Conditions in the Greater Vancouver housing market continued to favour buyers in August. Since April, prices have edged down slightly as the number of sales and the number of properties coming on to the market have been declining.

The Real Estate Board of Greater Vancouver (REBGV) reports that the number of residential property sales in Greater Vancouver totalled 2,202 in August 2010. This represents a 36 per cent decline from the 3,441 sales in August 2009, the second highest selling August ever recorded, and a 2.4 per cent decline compared to July 2010.

From a wider perspective, last month’s residential sales represent a 40.4 per cent increase over the 1,568 residential sales in August 2008, a 34.9 per cent decline compared to August 2007’s 3,384 sales, and a 26.6 per cent decline compared to August 2006’s 2,998 sales.

New listings for detached, attached and apartment properties declined 17.5 per cent to 3,750 in August 2010 compared to August 2009 when 4,544 new units were listed. Total active listings in Greater Vancouver currently sit at 15,421, a 6.1 per cent decline from last month and a 29 per cent increase from August 2009.

“We’re seeing moderate demand, low interest rates and a healthy but slowing stream of supply in our marketplace, all variables that favour those looking to purchase a home,” Jake Moldowan, REBGV president said. “The last few months have also shown some stability when it comes to price fluctuations in the region, which is a welcome trend after reaching record highs in April.”

Since spring, housing prices have decreased 2.8 per cent compared to the all-time high reached in April when the residential benchmark price was $593,419. Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 6.9 per cent to $576,597 in August 2010 from $539,600 in August 2009.

“Canada remains an attractive destination for foreign buyers, a fact that continues to affect activity in the Greater Vancouver housing market,” Moldowan said.

Source: REBGV

It is 1,554 square feet with a private back yard, deck, wood-burning fireplace, garage, and ensuite laundry, all within the heart of Vancouver’s central west side neighbourhood of False Creek. It has one of the best views in the city and is mere steps to Granville Island.

Price tag: $795,000.

The catch? It is owned by the City of Vancouver, and is leased until 2036. Whoever buys the property is buying the prepaid lease and the right to live there until that time. Almost all of False Creek is comprised of leasehold properties owned by the city and all are priced well below market value.

Would-be buyer Ryan Walters recently considered a 1,000-square-foot leasehold property in False Creek priced at $300,000. The townhouse also had a water view and was a stone’s throw to Granville Island. It sold a few days ago, and Mr. Walters, who was hesitant to dive into leasehold ownership, wonders if he missed out on a deal or a nightmare.

“If you were looking at a freehold condo, it easily would be $1.2[-million] or $1.5-million for that,” he says. “If you’re just looking for lifestyle, it’s probably something to look into for sure, because that’s one of the best neighbourhoods in the city.”

Mr. Walters, a 30-year-old machinist from Ontario, rents an apartment on Main Street. He is one a growing group of Vancouver residents who’ve decided that renting and investing money elsewhere may be a better option than depending on a home for equity. Because Vancouver house prices are still high and the market is uncertain, a leasehold property may work for someone like Mr. Walters. Leaseholds are generally spacious and located in central, desirable locations.

“If you do the math, that works out to some ridiculously low rent …,” he says.

“The big question in my mind is, is it going to be a crazy awesome deal or is everyone going to get shafted?’

In Vancouver, there are hundreds of leasehold condos in the West End, and leasehold townhouses and detached houses in False Creek, Fairview Slopes and Point Grey. They are either owned by the city, the federal government, the UBC Properties Trust, the Musqueam native band or private individuals. Leasehold ownership means the tenant owns the right to use the property for a given amount of time, which is usually 99 years.

As to whether leasehold ownership is a good deal depends on whom you ask. There are risks, such as if it’s not prepaid for the term, there are regular lease payments on top of mortgage payments. Those payments could come up for renewal that is based on a much higher market value than when the property was purchased.

The most famous example of a hike in lease payments was in 1995, when Musqueam Park leases came up for renewal after 30 years. The Musqueam band raised the payments in accordance with then-current market values on the tony west side properties. It meant average lease payments went from about $400 to more than $2,000 a month.

Senior mortgage consultant Rob Regan-Pollock helped several devastated clients through the price hike and ensuing court battle, including one who was forced to declare bankruptcy. That client emerged from the crisis and went on to purchase land again – freehold.

“Their lease payments were in some cases higher than their mortgage payments,” Mr. Regan-Pollock says.

The other risk is that a leasehold property is marketable only when there’s lots of time left on the lease. As it gets closer to its renewal date, its value is certain to drop. Each lender is different, but banks generally only finance leaseholds that have at least five years remaining on top of the amortization period, Mr. Regan-Pollock says. But most leaseholds in Vancouver are young, which means they’re still marketable.

If a 30-year-old buys a leasehold with 80 years left, for example, he or she could live there for 40 years and still have a marketable property to the average lender.

“We run into difficulties with financing leasehold when the lease is coming up for renewal. If you’re the first in, it’s fine. If you’re the last one in, it gets tricky. … You’ll have limited marketability. You need someone willing to take the chance of occupying it and seeing if the lease is renewed and how much the escalation will be, because the reset of the lease terms are going to be done in current dollars. And it will be a huge increase from 70 years ago.”

Because some deals have gone sour, leasehold ownership has a bad reputation among some in the industry. Financial lecturer, author and former MP Garth Turner advises consumers to steer clear.

“In my experience it’s much more of a B.C. phenomenon than anywhere else,” says Mr. Turner, who operates a popular blog called the Greater Fool. “From an investment point of view, leaseholds are generally not a good investment. They should be selling at a discount to freehold properties, for obvious reasons.

A leasehold property is only of value, Mr. Turner says, when compared with the cost of renting.

“It is only the rent equivalent that gives it intrinsic value.”

Realtor Ken Leong has a $500,000 leasehold waterfront townhouse currently listed. He says it would be worth $800,000 as freehold.

“The price of entry is cheaper because you don’t own the land. You look at it like you’re renting an apartment,” he says. “You don’t want to pay the $3,000 a month to own that $800,000 place. You are saving money over the long term.”

Financial securities adviser Susan Stevenson purchased a prepaid leasehold apartment downtown five years ago, and she hasn’t looked back. She had it recently appraised and it’s gone up in value nearly $200,000. The apartment has stunning views of English Bay, and Ms. Stevenson can be at work within five minutes.

Like any condo, she pays monthly maintenance fees on top of her mortgage. Her lease has more than 70 years remaining on it.

“I probably won’t be here when it expires,” she says, laughing. “So for me, that wasn’t a concern. If I am here another 25 or 30 years, it will still be worth quite a lot because it’s waterfront property.”

Contrary to popular thinking, leaseholds do appreciate, but just not as much as a freehold, Mr. Regan-Pollock says.

“They appreciate because rents also escalate. When you buy leasehold property, you are buying the right to occupy that unit in today’s dollars – which down the road will be more, because everything goes up after a while.”

It’s like any major financial decision, he adds. You need a long-term plan.

“Make sure there’s a minimum of 30 years on the lease when you plan to exit so that someone else can have a successful run with it, and the next buyer will have to deal with the exit plan.”

In July, sales in all 28 markets totalled 271,717 units, seasonally adjusted at an annual rate for a decline of 11 per cent, the Conference Board said.Photograph by: Postmedia News files, .OTTAWA — Existing home sales plunged 11 per cent between June and July and have fallen 31 per cent year over year, the Conference Board said in a report Friday.

July resales were below year-earlier levels in all of the 28 markets tracked by the board and at least 10 per cent lower in 26 areas.

The worst declines were posted in the biggest markets, Toronto and Vancouver, where sales declined 13.6 per cent and 20.1 per cent, respectively.

Board economist Robin Wiebe said it is possible the drop came as a result of the application in Ontario and B.C of the harmonized sales tax in July. But aside from associated costs like legal fees, the HST applies only to sales of new homes and not resales, so it would have been more a matter of investor psychology than anything, he said.

Further, he added, the July numbers do not indicate a market in free fall but "a throttling back to less elevated levels," from the red-hot pace witnessed earlier in the year.

"I'd be hesitant to predict another big drop ahead," Wiebe said. "Canada's economic conditions seem sound, so conditions are in place for balanced markets to persist."

In July, sales in all 28 markets totalled 271,717 units, seasonally adjusted at an annual rate for a decline of 11 per cent, the board said.

The sales action in July has in fact left markets balanced in all but four of the 28 markets. The remaining four — Victoria, Calgary, Edmonton and Regina — are now considered buyers' markets.

The board's numbers are in line with those released by the Canadian Real Estate Association in mid-August showing July sales fell 30 per cent from a year ago.

A steady influx of new listings has helped create a balanced ‘typical spring’ housing market in the Greater Vancouver region.

The Real Estate Board of Greater Vancouver (REBGV) reports that new listings for detached, attached and apartment properties in Greater Vancouver totalled 7,004 in March 2010. This represents a 60 per cent increase compared to March 2009 when 4,385 new units were listed, and a 52.1 per cent increase compared to February 2010 when 4,606 properties were listed on the Multiple Listing Service® (MLS®).

At 13,538, the total number of property listings on the Multiple Listing Service (MLS®) increased 19 per cent in March compared to last month, but remains 7.6 per cent below this time last year.

“The total number of homes listed for sale on our MLS® is at its highest level in 10 months, which translates into more options and variety for those looking to buy during the traditionally busy spring period,” Jake Moldowan, REBGV president said.

Residential property sales in Greater Vancouver reached 3,137 in March 2010, a 38.5 per cent increase compared to March 2009, a 4.7 per cent increase over March 2008, and a 12.4 per cent decrease compared to March 2007. The current figure also represents a 26.8 per cent increase compared to the 2,473 sales recorded in February 2010.

“With a sales-to-listing ratio of 23 per cent, we see a healthy balance between buyer demand and seller supply in the marketplace,” Moldowan said.

Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 20.3 per cent to $584,435 from $485,845 in March 2009. This price is 2.8 per cent above the previous high point in the market in May 2008 when the residential benchmark price sat at $568,411.

Sales of detached properties in March 2010 reached 1,336, an increase of 49 per cent from the 897 detached sales recorded in March 2009 and a 19.7 per cent increase from the 1,116 units sold in March 2008. The benchmark price for detached properties increased 23.3 per cent from March 2009 to $800,341, but declined 0.6 per cent compared to last month when the benchmark price was $800,796.

Sales of apartment properties in March 2010 reached 1,252, an increase of 28.3 per cent compared to the 976 sales in March 2009 and a decline of 8.6 per cent compared to the 1,370 sales in March 2008.The benchmark price of an apartment property increased 17.3 per cent from March 2009 to $395,507 and is up 1.2 per cent compared to last month when the benchmark price was $390,899.

Attached property sales in March 2010 totalled 549, an increase of 40.1 per cent compared to the 392 sales in March 2009 and a 7.4 per cent increase from the 511 attached properties sold in March 2008. The benchmark price of an attached unit increased 17.3 per cent between March 2009 and 2010 to $493,263, but declined 0.5 per cent compared to last month when the benchmark price was $495,496.

OTTAWA — With a late-day announcement on Tuesday, Bank of Montreal became the last of Canada's major banks to raise its mortgage rates this week.

BMO hiked its five-year fixed-rate closed-term mortgage by 60 basis points to 5.85 per cent, matching increases announced earlier in the day by Canadian Imperial Bank of Commerce, Bank of Nova Scotia, National Bank and Desjardins Group.

Royal Bank of Canada, Toronto-Dominion Bank and Laurentian Bank announced on Monday that their benchmark five-year rates would also increase to 5.85 per cent.

"The era of historically low mortgage rates is coming to an end," said Sal Guatieri, senior economist, BMO Capital Markets.

As with the other banks, BMO is also raising its three-year fixed-rated, closed-term mortgage, in this case by 20 basis points to 4.35 per cent, and its four-year, fixed-rate closed-term rate will increase by 40 basis points to 5.34 per cent.

BMO said in a release it will still offer its lowest five-year fixed-rate mortgage at 3.75 per cent. Canadians who want a fixed-rate mortgage should lock in now "as pressure builds for rates to rise," the bank said.

Scotiabank is raising its four-year closed-term mortgage by 40 basis points to 5.34 per cent, which is also in line with the other banks, but a 20 basis point increase to its three-year closed-term mortgage brings that rate to 4.5 per cent, higher than the other banks, though lower than the 4.7 per cent posted by TD.

Desjardins Group said it would increase its four-year rate to 5.35 per cent, up 41 basis points, while its three-year rate increases 40 basis points to 4.55 per cent. It also lowered its six-month closed rate and its one-year closed rate by five basis points to 3.45 per cent.

All of the increases announced on Tuesday take effect on Wednesday, while the rate hikes announced Monday took effect on Tuesday.

National Bank, which lowered its five- and four-year fixed rates earlier this month, was the only bank to announce a change to a variable-rate mortgage, with its five-year variable-rate, closed-term mortgage now at 5.85 per cent.

Anticipation over the Bank of Canada raising its overnight lending rate, possibly ahead of schedule, is pushing up bond yields, said Benjamin Tal, senior economist with CIBC World Markets on Monday. Rising yields put pressure on fixed-rate mortgages.

The central bank has said it will maintain its key rate at a record low 0.25 per cent until mid-2010 unless inflation becomes a concern.

RBC and TD also hiked four-year term closed mortgage rates by 40 basis points to 5.34 per cent.
RBC's three-year product rose by 20 basis points to 4.35 per cent, while the equivalent at TD gained 40 basis points to 4.7 per cent.

© Copyright (c) Canwest News Service

OTTAWA — Residential work will lead the construction industry in the near future as institutional construction feels the bite of reduced stimulus spending and rising commercial vacancy rates hold back a rebound in that sector.

Reports from the Conference Board of Canada released Monday paint a rosy picture for residential construction, while noting that non-residential construction always lags behind the economy.

"At their ebb in the early spring of 2009, (housing) starts had fallen to their lowest point since the mid-1990s," Michael Burt, the board's associate director, industrial economic trends, writes in a report Canada's residential construction industry. "Now, nearly one year later, some people are openly discussing the possibility of a housing bubble in Canada, and the federal government has decided that it is prudent to tighten mortgage-lending rules."

The board forecasts that housing starts will increase to 180,500 this year from 147,600 units in 2009, while new-home prices will grow 2.4 per cent this year and will continue to increase until 2014.

The report attributes the resurgence in the residential market to record-low interest rates and recovering employment prospects. Consumer confidence is also a factor, though the report notes that the number of people who say now is a good time to buy a home is almost equal to the number who say it is not.

"Once the Bank of Canada begins to raise interest rates later this year, mortgage rates are also expected to rise. Mortgage rate increases will take place gradually over a period of about 18 months to two years, but they will restrain the industry's growth later this year and beyond," Burt writes

As the residential market rebounds, so will costs, with labour and materials both becoming pricier.

"After falling to a four-year low of $2.5 billion in 2009, industry pre-tax profits have begun to improve in tandem with rising revenues. However, it will be 2012 before profits return to their pre-recession peak," he says.

But profits in non-residential construction will decline to a six-year low in 2010, Burt writes in a separate report on that sector, falling 19 per cent to $918 million as total non-residential investment drops 2.3 per cent.

"Interest rates are expected to begin rising in the second half of this year, large government deficits ensure that stimulus spending will eventually be reined in, and it will take another year before employment surpasses its previous peak.

"All these factors suggest that the industry's recovery will be slow to materialize — and shallow when it does," he writes, adding that profits are not expected to return to their pre-recession peak until 2014.
Still, the overall effects of the financial crisis on the construction industry are expected to be mild compared with previous economic downturns, he writes.

While industrial construction has been a major recipient of stimulus spending, the report notes that the value of industrial permits is below the level reached at the beginning of 2008.

"Commercial-permitting activity has begun to edge up in recent months, thanks to improved spending on office buildings. But here too, overall spending remains weak," Burt writes. "Perhaps most ominous is the downward trend in institutional permits. Although expected as stimulus spending fades, this suggests that the industry's one source of strength will gradually become a source of weakness in coming months."

© Copyright (c) Canwest News Service

By Brian Morton, Vancouver Sun - March 12, 2010

B.C. should see its GDP rise by 3.4 per cent this year, making it among Canada's economic growth leaders, according to an RBC Economics report released Thursday. "We have good growth prospects for B.C. in 2010 and 2011, reflecting more favourable global financial conditions, improved prospects in the U.S. and a stronger economy related to the 2010 Olympic and Paralympic Games," Craig Wright, senior vice-president and chief economist, RBC, said in an interview about the RBC Economics Provincial Outlook. "And that will continue as we go forward. "Also, the housing market in B.C. has bounced back and is producing continued support for the economy."

According to the report, B.C.'s forecast GDP rise of 3.4 per cent compares favourably to Canada's projected 3.1-per-cent growth in 2010.

The report said B.C.'s forecast growth rate represents a significant improvement compared to the contraction of 2.5 per cent in 2009, which marked B.C.'s worst performance since 1982.

However, the report also notes that B.C.'s forecast growth of 3.4 per cent in 2011 is slower than the national average of 3.9 per cent, mostly because of the removal of the "stimulus" the 2010 Olympics and Paralympic Winter Games provided.

Wright said it is also a reflection that in 2011, other provinces will begin bouncing back as well.

Wright said the 2010 Olympics has already provided a boost to tourism, retail trade and other services, adding that the Games will help speed up an emerging economic recovery, while positioning B.C. "as a top destination for travelling, emigrating and doing business."

The report also said that B.C.'s economy should continue to benefit from very low interest rates and that housing starts are expected to rise to 25,600 units in 2010, after falling to 16,000 units in 2009. However, the HST is expected to temper new home building in the second half of the year.

The outlook for B.C.'s labour market is also encouraging, with a predicted return to pre-recession levels by the end of the year, with RBC forecasting a rise in job growth of 2.1 per cent this year compared to a 2.4-per-cent decline in 2009. The unemployment rate should average 7.7 per cent, slightly higher than last year's 7.6 per cent, because of the entry of more people into the labour market.

Wright said capital investment should also pick up in B.C., "thanks in large part to strength in the energy and mining sectors."

Meanwhile, Central 1 Credit Union chief economist Helmut Pastrick agreed, in an interview, that B.C. should see renewed growth this year, although he assessed the RBC report as a bit too rosy.

"I'm a little lower on the growth rate [than RBC]," said Pastrick. "I see about 2.8 per cent this year and 3.0 per cent next year.

"And [RBC] is assuming stronger U.S. growth and more housing starts than I do. They have it at 25,600, while I have it at 23,000. But the difference [in RBC's and Pastrick's forecasts] isn't that large."

Nationally, the RBC report forecast unemployment rates to average 8.4 per cent in 2010 before falling to 7.7 per cent in 2011. It also said housing starts nationally are expected to grow to 184,000 in 2010, up from 149,000 in 2009.

The Greater Vancouver housing market continued to experience strong demand from homebuyers and an increase in total property listings in a month where the eyes of the world were focused on the region.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 2,473 in February 2010, an increase of 67.1 per cent compared to February 2009 when 1,480 sales were recorded and a 28.6 per cent increase compared to the 1,923 sales recorded in January 2010.

More broadly, last month’s sales totals marked a 7.6 per cent decline compared to the 2,676 sales recorded in February 2008 and were 13.5 per cent behind February 2007 when 2,859 residential sales were recorded on the Multiple Listing Service (MLS®) in Greater Vancouver.

Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 19.7 per cent to $581,911 from $486,054 in February 2009. This price is 2.4 per cent above the previous high point in the market in May 2008 when the residential benchmark price sat at $568,411.

 “We don’t know at this point what long-term impact the Olympics will have on our housing market, but we do know that activity in our market remained steady through all of the excitement and distraction of the last few weeks,” Scott Russell, REBGV president said.

“In February, for example, 110 sales were recorded on the MLS® in downtown Vancouver. That’s higher than 2009 and slightly lower than the mid-2000s, which is consistent with data from the overall market. It’s too soon to say whether that’s an Olympic effect,” Russell said.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 4,606 in February 2010. This represents a 17.6 per cent increase compared to February 2009 when 3,916 new units were listed, and a 10.5 per cent decrease compared to January 2010 when 5,147 properties were listed on the MLS® in Greater Vancouver.

At 11,346, the total number of property listings on the MLS® increased 11 per cent in February compared to last month and declined 21 per cent from this time last year.

“Two months into 2010, we see the total number of homes listed for sale on the rise and demand in the market strong, but less frenzied than we saw in the latter part of 2009,” Russell said.

Sales of detached properties increased 67.5 per cent in February 2010 to 983 from the 587 detached sales recorded during the same period in 2009. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties increased 22.5 per cent from February 2009 to $800,796.

Sales of apartment properties in February 2010 increased 65.2 per cent to 1,074 compared to 650 sales in February 2009. The benchmark price of an apartment property increased 17.3 per cent from February 2009 to $390,899.

Attached property sales in February 2010 are up 71.2 per cent to 416, compared with the 243 sales in February 2009. The benchmark price of an attached unit increased 16.2 per cent between Februarys 2009 and 2010 to $495,496.

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