B.C. Leads the Way in Ushering in a Buyer’s Market for Residential Real Estate in Canada

Business in Vancouver November 11-17, 2008; issue 994

Real Estate Roundup: Peter Mitham

Affordable accommodation in Vancouver remains a key challenge in the city’s efforts to draw new residents

An exceptional year

B.C. real estate is shaping up for an exceptional year, but the exception isn’t on the upside.

Speaking to the Canada Mortgage and Housing Corp.’s annual housing outlook conference in Vancouver on October 30, CMHC senior economist Bertrand Recher noted that B.C. led Canada into a buyer’s market for residential real estate in the three months ended August 31 this year when fewer than 40% of listings sold. (Buyer’s market status was confirmed last week by the latest sales figures from the Real Estate Board of Greater Vancouver, which reported that sales in October represented just 28.2% of total listings.)

Nationally, home starts in 2009 will drop below 200,000 units to 177,975 units for the first time since 2001. The trend is reflected in a forecast of 29,200 starts for B.C. in 2009, taking starts below the 20-year average of 30,000 for the first time since 2003. Starts for the Vancouver area are forecast at 16,500, a 17.5% drop from an estimated 20,000 starts this year.

Resales are also being hit, after years of rising prices and bidding wars that saw buyers scramble to cut the last best deal in a heated market.

Robyn Adamache, senior market analyst for CMHC in Vancouver, stoically announced that the average price of a home in the metropolitan area is set to fall 9% next year. With home prices peaking in 2008 at $588,000, the decline will take the price of the average home to $535,000.

Judging by the graphs Adamache showed, as well as the REBGV’s announcement that resale prices dropped 3.9% in the first 10 months of 2008, the downward march is already well underway.

Important minority

Canada Mortgage and Housing Corp. regional economist Carol Frketich struck a sunny tone at the CMHC’s recent housing outlook conference when she noted that home ownership in the province is high at approximately 70% of households. Since mortgage-holders in the province pay their debt sooner, Frketich argued, this bodes well for the local economy.

But with the news that tenants at yet another apartment building in the West End are at risk of eviction (from the Seafield Apartments at 1436 Pendrell Street), one had to wonder if the picture Frketich presented wasn’t too rosy.

Rental housing is an important part of Vancouver’s housing mix, as the regular references to condo investors as the new suppliers of rental accommodation in the city make clear (according to CMHC, 45% of downtown Vancouver condos are investor-owned, while 23% of condos across metropolitan Vancouver are investor-owned. Tellingly, 22% of Metro Vancouver condos are rented out.

True enough, Statistics Canada reports that 69.7% of households in B.C. own their homes, with just 30.3% of the province in rented accommodation. But in metropolitan Vancouver, 34.9% of households rent and in Vancouver itself, 51.2% of households rent.

While homeownership may be a barometer of economic health outside Vancouver, the health of the city’s rental stock is critical to the health of the city (and likely other urban centres). CMHC reports that home ownership stands to be the preferred tenure for future residents of Metro Vancouver, but that’s not the case today. And with vacancies well below 1%, there are few options for tenants facing displacement and newcomers seeking any place at all.
That stands to be a drag on the city’s ability to attract residents, as reports by the Conference Board of Canada and other groups have indicated.

To quote the most recent RBC Economics study of housing affordability released this past spring, Vancouver remains “in deeply stressed territory,” with detached homes requiring twice the amount of monthly payments observers consider affordable.

On the positive side …

Several conversations in recent weeks, some mere blocks from the site, have suggested that the redevelopment of the Hotel Georgia at Howe and Georgia in downtown Vancouver is in difficulties.

Of course, passersby can see workers at work on the project and developer Bruce Langereis of Delta Land Developments Ltd. said last week that’s as good a sign as any of progress. While sales are slow, the private residences adjacent to the hotel are half sold.
Langereis isn’t the only developer keeping busy despite challenging times.

With its eyes set on a 2010 opening, the developers of the Sparkling Hill Resort and Wellness Hotel at Predator Ridge in Vernon are forging ahead this winter with plans for the spa and wellness centre.

Construction of the 150-room resort, previously known as the Kristall Resort, began in December 2007 after several years of planning. The site was bought in 2003 and plans for the resort were announced in 2004.

The brainchild of Europe’s Swarovski Group, the $100 million project is now backed by a private European investment group. •

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