dunsmuir viaducts, a move that could result in rerouting traffic either along Pacific Boulevard or along Hastings Street into the downtown core.

Source: Charlie Smith, Georgia Straight

The Real Estate Board of Greater Vancouver (REBGV) is heralding a buyer’s market in Vancouver, but if prices are still going up, how can this be true?

The following is part of an article written by Harvey Enchin for the Vancouver Sun:

A buyer’s market is loosely defined as a market condition in which supply exceeds demand.

So, the REBGV was technically correct in declaring Vancouver a buyer’s market this week. Sales of houses, townhomes and apartments dropped 27.6 per cent last month to 2,362, units from 3,262 in June 2011.

While it may be true that buyers were presented with more choice and faced fewer rival bidders than a year ago, the fact that sales volumes were down is meaningless without an accompanying downward adjustment in price. And that hasn’t happened.

Metro Vancouver prices were up on average by 2.6 per cent from January to June, while West Vancouver and Whistler were up 7.1 per cent. In fact, the benchmark price for a detached home in Vancouver is up 3.3 per cent from a year ago to $961,600, or roughly 14 times the annual median household income. The average ratio of house prices to median income in Canada at the start of 2012 was 4.6 times.

Just because the real estate industry has heralded a buyer’s market, doesn’t mean it’s time to buy.

CREA’s forecast earlier this year called for a slight dip in property prices in 2012 — which is looking increasingly unlikely — and a rebound in 2013. However, TD Bank sees a price decline of up to 15 per cent over the next two to three years.

Academics who specialize in real estate finance — namely Tsur Somerville at the University of British Columbia and Andrey Pavlov at Simon Fraser University — are on record saying price changes won’t happen overnight. It might take six months for sellers to lower their expectations. Neither deigned to declare the current state of affairs a buyer’s market.

Eventually, tighter mortgage rules, high household debt, rising interest rates, overbuilding of condominiums and townhomes, and a slowdown in offshore investment will begin to bite and prices should start to decline.

The economic model of supply and demand is supposed to be a determinant of price, so unless practitioners of the dismal science have got it all wrong, the price of real estate — even in Vancouver — should soften sooner or later. Probably later.

One can understand the real estate industry’s hope for a buyer’s market — its members need sales to earn a living. But existing conditions in Vancouver, and other places in B.C., constitute a buyer’s market only if money is no object.

Source: Harvey Enchin, Vancouver Sun

Vancouver’s new housing affordability initiative may have the effect of increasing the value of single detached homes, while providing a moderating influence on prices for condos and townhomes, according to Tsur Somerville, director, Centre for Urban Economics and Real Estate, Sauder School of Business at the University of B.C.

“If this is successful, I’d expect higher single family prices than they’d be otherwise,” said Somerville Monday of the plan, which will see the city become more involved in the housing development business.

Somerville said there are already pressures to convert single family homes into denser types of housing, and that those pressures should increase under the plan.

The city’s housing initiative, he said, proposes reducing development costs and red tape to augment denser housing projects, which would result in “more applications to rezone existing single family sites along major arterials.

“You’ll redevelop more single family [land] into condos, which increases [single family] land prices and reduces the supply of single-family homes. There’d be fewer single-family homes, so they’d be worth more.”

However, Somerville believes the policy might also have a moderating effect on overall prices for townhomes and condos in Vancouver, because the supply of high-density housing would increase as average rents drop. “If rents fall, the rental value is lower for an investor, so they’ll pay lower prices. And if we build more condos and townhomes, there will be more supply and prices will moderate.”

However, the chief economist for the B.C. Real Estate Association believes the new housing policy won’t have much of an effect on overall home values in Vancouver.

“It will help increase the stock of affordable housing for lower income households,” said Cameron Muir, noting that high-density housing tends to be less expensive. “But [for overall price levels in the city] I would expect that it would be negligible.”

Source: Brian Morton, Vancouver Sun

Vancouver is building on its reputation as a city of glass and steel.

Look around the skyline and you’ll see it dotted by cranes, and everywhere there seems to be another hole in the ground making way for another apartment building.

Sixteen condo towers are under construction, according to a database by Skyscraperpage.com and another 67 proposed high-rises are in the works.

Amid newly-tightened mortgage rules and concerns of an over-supply in the Toronto condo market that prompted financial authorities including Bank of Canada governor Mark Carney to sound an alarm this week, we think we’ve earned the right to ask: Is Vancouver oversaturated with condos?

Housing starts in Vancouver are up in the first five months of 2012 compared to the same period last year, driven largely by multiple-unit dwelling construction – which is up by about 50 per cent from last year.

According to the Canada Mortgage and Housing Corporation, 5,503 condo units are under construction in Vancouver in April, adding to the existing 230,000 units already in the city.

B.C. Real Estate Board economist Cameron Muir says the short answer to our question is no.

“Prices have been pretty flat since 2009,” Muir said. “There’s ample supply in the market place, but we are seeing prices at a steady pace.”

The fact more condos than single-detached homes are being built in Greater Vancouver is nothing new, said Muir, as condo starts have consistently made up about 75 per cent of all housing starts in the last several years. “It’s a function of land supply.”

Consumer demand during the last several months is trending on a 10 to 15 year average, he added.

One indicator, says Muir, of the demand-and-supply balance in the marketplace is the sales-to-new-listings ratio.

In Vancouver last month, the ratio, at 15.3 per cent, inched closer to a buyer’s market — but sits within the balanced range of between 15 to 20 per cent.

There hasn’t been a sustained buyer’s market since the recession hit, between late 2008 to early 2009.

As of April, 504 recently-completed units remain unsold. Overall, 3,017 units are listed on MLS.

Is Vancouver over-supplied with condos? The market will let us know.

Here are some of the condos currently under construction in Vancouver:

1. Wall Centre False Creek I, II, III, IV

100 W. 1st Avenue

• 556 units in four towers

• Completion: Early to mid-2014

2. Maynards

1901 Wylie Street

• 253 units

• Completion: Fall 2012

3. James Living

289 W. 2nd Avenue

• 155 units

• Completion: August 2012

4. The Mark

1372 Seymour Street (at Pacific Boulevard)

• 300 units

• At 41 storeys, it is billed as the tallest tower in Yaletown

• Completion: Summer 2013

5. Salt

1308 Hornby Street

• 199 units

• Completion: June 2014

6. Cosmo

161 W. Georgia Street

• 253 units

• Status: Move-in ready

7. The Rolston

1300 Granville Street (site of the old Cecil Hotel)

• 187 units

• Completion: June 2013

8. Maddox

1304 Howe Street

• 214 units

• Completion: December 2013

9. Uptown

2788 Prince Edward

• 100 units

• Completion: Fall 2012

10. TELUS Garden

775 Richards Street

• 428 units in a 53-storey tower, which will be the second-tallest in the city after the Shangri-La

• Completion: 2015

11. Marine Gateway

8400 Cambie Street

• 415 units in two towers

• Completion: 2015

12. 1153 West Georgia Formerly the Ritz Carlton

• 290 units (but should be confirmed independently, based on CBC report)

• Completion: XXX

13. Wall Centre Central Park Boundary Road and Vanness Avenue

1,114 units in three towers

Status: Rezoning application approved. Completion date: XX

TOTAL: 4,464

Here are some proposed developments:

1. Rize Mount Pleasant

Kingsway and Broadway

241 units

Status: Rezoning proposal approved by city council in April. If approved, completion date of XX.

2. Burrard Gateway

1290 Burrard Street (and 1281 Hornby Street)

About 589 units in two towers

Status: Proposed, awaiting rezoning approval. If approved, completion date of 2015 to 2016

Source: GlobalNews. A division of Shaw Media Inc., 2012

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Greater Vancouver housing sales hit a 10-year low in May, dragged down by plunging sales of high-priced homes in West Vancouver, Richmond, and on Vancouver’s pricey west side.

May sales figures show that detached-home sales fell 59 per cent in West Vancouver, 46 per cent on the west side of Vancouver, and 25 per cent in Richmond.

Overall sales of detached homes, townhouses and condos fell 15 per cent compared to 2011, making this the bleakest real-estate May since 2001.

Eugen Klein, president of the Real Estate Board of Greater Vancouver, said the year-to-year comparisons in areas such as West Vancouver follow a frantic spring market in 2011 marked by bidding wars, multiple offers and homes selling well above the asking price.

“Last year we saw 228 detached homes sell in May on the west side of Vancouver – this year we’re looking at 115,” Klein told The Province. “Last year, there were pockets of heavy activity.”

Klein explained the drop followed a hot market in 2011, fuelled by prices that had continued to climb quickly year after year — a cycle Klein said had to end at some point.

“It’s a reality of the market – you can’t have double-digit increases forever,” he said. “We’re not seeing the large offers, and the multiple offers. Whether it’s foreign policy, I don’t know. It’s a stabilizing period.”

Klein puts a positive spin on the negative numbers, saying fewer sales and more listings mean that buyers can look around and haggle over price.

“People are talking all the time about affordability,” he said. “There’s more room to negotiate with sellers. That’s when you have better affordability.”

The overall 15-per-cent decline from May 2011 to May 2012 was nearly across the board — with a few notable exceptions, especially in (relatively) lower-priced regions where value and affordability are far better than the westernmost areas.

From May 2011 to May 2012, the following areas swam against the stream, showing increased sales:

* Detached homes: Whistler, Maple Ridge/Pitt Meadows, and Port Moody/Belcarra

* Apartments: Coquitlam, New Westminster, North Vancouver

* Townhomes: North Vancouver and Port Moody/Belcarra

The extensive REBGV study found overall that prices for all categories of homes were up 3.3 per cent, with each group having substantially different results:

* Detached-home sales fell 25 per cent, while detached-home prices rose 5 per cent.

* Apartment sales fell 6 per cent, with prices increasing 1.7 per cent.

* Townhouse sales fell 10 per cent, with townhouse prices falling 5.3 per cent.

Source: Ian Austin, The Province

This is my favourite quote of today “None of the places that build a lot are expensive. And none of the places that are expensive build a lot.”

Below is an interesting article that appeared in this weekend’s Vancouver Sun by Don Cayo on why our city needs more quality high-density housing.

Think globally and act locally?

Nonsense, sniffs Edward Glaeser, a Harvard University economics professor, a prolific author and a globally recognized authority on urban issues.

Glaeser has made his name, and he makes his living, documenting evidence that pokes holes in many of the myths about what it takes to live lightly on the planet.

And it turns out it has nothing to with trekking back to the land, or with building chicken coops or cultivating gardens on what ought to be high-density urban land.

Indeed, “Local environmentalism often turns into bad environmentalism,” he told me as we strolled busy streets from former mayor Sam Sullivan’s first Vancouver Urban Forum in the Playhouse Theatre to a downtown radio interview.

“The key is not to ask about the footprint of the person in Vancouver. Rather, it’s about what has Vancouver done to lower the footprint of the world.”

What we have done – though not enough of – is live close together in a place that is packed not only with people, but also with amenities that make life pleasant.

Glaeser has been to this city before, and he’s a fan of Vancouver, though he admits that really he knows only its downtown core and the area around the University of B.C.

But that’s enough for him to proclaim to the Playhouse audience that this city stands “as a model to the world.”

Which is not to say he has no ideas to make it better.

Glaeser’s main thesis is summed up in the title of his most recent book, Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier. The book documents how innovative and entrepreneurial cities – as opposed to the dying industrial cities like those of the U.S. Rust Belt – are substantially ahead of other areas in all measures of quality of life, and they have a much smaller impact on the environment.

“If the environmental footprint of the average suburban home is a size 15 hiking boot, the environmental footprint of a New York apartment is a stiletto-heel size 6 Jimmy Choo,” he observes in the book.

So what Vancouver has begun to attain, but needs more of, is high-quality density. And this means, among other things, housing that’s affordable to the full range of citizens who might like to live here.

His recipe is simple: build more homes.

In his extensive studies in the U.S., he said, “None of the places that build a lot are expensive. And none of the places that are expensive build a lot.”

Building more means dealing with some sensitive issues – NIMBYISM, a faddish affection for urban agriculture, even heritage preservation.

He even dares to take issue with perhaps the most influential urbanist of her day, Jane Jacobs – a writer and thinker who, for the most part, he admires greatly, as do I.

“But she did make a mistake when she looked at old buildings and new buildings”, he said.

Jacobs concluded that, because old buildings were cheaper to live in than new ones, they should be preserved for affordable housing.

“But this isn’t how supply and demand works. We’re not promoting affordability when we freeze cities in amber,” he argues.

In conversation, Glaeser used the counter-intuitive example of Yaletown’s pricey towers as construction that enhances a city’s affordability.

“Beautiful green glass towers are expensive to put up, and they’ll never be an affordable housing option. But by building green glass towers, we limit the push to gentrify middleincome areas. So creating supply in one area eases demand in another.”

And vice versa when we limit density through stultifying regulations or by crowding it out with low-density uses.

We may fool ourselves into thinking we are doing good for the environment, but we’re pushing other would-be residents out of the city and into places where their presence creates a much larger impact.

“We are an extremely destructive species,” Glaeser said, recounting how Henry David Thoreau, revered today as an early environmentalist who chronicled the good life on Walden Pond, enraged his neighbours when he inadvertently burned down a large tract of forest.

“So if you love nature, often the best thing is to stay away from it.”

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