Vancouver Real Estate “Not a Bubble, but an Air Mattress”

Recently a lot of attention in the news has been focused on the topic of whether Canada and in particular cities such as Toronto and Vancouver are going to experience a real estate bubble. From the articles that I have read and the research that I have reviewed, there are folks who promote and predict a bubble burst and price corrections of as high as 45%.  While I am not of this opinion, nor has anyone been able to provide me with any new information that gives substance to such an event happening, there is certainly a group of believers out there. To be clear, the below is simply my opinion based on what I’ve discovered and determined in the last couple years immersed in the Vancouver Markets.  Everyone has an opinion, but I wanted to share mine with you.

Argument: It is expensive to live in and buy a home in Vancouver, and the market is drastically over-priced.  Those who promote a looming price correction in Vancouver strongly maintain that the market is currently overpriced. They argue that the housing market has grown exponentially over the past 10 to 15 years, and has been driven mainly by investors who will sell if the markets begin to change. If this were true, there would be no other option for prices than to dramatically correct themselves – its simple supply and demand. 

A few reasons why I politely disagree:

VALUE: Prices of similar products vary dramatically for various reasons in every industry and country. The average BMW will cost more than the average Ford.  This in itself does not mean that the BMW is overpriced, rather than for a number of factors (real or perceived), there is a higher value being placed on the BMW by the marketplace. As long as the customers who value the features, brand, styling, and handling of a BMW continue to place a higher value on it, the price differential will remain.  Bringing it back to Real Estate, a similar apartment in Vancouver costs more than the apartment in Winnipeg for a number of different reasons.  As long market participants continue to place a higher value on the Vancouver apartment the price disparity will remain.  Regardless of how much market prices have increased in either city, it does not necessarily mean a correction is in order.  The correction will be determined by what the market can bear. 

LIFE CYCLE: Over the past 10-15 years, Vancouver went through a dramatic growth cycle that was accompanied with price increases. 10 years ago, there was a severe shortage of apartments for the growing city which induced extensive construction and we can now see that we are in a mature market place. Vancouver has smoothly transitioned from growth to maturity and is now relatively balanced.  Without dramatic changes in migration, birth rates, interest rates, or jobs I see us riding out a side-ways market for the next couple years with price fluctuations of about +3 % to -8%. I believe that 2013 will have modest growth across the board, however the detached home market continues to show more demand from buyers than good product available.  This sector will thereby produce more growth than apartments and condos, which are staying balanced.

MIGRATION: I believe the statistic is that 35,000 new people move to Greater Vancouver each year. Many of these new emigrants to Canada are in a position to purchase property right away which is faster than previous immigrant groups from Europe that came to Vancouver. There are on average about 35,000 sales that take place in the Greater Vancouver Area on any given year (plus or minus a few thousand)... Between local demand, some investment and continued immigration, I do not see a significant change in the number of buyers available for the average number of annual sales.

INTEREST RATES: Yes rates are low right now, and they will certainly be higher in 5 – 10 years.  I don’t see a spike in rates that will induce default or forced sales of volumes that cause a dramatic fall in market value.  I see a gradual increase over the next years that will allow families and homeowners to make the necessary adjustments to their payments.

LOCATION: Canada is a phenomenal country, BC is amazing province and Vancouver is where I want to live. There are many other places that I could live and potentially have more disposable income, but I love Vancouver and have chosen it to be my home.  Vancouver is currently a top 10 city in the world.  I believe it will always be a top 20 city in the world. Unless we build a nuclear power plant in False Creek or build an iron smelter on Spanish banks...my attraction to Vancouver and willingness to pay the price will continue.

JOBS: While Vancouver has no singular industry that employs the majority of people, we have numerous sectors that grow, change periodically and support our economy. We have no steel mill, no paper plant, no oil rig and no subordinate employer that would induce people to leave if markets changed. People’s earning power compared to living costs may be slightly disproportionate in Vancouver, but their lifestyle might weigh out the negatives.  

PEOPLE NEED HOMES: In the past two years I have helped more than 50 people buy homes in Vancouver. Three have been investors, who have no interest in selling their property despite what the market might do – they are looking for a safe, long term investment.  Additionally, for them the rental market is solid.  Of the 50 buyers I have helped, less than 10 were people downsizing from larger homes (there was no shortage of buyers for the detached homes).  All of these clients are looking to live in their homes for many years. The majority of my buyers were first time buyers, looking for their first Vancouver property because they are tired of renting and paying someone else’s mortgage. These buyers have been planning for an average of three years and saved an average 12% down payment.  What does this mean?  Of the buyers that I have helped in the past two years, price fluctuations of less than 10% will not induce any of them to sell as it’s not a viable option, while buyers who bought before them have built in equity in their homes in addition to their down payment. Personally, I don’t see the compounding of factors culminating to create a downward spiral and price corrections of 25% to 45%.  That is not to say that there couldn’t be small corrections along the way, but overall I’ve noted that there is a consistent number of people that want to continue to call Vancouver home and place its value high enough to support the higher prices.

Thank you.

Roland Kym

Medallion Club Member ~ Re/max Executive Club & 100% Club Member

Remax Select Properties
Cell : 604 970-0393

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Brand New Listing, 751sqft, $399,000 DT Apt. Open House today from 1:00pm to 4:30pm

This large 1-bedroom with an office/den looks over English Bay and the calm side of the Pacific Promenade/False Creek. This apartment features a great floor plan with hard surface flooring, stainless steel appliances and an open kitchen. Supported by a pro-active 163 unit strata, this excellent concrete building offers great value for home ownership and for rental ability. The entire building was re-piped in 2008. with updates to the common areas, featuring fantastic amenities of an indoor pool, squash court, work out area and a resident caretaker. Move in and you could live just a few steps to cafes. shops, recreation and the beach ... Property includes one parking and one storage locker.

Roland Kym

Medallion Club Member ~ Re/max Executive Club & 100% Club Member

Remax Select Properties
Cell : 604 970-0393

 

 

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Before you buy a strata property... here are some standard due diligence steps

Before you buy a strata property, here are some standard due diligence steps that you and your REALTOR should complete. Make sure to clearly understand the differences between a strata freehold and freehold. Also the rules and bylaws will are often different in each building and can have a big impact on your ability to do what you want versus what the strata rules allow... read these!

Review Strata Council minutes for the past 12 months or more, along with by-laws, financial statements, Annual General Meeting minutes, and engineering reports that may have been completed. Look for past problems, previous repairs, special assessments, and upcoming expenditures.

Ensure a maintenance program is in place by talking to the strata property manager to determine whether the building has a solid preventative maintenance program in place.

 

Check the contingency fund since a portion of strata owners’ monthly maintenance fees must go into a “contingency fund” to pay for extraordinary repairs, such as a new roof or exterior painting. Find out if the contingency fund is large enough to cover any upcoming expenses.

 

Review the Strata Property Condition Disclosure Statement which sellers are strongly encouraged to complete. It is a checklist about the property's condition. Buyers should carefully review it for any defects or potential problems. The statement can be legally incorporated into the Contract for Purchase and Sale.

 

Investigate the warranty program and builder’s background, whether the condo is new or resale. Your REALTOR® can find out what type of warranty the building carries, noting the limits and duration of coverage. S/he may also be able to help you obtain background information about the builder/developer of the project.

 

Hire a professional home inspector with proper accreditation and one who carries errors and omissions insurance to inspect the condition of the suite, common areas, and the overall building structure.

 

SOURCE: Greater Vancouver Real Estate Board

Many REALTORS® specialize in condominium sales.

 

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New strata property regulations approved by BC government

Highlights of the new regulations

These regulations were developed after extensive consultation with strata owners and corporations, legal experts and other professionals. In addition, 1,800 British Columbians participated in an online consultation survey.

Depreciation reports

Depreciation reports are now mandatory for all strata corporation with two exemptions:

• strata corporations which have less than five units; and
• strata corporations which have more than five units but exempt themselves through an annual three-quarter vote. If a three-quarter vote expires, strata corporations will have 18 months to get a depreciation report.

A depreciation report must be updated every three years, and must include:

• an onsite inspection and inventory of common property and building systems such as the building’s structure, exterior including roofs, decks and doors; the building systems such as electrical, heating and plumbing; utilities such as water and sewer, parking and landscaping;
• a schedule of anticipated maintenance, repair and replacement costs for common expenses projected over 30 years which includes potential interest and inflation rates; and
• a financial forecasting section which includes anticipated maintenance, repair and replacement costs and at least three cash-flow funding models for the contingency reserve fund.

Who can prepare a depreciation report?

The regulation does not specify qualifications. Strata developments can range from two-unit duplexes to bare land to low-rise wood frame buildings to high rise towers. The legislation leaves it up to the strata corporation to select a qualified person and requires that the depreciation report include the person’s qualifications, whether the person has errors and omissions insurance and the relationship between that person and the strata corporation.

Non-exempted strata corporations have until December 13, 2013 to comply.

A depreciation report is a key document for REALTORS® because property buyers, lenders and insurers will use the report to gain a better understanding of potential costs and risks associated with a property.

Contingency reserve funds

Previously, an annual three-quarter vote was required to make contributions to the reserve fund if it exceeded 100 per cent of the annual operating expenses. Strata corporations now don’t have to fund contingency reserve funds (CRF) above 25 per cent of the operating budget and can make additional CRF contributions by a majority vote.

Form B Information Certificate changes

To improve disclosure, by March 1, 2012, strata corporations must attach copies of the following documents to Form B:

• the rules of the strata corporation;
• the current budget of the strata corporation;
• the owner-developer’s Rental Disclosure Statement, if any; and
• the most recent depreciation report (if any).

By January 1, 2014, strata corporations must also provide additional information to prospective buyers on parking and storage allocated to the strata lots.

Strata corporations may use the revised Form B sooner than these dates. The government plans to publish a guide to these changes sometime in 2012.

For information on the new strata regulations, visit: http://www.housing.gov.bc.ca/strata/regs

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Did your know...?

In Canada, the most common mortgage is the five-year fixed-rate closed mortgage.

Historically in the U.S., the most common mortgage has been the 30-year fixed-rate open mortgage.

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We are so excited, a client of ours just gave us a great testimonial!!!

I would like to sincerely thank Roland kym for helping me to purchase my first apartment in Vancouver.

I experienced working with two other realtors for over six months before being referred to Roland. Roland’s professional manner in really listening to my needs, patience in addressing every concern of mine, organized approach in accommodating restrictions in my time schedule, integrity in giving honest opinion throughout the process, and his very friendly attitude are his career’s treasures. 

Roland’s professionalism is outstanding and working with him was a real pleasure. I will happily refer Roland to any friend of mine.

Mahdi – November 2011

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Average housing price slips in Greater Vancouver and Fraser Valley for January 2012

While home sales in Greater Vancouver and the Fraser Valley dipped at the start of 2012, other regions throughout the province faced increased market activity, according to the British Columbia Real Estate Association.

The number of houses sold in the Vancouver region through Multiple Listing Service was down 13.4 per cent in January from the same month last year, the industry group said Wednesday.

In addition, the average price of a Vancouver home declined slightly, from $762,562 in January 2011 to $752,380 this year - a difference of 1.3 per cent.

In the Fraser Valley, sales dipped by 3.1 per cent during the same time period. However, prices rose 6.4 per cent from an average of $441,544 last year to $469,635 in 2012.

Meanwhile, B.C.'s northwest and northeast regions, Kamloops and Victoria saw sales gains of more than 10 per cent.

The biggest jump occurred in B.C.'s northwest region, where the average house price increased 14.2 per cent - from $214,357 to $244,872 - in the 12 months from January 2011.

Powell River, with an average price of $209,636, recorded the least expensive homes in the province - a figure down 1.2 per cent ($212,078) over January 2011.

Cameron Muir, chief economist with the BCREA, said consumer demand driven by low mortgage interest rates saw modest improvements in January from a year ago, despite a decline in provincial sales activity.

Across Canada, home sales were down 4.5 per cent in January from the same month one year earlier, while the number of newly listed homes edged down 1.4 per cent.

"This marks the first monthly decline in national activity since August 2011 and the biggest monthly decline since July 2010," the Canadian Real Estate Association stated.

"The monthly decline reversed a string of monthly increases over the closing months of last year, and returned national activity to where it stood at the end of the third quarter of 2011.

January's sales declines were led by Greater Toronto and Montreal, as well as a softening in other major centres such as Greater Vancouver, the Fraser Valley, Calgary, Edmonton, Winnipeg and Ottawa.

Still, unadjusted sales last month were up four per cent from January 2011 and were even with the five-and 10-year averages for January sales, it said.

"The national housing market is stabilizing and remains well balanced," said CREA president Gary Morse.

"That said, forecasts for economic and job growth going forward vary widely for different parts of the country, suggesting a possible continuation of a softening trend in some markets, as well as the potential that demand will pick up based on strong fundamentals in others."

Source: Vancouver Sun

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I just finished uploading this Townhouse for sale, 209 11TH Ave E, Vancouver East, British Columbia

Welcome to the cool factor! Move right into this stylish two-level, south-facing townhome at Tala Vera, a small complex minutes from Main! Great street appeal and your own front entrance! Walk into a bright open plan that encompasses living, dining and kitchen on the main and two good size bedrooms up! Cozy, comfortable, convenient with a gas fireplace. And a patio right off the kitchen that's made for BBQing. Close to everything: Trendy restaurants and shops on Main Street, the Mount Pleasant Community Centre and a short commute to downtown on public transit.

See the full gallery on Posterous

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Did you know... 50% of buyers right now in North America are first time buyers?

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Vancouver's housing market unlikely to face significant price correction:

 

While Canada’s banks are tightening lending standards in a move to avoid a U.S.-style housing correction, experts say Vancouver’s robust housing market isn’t expected to face a severe price correction.

Canada’s banks are in talks with the federal government about ways to curb mortgage lending in response to a “genuine concern” about the country’s housing boom and rising consumer debt levels, said TD Bank chief executive officer Edmund Clark.

“Household debt numbers are coming up to U.S. levels, so that is causing us a concern,” said Clark.

The banks have responded by restricting some lending and raising prices on higher-risk borrowers.

TD Bank joined Royal Bank of Canada this week in ending a promotional 2.99 per cent four-year mortgage rate, three weeks before it was set to expire.

Although the Vancouver housing market may be out of equilibrium, a significant correction is not expected, said Tsur Somerville, director at the University of B.C. Centre for Urban Economics and Real Estate at the Sauder School of Business.

“I think there’s some concern that prices don’t get so far out of whack that there’s a substantial correction,” Somerville said. “All you have to do is look around and you’ll see that if [a substantial correction] does happen, that would be a real big problem. So let’s not let the housing market be driven by a wave of cheap and easy-to-access money.”

The Bank of Canada is trying to reduce the exposure to mortgage debt and put the brakes on the housing market without using “really, really big hammers,” like raising interest rates, Somervilles said.

“The government has already taken steps to control mortgage lending through its regulations and I think there’s a wariness about tightening those too much, so they’re encouraging the banks to look at their mortgage book more closely.”

However, an expectation that mortgage rates will stay low is taking the sizzle out of Vancouver prices, Reuters reported.

“Since October, it was like someone turned off the tap. It became absolutely dead,” said longtime realtor Pam Allen.

At the same time, Chinese investors, who have long helped to underpin the city’s red-hot market, are holding back because property market curbs back home means they have less cash available.

But with immigrants still streaming in from China and elsewhere, and the city frequently rated one of the most livable on the planet, most experts see prices fizzling rather than imploding with a bang.

Vancouver price rises peaked at a stunning 19.8 per cent in 2006, dipped in 2009, and came roaring back with double-digit growth in both 2010 and 2011.

A house bought for $500,000 in 2001 would have fetched about $1.2 million a decade later, based on average price changes.

But the latest month-to-month figures show Vancouver prices fell in five of seven months from last June to December, including drops of more than 5 per cent in November and December.

Bloomberg News with files from Reuters and Tracy Sherlock

© Copyright (c) The Vancouver Sun

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New East Van 2 Bedroom Listing & Open House this Sunday

I just finished uploading this Condo for sale, 201 3465 GLEN Drive, Vancouver East, British Columbia

Check out this spacious, top floor 2 bedroom suite in the vibrant and friendly Cedar Cottage neighborhood. This exceptionally bright, corner unit has an open layout great for entertaining, featuring a large updated kitchen w/ s/s appliances, plenty of counter space & cupboards. The open living/dining area features a gas fireplace, vaulted ceilings, built-in storage, crown moldings & laminate floors. Very well managed building, with newer roof, rooftop deck, boilers & windows & exterior paint already paid for. Convenient location, w/in steps to transit, restaurants, Sunnyside Park & Charles Dickens Elementary. Shared laundry on the same floor, pets & rentals allowed. Great value! Open House Sunday 12pm to 2pm!

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Open House at 1080 PACIFIC Street this Sunday Feb 12th, 2:45 PM to 5:00 PM

We are proud to announce that this Feb 12th, 2:45 PM to 5:00 PM we will be hosting an Open House at 1080 PACIFIC Street in the West End VW neighborhood, Vancouver West. This is an opportunity to visit this excellent Condo for sale in beautiful West End VW.

Please come with any questions you may have. In the meantime you can take a virtual tour of this West End VW Condo for sale.

As always please do not hesitate to give me a call at 604-737-8865 if I can answer any questions before the open house, or if you would like to book a private showing.

Roland Kym
Remax Select Properties

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Are you a Non-Resident wanting to BUY or SELL property in Canada?

Buying and Selling Canadian Property for a Non-Resident.pdf Download this file

I just finished touring some properties with a client from Central America who had some great questions about purchasing a home in Canada as a non-resident.

 

The following PDF will give you a quick over view and some easily digestible information with key links to important websites.

 

For further information, call me directly to chat. 604-970-0393, Roland with REMAX

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Trying to calculate the BC HST tax credit on a new home?

Following is a great link for you to quickly determine what your HSt tax credit would be on a new home purchase in BC.

**Of course always seek legal and account advice from your accredited advisers before moving forward.

 

http://www.rosborough.com/bc-real-estate-new-home-hst-calculator.html
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Sincerely, your friend in the real estate business,

 

Roland Kym
Remax Select Properties
Cell : 604 970-0393

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Did you know... that 17% of single woman buy Real Estate & only 9% of single men do!?

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Canada Mortgage Housing Corporation (CMHC) nearing its limit

The Canada Mortgage Housing Corporation is bumping its head up against the ceiling and may need to apply for renovations to its $600-billion mortgage insurance cap. The Financial Post reports that the CMHC is cutting back on the number of mortgages it insures as the value of its portfolio swells towards the limit of its government-backed mandate.

 

And by government-backed, I mean tax-payer backed, by which I mean you and me. With debate still not settled over whether the Canadian housing market is a bubble, a balloon, or merely a little bloated, Canadians will be talking about this story today and asking about the risks of a $600-billion portfolio going suddenly bad and what it would mean for them.

 

Granted, mortgage defaults in Canada sit at a puny 1 percent so the risk to the portfolio is next to nothing, but what happens when the CMHC hits the $600-billion limit? Would the government say "no" to a request to increase it, running the risk of killing a booming housing market? Can the CMHC change its business a bit to stay under the cap, say stop insuring loans with more than 20 percent equity?

 

Source: BNN Morning Newsletter January 31, 2012: The chase by Marty Cej:

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We are so excited, a client of ours just gave us a great testimonial!!!

It was a pleasure working with Roland. He is very organized and maintains a high level of professionalism. I was impressed with his knowledgeable about the Vancouver Real estate Market and valued the advice and guidance he provided.  He is person of integrity and would highly recommend him to my family and friends. 

–Kashmir Hare

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House for sale, 2574 5TH Ave W, Vancouver West, British Columbia

This property is RTA Zoned, allowing for the building of a Duplex. Increase your buildable space if you keep the heritage style and build to 75% lot size.

Older Kitsilano home with 3 separate suites (one per floor) in good location close to beach, transit and all 4th Avenue amenities. Roof replaced 2 years ago. The liveable house has retained most of its original bones and restored could be a beautiful character and family home.

I AM HOSTING AN OPEN HOUSE ON SATURDAY, FEBRUARY 4, 2:00PM TO 4:00PM

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Sincerely, your friend in the real estate business,

 

Roland Kym
Remax Select Properties
Cell : 604 970-0393

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