Vancouver Real Estate: February 2011

Monday, February 28, 2011

Chinese investment surge hits Metro Vancouver housing market

Stable Canadian economy and good quality of life is luring 'planeloads' of overseas buyers eager to invest

When real estate entrepreneur Cam Good hosted a group of predominantly mainland Chinese investors this Wednesday at a White Rock condo showing, he was tapping into a market that's surging across much of Metro Vancouver.

Good, president of The Key, a Vancouver-based sales and marketing firm that's focusing on a new wave of Chinese buyers, figures he's sold more than 500 homes to mainland Chinese investors and immigrants in January and February in Vancouver and Toronto.

He's also opened an office in Beijing's business district -The Key China -where Chinese buyers can purchase Canadian condos from a presentation centre and view videos that showcase various condo developments and the virtues of Canada.

"[Chinese investors] have really picked up a lot of steam in the last two or three months," Good said in an interview. "And I believe this is just the tip of the iceberg. There's an über-wealthy upper class forming and there's a strong middle class growing in China. This massive middle class is now getting to a point where they can afford international real estate. And Canada is viewed by the Chinese as a very stable place to put their money.

"There are literally planeloads of Chinese coming here to buy real estate."

Wednesday's attraction was Avra, a 17-storey condominium tower that's slated to be built over the next two years, and Good took along a busload of investors -some from China and some already living here -and their agents to view the plans.

But it's not just condos that are attracting Chinese buyers, with single-family homes and large lots topping the list.

Across the Lower Mainland, especially Richmond and Vancouver's west side, mainland Chinese buyers and immigrants are becoming a major part of the market, in some cases competing with each other through multiple offers.

But the phenomenon is starting to spread to other areas including Burnaby, West Vancouver, White Rock and beyond.

"We predict that this will be a dominant trend for a long time," Scott Brown, senior vicepresident, Western Canada for Colliers International residential marketing, said in an interview. "Some of the most expensive [Vancouver] real estate is only being marketed to Chinese buyers. And Vancouver and Toronto are very popular."

According to a report on new multi-family home sales in the Lower Mainland by Colliers, which recently opened a dedicated office in Shanghai to deal with the increasing demand, a total of 2,711 new multi-family units were sold in the region in the fourth quarter of 2010, making it the most active quarter of the past year.

"As in each quarter in 2010, the health of the market is expected to continue to be positively impacted by increasing Asian immigrant and investment demand," the report, prepared by Colliers and Urban Analytics, concluded.

Scott said the expected offshore demand will continue to be "the dominant story in 2011 that it was in every quarter of 2010 especially in Vancouver-west, Metrotown and Richmond."

The demand for Vancouver properties appears to be fuelled by many factors -including, ironically, a crackdown on property purchases in mainland China that may be moving much of that investment overseas, particularly to Canada.

Local real estate companies are tapping into the demand, which realtors say is also partly fuelled by an easing of travel restrictions by China with the granting of approved destination status to Canada.

As well, local Vancouver area Chinese-language newspapers are being used by realtors and agents to specifically target mainland Chinese buyers, citing Canada and Vancouver's stability and strong local real estate returns.

A recent report in the China Daily, a state-run publication based in Beijing, said Canada was "the most popular choice" for overseas investors while "growing restrictions on property purchases in major Chinese cities [are driving] the country's nouveau riche to look overseas for investment opportunities."

The newspaper noted that most overseas property purchases are motivated by a combination of factors including immigration, education and investment, with Canada, Australia and the U.K. topping the list of destinations.

The China Daily report also said buyers from the Chinese mainland represent between 40 and 50 per cent of the current market for pre-sale projects in Vancouver.

But China's effort to cool an overheating market is just one reason investment is pouring into Canada.

Brown believes there are many factors, especially Canada's image as a great country to live in and a safe place to invest money. "There's no one easy answer, but one of the main drivers is [they] believe that having their children educated in Canada [is good]. The other driver is that Vancouver is a beautiful, livable city and they want to buy their own piece of it."

One recent buyer is former Beijing resident Yang Yang, who moved to B.C. with her husband and young daughter last summer, purchased a detached house in Surrey, and accompanied Good to the White Rock condo showing.

"We prefer the peaceful life here," Yang said in an interview. "Beijing is very crowded and the air pollution is bad there."

Yang said that she and her husband, an IT engineer, are considering a condo at Avra as a place to retire when they no longer need their larger home.

Yang's realtor, Hong Lui, with Interlink Realty in Richmond, said she first noticed a surge in mainland Chinese interest last spring and it's grown increasingly stronger, with a mix of investors, including those who want to immigrate to Canada and others who are looking here after the Chinese government restricted their ability to own several homes.

Richmond MacDonald Realty realtor David Lindsay said: "January and February has been almost exclusively mainland Chinese buyers of big lots, with a house of little value on it. And we're getting multiple offers."

He said, for example, that a typical lot in the Seafair area, which sold for $800,000 in October, is now selling in the $1.2-million range. "I sold one last Sunday and we had four offers. The winning bid was $1.03 million. It was on the market for $968,000." Lindsay believes there's speculation is going on, because some buyers are getting an accepted contract with a clause that allows them to assign the contract to a third party before the sale is completed. "One buyer didn't even set foot on the property."

Real Estate Board of Greater Vancouver president Jake Moldowan said he believes lifestyle is the core reason for the interest. "Vancouver is an extremely desirable place to be."

He said that Richmond lots are now going for $1 million to $1.3 million. "And I know that there have been realtors from Hong Kong and mainland China, who fly over there, put packages together, and then bring people over."

Meanwhile, Bosa Properties announced this week that its 34-storey Sovereign tower in Burnaby's Metrotown sold out immediately, surpassing the single day sales record in the Burnaby market by selling $98-million worth of real estate.

B.C. housing starts to trend higher in 2011, 2012: CMHC

VANCOUVER - Housing starts in British Columbia will trend higher over the next two years, totalling 26,900 units in 2011 and 29,000 units in 2012, Canada Mortgage and Housing Corporation forecasts in its Housing Market Outlook, released today.

CMHC also expects the existing home market to stabilize in 2011, then strengthen in 2012.

"A stable existing home market, combined with positive economic factors, support the conclusion that the residential construction outlook will continue to be balanced, providing opportunities for both developers and home buyers," noted Carol Frketich, CMHC's B.C. regional economist.

"Mortgage loan interest rates which will remain low by historic standards, together with stable employment and strong population growth, will support the resale and new home markets in 2011 and 2012," she added.

CMHC said resales are expected to remain in line with job and population growth, approaching 81,000 sales in 2011 and 88,900 sales in 2012, slightly above their ten-year average.

The sales to new listings ratio, an indicator of resale home price change, points to balanced market conditions and moderate price movements in 2011, the outlook added.

Saturday, February 26, 2011

Resale housing market shows further improvement in January (CREA Monthly Report)

National resale housing activity climbed further in January 2011, according to statistics released today by The Canadian Real Estate Association (CREA). Seasonally adjusted national home sales activity rose 4.5 per cent in January 2011 compared to the previous month, reaching the highest level since April 2010. Led by Vancouver and Toronto, seasonally adjusted sales activity posted monthly gains in more than half of all local Canadian markets in January. National sales activity has improved steadily since last summer, and now stands almost 25 per cent above the low point reached in July 2010.

B.C. Economy is Weak

Thursday, February 24, 2011

Olympic Village Selling Well

Olympic Village Selling Well

'Ghostbusters' sell 128 units at Olympic Village

After months of sluggish sales, condos are finally selling at Vancouver's former Olympic athletes' village, with more than half of the re-marketed and re-priced units selling over the opening weekend.

Out of 230 units available for sale at the newly christened Village on False Creek, 128 have sold since Friday. Before it was placed in receivership in November, only 36 condos had sold since the development hit the market in May, despite strong presales of 223 units in 2008.

Marketer Bob Rennie told reporters that the Village has now lost its "ghost town" image.

"The clouds are rolling away," he said. "I think what we brand our company is ‘Ghostbusters.'"

Twenty units priced at more than $1 million sold this weekend, with the most expensive selling for almost $3 million and the cheapest for $329,900. The average selling price was $778,800.

Buyers have seven days to rescind their offers if they change their minds -- Rennie estimates that between four and 10 per cent of buyers typically rescind their offers.

All of the units sold over the weekend went for the asking price. Since Ernst & Young took over as receiver for the development, Rennie and his marketing team have sliced prices drastically, cutting them by an average of 30 per cent.

Rennie credited that move for the heavy sales over the opening weekend.

"I've never had a proximity problem or a product problem, but we did have a pricing problem," he said.

Another 244 waterfront units in the development have been held back from the market -- half were meant to be offered for rent, and the rest would go up for sale at a later date. But Rennie said Tuesday that he would like to hold the rental units so that they can be sold as well.

The marketer was hopeful about what the upswing in sales will mean for the $740-million debt on the development owed to the city.

"Between Bob being happier or the taxpayer, the taxpayer has to feel good that things are moving along properly," Rennie said, referring to himself in the third person.

"We're cautiously optimistic that we have stabilized the asset for the taxpayer."

Real estate experts have estimated that the city stands to lose between $150 million and $170 million on the development.

Wednesday, February 23, 2011

Vancouver Olympic Village Condo buyers beware

Vancouver Olympic Village Condo buyers beware

A lawyer warns that it is unclear who would be on the hook for any problems at the former Olympic Village.

See Below for CBC news report:

Monday, February 21, 2011

Price of units lower, but still no bargain, expert says

Price of units lower, but still no bargain, expert says

Even at reduced prices, it's unlikely taxpayers will fully recoup $740 million invested in project, according to UBC professor

The new prices for condos in the taxpayer-owned Olympic village are more in line with the rest of the real-estate market, but they're still no bargain.

That's the analysis of a real estate expert and a business professor who say it will still take years to fill out the Southeast False Creek project.

And even then, it's unlikely that taxpayers will fully recoup the $740 million they invested in the project through construction financing and land sales.

On Thursday, condo marketer Bob Rennie set the stage for the sale of 230 units in five buildings starting today.

He laid out for reporters and fellow real-estate agents an average price reduction of 30 per cent for the units, which make up about half of the 474 unsold units in the village.

Some units, principally the more expensive ones, have been reduced by as much as 50 per cent, while price cuts on smaller lower-priced units are closer to five and 10 per cent.

But Scott Brown, the vicepresident of residential marketing for Colliers International in Vancouver, said those cuts may not be enough.

"It's definitely come down from where it was, which tells you how far out of reality the prices were. They were really out of whack," he said. "I don't know if they have come down far enough to drive any really serious volume."

Brown said Colliers' market research has shown that threequarters of sales in the area have been for units priced at $650 to $750 per square foot.

But most of the new prices in the Olympic village are still higher than that.

Brown cited a 1,445-squarefoot two-bedroom unit now offered at $1.3 million. At nearly $900 per square foot, "that's not a deal," he said. "Those prices are not low enough yet where people will say, 'This is such a deal I've got to buy it now.'" Tsur Somerville, a professor at the University of B.C.'s Sauder School of Business, said he thinks Rennie's overall repricing strategy will eventually drive enough sales for the city to recover the remaining $570 million it loaned for construction.

But he's doubtful there's enough residual value left to also cover the outstanding $170 million owed on the city's sale of the land to the project's original owners, Millennium Developments.

"I think it is reasonable to say that it is highly unlikely that the taxpayers of Vancouver will see the full value of the lands the city contributed to the project," he said.

Somerville said the prices are competitive with other built projects in the city but not for those being sold on the basis of pre-sales, where buyers put down a small deposit and have longer to pay. By Thursday, a dozen people had camped outside the sales office, waiting for today's opening sale.

Rennie said the lineup was encouraging and he expects to see a crush of potential buyers on the weekend. However, the lineup pales in comparison to the interest in other condo developments in Metro Vancouver.

On Saturday, Bosa Properties will open its sales centre for its 45-storey 202-unit Sovereign tower in Burnaby's Metrotown.

Earlier this week, more than 400 people lined up and 2,600 signed on to a company website.

The company sent people home after giving them numbers reserving their place in line, said Bosa vice-president Daryl Simpson. He projected that up to 70 per cent of the units, priced at $650 a square foot or less, will be sold by the end of the weekend. Rennie told reporters that demand in the Olympic village can't be compared to pre-sales at other developments, noting he'd sold all but 11 of 540 pre-sale units in Wall Centre False Creek behind the village.

Pre-sale buyers put down 10 to 20 per cent and have up to three years to pay. But with built stock such as the Olympic village, buyers have to complete their sales in 60 or 90 days. For that reason, Rennie expects upwards of 70 per cent of buyers in the village will be people wanting to live there or buying for their family. There is little true investor demand for the units, he said. Brown said he thinks Rennie's prices may only translate into four to eight sales per month. "I don't think necessarily they will do 20 or 30 transactions a month and shoot the lights out."

Vancouver, Most Livable City for the Fifth Straight Year

Vancouver, Most Livable City for the Fifth Straight Year

Vancouver has topped the list of the world's most livable cities for the fifth straight year, while Melbourne claimed second place from Vienna in a list dominated by Australian and Canadian cities.

Melbourne, Perth, Sydney and Adelaide received perfect scores on education and healthcare.

Melbourne is the cream of the Aussie crop, pipping Sydney (no. 7) to second place.

Perth and Adelaide are ranked joint eighth.

Health care and education are among Perth's strong points in the survey by the Economist Intelligence Unit which compared 140 cities.

The survey is based the findings on five categories: stability, health care, culture and environment, education and infrastructure.

"What the survey does tell people is we are doing a lot of things right and as we continue to create precincts such as the Waterfront and the Northbridge Link, we are hopefully going to remain in a high position for many years," Lord Mayor Lisa Scaffidi said.

Top scorer Vancouver scores 98 per cent on a combination of stability, health care, culture and environment, education, and infrastructure - a score unchanged from last year.

"Mid-sized cities in developed countries with relatively low population densities tend to score well by having all the cultural and infrastructural benefits on offer with fewer problems related to crime or congestion," Jon Copestake, editor of the report, says in a statement.

Pittsburgh is the top US city ranked 29 while Los Angeles has moved up three places to 44th and New York retains its 56th spot.

London has climbed up a place to 53rd while Paris comes in at number 16.

The top Asian city is Osaka at number 12, a joint position with Geneva, Switzerland. Japanese capital of Tokyo, comes in at 18.

Hong Kong is rated 31 but Beijing, capital of the world's No. 2 economy, struggles in at 72.

Following is the full of list of the top 10 most livable cities:

1. Vancouver, Canada 2. Melbourne, Australia 3. Vienna, Austria 4. Toronto, Canada 5. Calgary, Canada 6. Helsinki, Finland 7. Sydney, Australia 8. Perth, Australia 8. Adelaide, Australia 10. Auckland, New Zealand
The bottom 10 cities were: 1. Harare, Zimbabwe 2. Dhaka , Bangladesh 3. Port Moresby, Papua New Guinea 4. Lagos, Nigeria 5. Algiers , Algeria 6. Karachi, Pakistan 7. Douala, Cameroon 8. Tehran, Iran 9. Dakar, Senegal 10. Colombo, Sri Lanka

Sunday, February 20, 2011

Property sales rise ahead of mortgage changes

Canadian sales of existing homes rose 4.5% in January, hitting their highest level since April last year, as buyers rushed to beat tighter mortgage regulations set to come into effect next month, according to Canadian Real Estate Association figures.

Vancouver and Toronto led the growth, with half of all local markets reporting seasonally adjusted gains in the month, CREA said. Sales activity improved over the second half of last year and is now 25% above its low in July, it said.

"We anticipated the recent announcement of tighter mortgage regulations, which will come into effect this March, would pull forward sales activity into the first quarter of 2011, particularly in some of Canada's more expensive housing markets," said Gregory Klump, CREA's chief economist. "The sharp rise in sales activity in Toronto following the announcement provides early evidence confirming this," said Klump.

CREA warned the government not to take any further action until the longer-term impact of the most recent changes is fully known.

Ottawa announced in January that it would tighten mortgage-lending rules for the second time in a year to stop borrowers taking on more debt than they can afford. The government is reducing the maximum amortization period on mortgages backed by government insurance to 30 years, from 35 years, which makes monthly payments higher.

The tightening is expected to primarily hit first-time homebuyers, or those with less available for a down payment.

BMO mortgage expert Laura Parsons said the changes are a good thing.

“People are like deer in the headlights when these things happen, but they need to be properly informed,” she said. “This is a good thing, it saves them money.”

Reducing the amortization period by five years to 30 years would save about $53,000 in interest payments over the life of the mortgage, she said.

Actual new listings through the MLS System posted their biggest month-over-month increase since 2007 in January, with more than double the listings from the previous month, CREA said.

As sales activity and new supply have risen in tandem, the national market remains balanced, CREA said. The national sale-to-new listings ratio stood at 55.7% in January, little changed from the previous two months.

Parsons said BMO expects the market to remain balanced throughout 2011.

“According to our survey, 61% of homeowners are confident their homes will hold their current values throughout the year,” she said.

The national average price was little changed from the previous three months at $343,675, an increase of 4.5% from January last year, CREA said.

The January year-over-year gain was distorted by a jump in the number of multi-million dollar homes sold in a couple of areas in Greater Vancouver, it said.

By Sharon Singleton, QMI Agency