Vacant Downtown Units – “I expected at least 1/4 of the units to be lit up, and there were hardly any.”

The percentage of downtown condo units standing empty, and their possible meaning to the RE market, remains a hotly debated topic. Vacation homes for wealthy out-of-towners? Speculative vehicles? Owned by locals or foreigners? And, perhaps the most important question: – How many of these units would come on the market if we start seeing substantial price drops and/or if the economy shows a double dip? -vreaa

This observation from davers as reported in a comment at VREAA 5 Dec 2009 4:07 pm -

“A friend of mine works at a certain high rise downtown very close to the Shangri-la. He got us access to the roof, and we had a great view of the whole city, as well as the top 30 or so floors of the Shangri-la. In the top 27 floors (I counted) there were 9 places lit up on the 2 sides we could see. Maybe 14 at most because it is tough to tell where one unit ends and one begins. I know those are all high class places and many owners may not live there full time, but I expected at least 1/4 of the units to be lit up, and there were hardly any. This was at 9:00 pm on a weeknight, when I would expect most people to be home. Maybe there really is an endless supply of rich people buying Vancouver real estate. Or maybe they are stretched to the limit and can’t afford to light their home, who knows?”

“No Brainer… or Madness?”

This from realtor Maggie Chandler’s blog 1 Dec 2009 (hat-tip to Starving Artist at vancouvercondo.info)-

“If memory serves me right, it’s been early 2007 since we’ve seen lineups for Vancouver condo pre-sales but that changed on Saturday as the investors lined up (in the rain) to take advantage of the low prices at The Mark, on Seymour and Pacific. Onni’s new building will be 41 storeys and prices started at $325,000. Given that completion will be 2013, it’s a no brainer that investors can only win as this is one of the final sites available in Yaletown and we assume prices will be higher in 2013 than they are now. Is this madness? Given the current economic conditions around the world, should Vancouver real estate be moving at such a pace? The problem is lack of supply and lots of International buyers – from what I have observed Mainland Chinese are all over West Side homes and luxury condos and the word is they’re here for a while. In my 28 year career I have never seen such a quick downturn or such a fast recovery. Some buyers are expecting a downturn after 2010 Olympics and some are expecting prices to continue to rise. We shall have to wait and see.”

Your choice is to hustle, or to be stepped on by hustlers.

The most destructive social consequence of a large bubble is the misallocation of capital. Resources (money, effort, time) get redirected away from goals that would truly build a society and into high risk speculation, into chasing the fast buck. Honest and prudent citizens make 0.4% on their Canada Savings Bonds. Condo flippers make more in  year than the average Canadian could save in a lifetime. Five years of this and a lawless, frontier quality creeps in to the prevailing ethos. Your choice is to hustle, or to be stepped on by hustlers. Blog discussions show that ‘legal tax evasion’ has become a priority for many regular citizens. It is also clear that some players in the housing boom have quite simply broken the law by not paying taxes. Undeclared income from tenants. Under the table cash payments for construction work. Flippers avoiding taxation by calling each flip a primary residence for someone in the family. When this lawlessness is rampant, honest citizens feel like schmucks for being honest. One hopes that the CRA has their best folks on this. The public coffers certainly could do with the revenue. More important, the society needs to be confident that honest and well directed efforts are those that are most valued and rewarded. -vreaa

This from LTR,FTW at greaterfool.ca 3 December 10:06 pm -

“I’ve lived in at least a half a dozen basement suites (”Mortgage Helpers”) that I know for sure that the Rent was not declared as income for the slum-lord. What about those self employed business owners that can write-off family meals, gas receipts etc as a business expense. It may not seem like much when taken in isolation but across the country it can sure add up.
Just look at grow-ops. You can’t tell me there is a demand for Hydroponic Tomatoes to justify thousands of dollars of equipment and supplies. And when the unemployed farmer gets caught, he gets a small fine and off he goes in his Hummer to the Cabin at the lake to enjoy all of his tax free gains.
As an hourly paid employee, there is not much I can claim back on my taxes. When I used to pull wrenches for a living, I couldn’t even write-off my tools !
It’s about time everyone paid their fair share of taxes and crime shouldn’t pay ….. but it does!”

“Currently there are 4 empty stores (the most I have ever seen)”

This from MPM at greaterfool.ca 30 Nov 2009 11:08 am -

“I have lived near this street for 6 years [Denman St in Vancouver], and currently there are 4 empty stores (the most I have ever seen). Two of them say that they are renovating, but there is never anyone there. I imagine that most of them are being pushed out by greedy landlords charging insane prices to lease a 250 sq ft store… Just up the road, there is a ‘dream condo’ development – 8 floors on Robson st with a Starbucks on the street, what else in Vancouver?? This was a perfectly functioning office building for the past 40 years before the idea of building condos. Construction stopped about a year ago and it is completely covered by tarps. The only work happening on the site is the security guard that you see there once in a blue moon….”

“Vancouver is back in boom times… Unlike anything in the world… The speculation is that prices will go up after the Olympics”

Speculators continue to bet on rising Vancouver RE prices, and some still appear to be anticipating that the effect of the Olympics is not yet priced into the market.

Here are extracts from a report by Sam Cooper in The Province 29 Nov 2009 -

“The buzz is back. In scenes rarely seen since the Vancouver real-estate market peaked in early 2008, a horde of hungry investors lined up for hours in a downpour Saturday [28 Nov 2009] to get first dibs on pre-sale condo units in a tower to be erected in Yaletown. Cam Good, who is heading up marketing for “The Mark” by Onni, said some investors even slept outside Friday night to ensure prime line-up positions. “We’re blown away by the turnout,” Good said from inside the downtown pre-sale centre as about 50 investors scrambled around a model of the building.”

“While the global debt and credit crisis continues to haunt developments in former real-estate hotspots like Dubai in the United Arab Emirates, Good said Vancouver is back in boom times.”The [real-estate] strength in Vancouver is unlike anything in the world,” Good said.”

“Mayur Arora, who told The Province he hoped to land a top-floor unit, and his realtor K.D. Dhaliwal, said location and scarcity make the site an attractive investment. “I’m here because they are selling Yaletown at today’s prices, but the speculation is [that] prices will go up after the Olympics,” Arora said.  Steve Dhana was amazed by speculator interest as he watched investors rushing to place bids on units. “The prices went up $50,000 last night,” Dhana said. He hoped to buy a unit in the $500,000 price-range, and also expected prices to surge in February 2010.”

“In my neighbourhood, for the last 3-4 years, the amount of housing which is unavailable due to renovation is about 10%”

Has the boom resulted in a larger ‘reservoir’ of housing that is off-market because of renos?  A very interesting idea from Drachen at vancouvercondo.info 23 Nov 2009 4:51 pm -

“I think part of what is supporting the market is that turnover of housing is so fast that a decent chunk of available housing is constantly in a state of renovation/pre-renovation/post-renovation. In my neighbourhood, for the last 3-4 years, the amount of housing which is unavailable due to renovation is about 10%. Right now the duplex next door is without tenants and awaiting planning approval, there’s another two in the same state within a block of me and a rental complex of 8-10 units that was bulldozed 2 1/2 years ago and has sat empty ever since. This is a consistent pattern throughout the neighbourhood and it’s been at about that level for years now. Because of the inflation in prices, owners aren’t in any rush and really don’t care much if the renovations take 2-3 years to complete because it just means the place will be worth more when they finally sell. There was a big rush of activity last year around this time when prices were falling though, which indicates to me that there will be a lot of properties listed in a relatively short time once a consistent downwards (or even neutral) trend emerges.”

‘Real Life’ – “This week I heard this…..”

This intense concentration of anecdotes breaks all records for efficiency of story telling on VREAA. Please send your own observations. Here’s Real Life at vancouvercondo.info 21 Nov 10:43 am -

“This week I heard this:

1. Hotel in Whistler – “last year was bad, this year is worse” (Global TV)
2. Fitness Centre in Fraser Valley – closing after 12 years (friend works there)
3. Condo back on market for -20% than paid 18 months ago (FTB friend)
4. Hours cut by 50% (friend that is an electrician)
5. Renegotiated rent (friend had landlord reduce rent from $1250 to $1050 in Chilliwack – for 1 year old 4 bedroom house.)”

“They were beginning to get freaked out by the prospect of losing their jobs while trying to pay their mortgages.”

This from logic at vancouvercondo.info 16 Nov 2009 3:53 pm -

“I was sitting in the Starbucks on the corner of Denman and Davie this morning, doing a bit of work and listening to a group of 4 construction tradesmen at the table behind me talking about all the layoffs in the places they work, and stating that they were beginning to get “freaked out” by the prospect of losing their jobs while trying to pay their mortgages. They were most worried by the fact that it’s not just the new hires being let go, but also people with “seniority”. I felt sorry for them, as they genuinely sounded worried, and seemed like nice enough guys.”

 

“What I have seen going on in the renovation and home construction industry, in electrical work, carpentry, and plumbing, is disgusting beyond words”

In what is potentially an industry shaking case, the BC Supreme court has found in favour of a home buyer who sued a negligent home inspector for $192,000, despite a contract that limited the inspector’s liability to $450. Sean Wiens, home inspector, comments in the article at the CBC website, 11 Nov 2009, 7:46 pm -

“The average inspector is only there for three hours or less. I’m of the view, and I don’t represent the majority, by far, that a good inspection is a full day.”

In the comments section, an insider chills prospective buyers. Here’s J.Mustwrite CBC.ca 12 Nov 2009 7:26 am -

“I have been in the building construction and service industry as an electrician for over 30 years and I have found that most [home inspectors] in this so-called regulated agency have no construction experience at all. I have done a number of home inspections and found many serious issues. I warn all my clients when offering to purchase a home with a finished basement, [or any] evidence [that] the house has had some structural changes made to it, [that] if the sellers cannot produce building permits, electrical permits, plumbing permits along with contractors names phone numbers and business licences and insurance certificates, that [means that] $50,000.00 to $100,000.00 dollars minimum must be negotiated off the price of that home no matter how pretty it looks. And that is before I even look at it. Why? What I have seen going on in the renovation and home construction industry in electrical work, carpentry, and plumbing is disgusting beyond words. Is the system broken? Pretty much, in my opinion, because, really, if some building inspector has not swung a hammer for at least 5 years, or been connected to the construction business as an electrician or plumber, he really has only read a book, and that is not what constitutes a ‘qualified person’ in construction, no matter how many degrees or letters one may have behind [one's] name. There is a structure of regulatory municipal and provincial agencies is in place but bureaucrats seem to chew up resources that would otherwise put people out in the field. “Buyer beware” is all I can say for now, until these agencies are set up to actually work.”

Update - This discussion of this issue at Mohican’s Housing analysis blog article Home Inspectors’ Rotting Frames’ 20 Nov 2009