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Type of Anecdote
- 01. He Said, She Said (248)
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- 24. Policies On Housing (10)
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- 26. Premature Calls Of "Bottom" (3)
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- 29. Bubblespeak (1)
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Tag Archives: Construction
“My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”
“The dominos start to fall: SFR Project on indefinite hold in Van West!
This is a property I have been watching for some time: 4988 Chancellor Boulevard in University, Vancouver West. A 7,700 square foot lot with an old house in an exclusive area of mostly older homes, with a few new builds. Sold under MLS V951758 in June 2012 for about $2,600,000 listing was at $2,688,000; by June 2012, properties in Van West were already coming under some price pressure. After it was sold, a sign appeared on the site, advertising a new 4,500 square foot modern architectural home to be ‘built in 2013′ with completion by 2014, priced at $5,188,000 under V989612 still active, but listing now says ‘completion in 18-24 months’. However, after about 6 weeks the sign disappeared and from June 2012 through last week the house was vacant and there were no signs of construction. Then last week April 10, several large U-Haul trucks arrived and a pickup toting a boat. Now, there is furniture in the house, a new ‘beware of dog’ sign on the front and from the shoes outside the front door, it appears it has been rented to a family plates on vehicles are BC. Normally, a family doesn’t move lock, stock and barrel into a house on a month-to-month tenancy, so I’m guessing they have a longer lease, but I cannot find a rental listing. The developer of the new house, Natural Balance Premium Home Builders, does not list this house on its website and the purported architect, Frits de Vries’, website does not mention this project.
My best guess: this property is now an ‘investment hold’ and will be built ‘when the prices recover.’Good luck on that!”
- RFM at VCI, April 15th, 2013 at 7:37am
Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]
Poster ‘DNAspark99′, [on the forum bcsportsbikes, 22 Mar 2013 and onwards; hat-tip RE Lurker] has posted images of a ‘building’ that is under construction, with this commentary: “So, my landlord has taken it upon himself to build a ‘toolshed’. For a roto-tiller. At least, that’s the entirety of what he told us – there are, however, some inherent communication issues. (He’s Korean, and not yet well versed in English (though certainly much better than my Korean)). There’s one door so far, and a lawnmower will not even fit through it. (I don’t think he knows that yet though)
So, this is the ‘project’ thus far. For one, the ground it’s being built is mushy moist marshland – your feet sink with every step. Which is always ideal for a good foundation – or complete lack thereof.
It may not be immediately obvious, but I don’t think this man has a background in construction.
It appears he owns a hammer and saw, perhaps a measuring tape, perhaps not. Certainly nothing like a square, straightedge, or level.
I guestimate that he has seen no more than 3 episodes of various home improvement shows, and maybe at best he’s driven by a construction site atleast once in his life. After all, “How hard could it be?”
And now, in time-lapse video:
A second time-lapse video [posted 2 Apr 2013], worth the watch for casual efficiency, for the horse, for the stuff falling off the roof, and for the paint-job:
Housing Makes Up 20% Of Canadian GDP – “This heavy reliance is not healthy. We basically borrowed our way out of this recession. Now, it’s payback time.”
“If the city is any indication of what’s going on in the country, it’s over-reliant on its housing sector.” – Herbert Crockett, a retired World Health Organization executive who lives in France says of Toronto.
“We basically borrowed our way out of this recession. Now, it’s payback time. We will be in for a period of long, slow growth.” – Benjamin Tal, deputy chief economist at the investment-banking unit of Canadian Imperial Bank of Commerce.
“It did seem a little unusual to have every policy maker in Ottawa hectoring Canadians about their excessive debt levels and yet the economic incentive for the average Canadian was completely slanted to taking on debt and not saving. The realist in me would admit it was the only tool the Bank of Canada had. The reality was, they really could not lift interest rates.” – Douglas Porter, chief economist at Bank of Montreal.
“As an economist working for a Canadian bank, I can’t go into a client meeting and have someone not ask me about housing in Canada. For U.S. investors, they are still a little gun-shy about what happened in the U.S., and I think they worry the same fate will happen to Canada.” – Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC, Royal Bank of Canada’s investment-banking unit, in New York.
Meantime, the share of GDP linked to housing, including construction and renovation, soared to more than 20 percent. A similar U.S. measure peaked at 18 percent in 2005. Canada’s share of construction jobs in total employment was 7.3 percent in January, above the 4.3 percent in the U.S.
“This heavy reliance is not healthy,” CIBC’s Tal says. “I expect to see some softening.”
- excerpts from ‘Canada Losing Debt Halo as Bull Market Housing Peaks With Carney’, Bloomberg, 26 Feb 2013 [hat-tip Nemesis]
As we have been saying here for years.
What percentage of Vancouver’s GDP is linked to housing?
Home Inspector Oversight – “It’s been a nightmare, like I wish I’d never set foot in this house. I just wanted a place to live.”
“Buyers like Lindsay Denton, a 39-year-old single mother, are finding out the hard way they have little recourse if they believe a home inspector misses an obvious, visible defect. Complaints to the inspectors’ association might cost an inspector the loss of his or her license for a week, but financial settlements are only awarded through the courts.
Denton was battling breast cancer when she bought a $750,000 home in East Vancouver after an inspector’s report found no structural defects.
“It’s been a nightmare, like I wish I’d never set foot in this house. I just wanted a place to live,” Denton said.
“It doesn’t mean anything that they have a license or that they have errors and omissions insurance.”
Denton has filed a lawsuit against inspector Christopher Stockdale, who used to be the president of the Canadian Association of Home and Property Inspectors of B.C.
In her notice of civil claim, she alleges Stockdale failed to follow the standard practices of his association.
Denton claims he missed the fact that her home was structurally unsound, with extensive water damage, a hole in the roof, asbestos in the air ducts, and visibly rotten sill plates and posts.
She also claims Stockdale examined her one-storey roof with binoculars instead of climbing up with a ladder and failed to carry a tool to prod any potentially rotten wood.
Denton said she discovered some rot in the structure after the tenants in her basement suite moved out.
“I went downstairs to paint and I touched the wall and it was wet and soft and the wood on top of the foundation was rotten,” she said. “It was crumbling away.”
The crumbling wood Denton refers to is the sill plate, which sits underneath the posts that hold up the structure. She said the inspector should have seen rotten posts next to the furnace he inspected.
Inspections ‘do not constitute a guarantee’
In her claim, Denton says Stockdale of Home Sweet Home Inspections returned to her house, looked at the problems and offered to refund her the $565 inspection fee.
She claims she told Stockdale he also should have seen rot on the side of her house.
“I’ve borrowed $40,000 and I’ve spent more, and I’m looking for another $100,000 to fix my suite because it’s been 18 months without being rented.”
Denton says she’s struggling to make her mortgage payments and is waiting for another inspector’s report to assess the defects allegedly missed in her home, a report which will go before a judge in her civil case.
It’s almost impossible for homeowners to get compensation if something is missed during a home inspection, despite new regulations introduced by the B.C. government in 2009 requiring all home inspectors to be licenced and insured.”
- from ‘Buyers left with big bills when home inspectors miss defects’, CBC News, 21 Feb 2013[hat-tip 4SliceofCheese]
During a speculative mania, construction and inspection standards drop, as the abnormal pace of price gains paper over shoddy work. People are forgiving of all sorts of deficits as long as they know they are accumulating equity at a rapid pace. When the tide goes out, they look for people to blame. Ironically, that often leads to standards being tightened at the very time when such measures are least needed.
As an aside: If you “just want a place to live”, why buy a house where you need to rent out your basement to make the mortgage payments?
Large Abandoned Richmond SFH Construction Site For Sale – “Assessed value is $2,300,000. Asking $1,888,888 for quick sale.”
“Ad posted in Richmond News Feb 15.
10111 Sidaway Road, Richmond
4 Acre Estate Property, located in area of multi million dollar mansions and is adjacent to Mylora Golf Course.
The property was under construction in 2011 but construction was stopped.
House plans currently include a permit to build a 16,000 square foot house, but buyer can change the plans and build on the Engineer approved foundation that is on site.
Value of foundation is in excess of $300,000 and the assessed value of the property is $2,300,000.
Asking firm price of $1,888,888 for quick sale.
- posted by ‘Real Estate Tsunami’ at VREAA 18 Feb 2013 7:41pm
Filed under ‘Misallocation of Resources’; the central tragedy of a speculative mania.
“J.J. Miller and his brother William made their fortunes in real estate, and built giant houses in East Vancouver in 1908. They then lost everything in the crash of 1913.”
“It’s a natural that the conversion of big old mansions into multiple-unit housing can boost density and protect our heritage in the process.
As one of Vancouver’s developers found out the hard way, one of the biggest sticking points is if the neighbourhood will allow it.
Developer James Evans and architect Timothy Ankenman, who are old friends, are also responsible for two recent conversions: one in the hotbed of community activism, Commercial Drive, and the other in the polar opposite prestigious hood that is Kerrisdale.
Anybody who’s lived around Commercial knows the Jeffs Residence at 1240 Salsbury Dr. It’s a hulking three-and-a-half-storey, 1907 house that’s provided rental housing to the area since the 1920s. It was built as both residence and doctor’s office for Dr. Thomas Jeffs and his wife Minnie and their kids. The popular doctor, also a city council alderman and police commissioner, moved out of the house shortly before he died in 1923. It may be considered an old working-class neighbourhood now, but in the early part of the 20th century the Commercial Drive area was a rich person’s enclave, and the Jeffs Residence was surrounded by many other Queen Anne Revival grand houses with turrets, pitched pyramid roofs and hipped dormers.
Mr. Evans lives about a block away, so he’d walk by the house all the time and think about restoring it. One day, he contacted the owner.
“We put together a deal and went through a rather painful approvals process, ended up buying the site, and here we are today,” says Mr. Evans, standing on the job site.
The painful process he is referring to is community reaction against the loss of rental stock.
“It’s a pretty reactionary neighbourhood with anything that smells like development, so here I am, getting launched in the middle of the thing,” he says, sounding dismayed at the memory. “A lot of people in the neighbourhood know who I am, and so I was walking around the neighbourhood with a bull’s-eye on my back over the course of the year I went through it.
“Loss of rental continues to be a sensitive issue,” he adds. “And I looked into trying to use this as rental and I figured the only way I could do it was to spend $1-million on the site, which would have bumped everybody’s rents by about 30 per cent, and that’s not affordable housing anymore.”
Instead, he and Mr. Ankenman went through the process of getting the house added to the heritage registry in exchange for density and other variances. The result is a seven-unit house comprised of mostly two-bedroom units, except for the top unit, which will be one bedroom, with an amazing view from the turret. The price starts at $400,000 for a 750-square-foot condo, and Mr. Evans says he’s already pre-sold three of the units. It’s about two months away from completion.”
I ask him if he would do the Jeffs Residence project over again, having gone through a year under the hot spotlight of contention. He pauses.
“This one is unique,” he finally says. “There’s only one of these in Vancouver. And I’ll be able to walk past this thing in 10 years and it will look great and continue to look great, and I will get some personal satisfaction out of that.
“Will I make any money out of it? I don’t know yet. Time will tell.”
- from ‘Vancouver developers of heritage properties convert homes and hearts’, Kerry Gold, Globe and Mail, 10 Feb 2013
Thanks for the link to the above article goes to regular reader and commenter Aldus Huxtable, who adds:
“I used to live right by this development and have watched it for some time.
It’s a fun story we can watch play out over the next few years.
Down the block is J. J. Miller’s Kurrajong, a heritage house [photo below].
It’s also really important to read the heritage waymarker [see below].
J.J. Miller and his brother William made their fortunes in real estate, and built this giant house on Salsbury in 1908. They then lost everything in the crash of 1913.”
2808 W 21st Ave, Vancouver Westside (V971425)
New build 2800sqft SFH on 33×123 corner lot
Offered now for $2,888,000
Hat-tip to Rob for this example of shrinking profit margins. He also writes: “Another good example of west side drop. This had been listed at 3.3 million for about the past 8 months…..now this week dropped to 2.88 million.”
It sounds like the plan was for two new builds on one old ‘double’ lot, a project where we’d imagine projected profit margins were quite generous. Even at $412K ‘off’, $2.888M still represents preposterously poor value for a buyer.
At what price levels does this deal become untenable for the developer?
- found at http://imgur.com/a/ny4uA, by proteus (the poster with many names).
Somewhere in Europe, it seems.
Inexpensive, but sound workmanship. ($280K? We think not.)
Non-leaking tiled roof.
“We bought in 2005 for $698K, we sold in 2011 for $2.1M and were looking for the Punk’d cameras as we faxed the agreements back and forth. The new owner was adamant that he was tearing down the second we moved out, but still hasn’t done so.”
“We bought in 2005 for $698k (I was 33) we sold in 2011 for $2.1m and were looking for the Punk’d cameras as we faxed the agreements back and forth. We rented back for 6 months (for 1$) so the kids could finish school with no disruptions. The new owner was adamant that he was tearing down the second we moved out. Had surveyors, architect dudes coming by to measure stuff, lot was marked out and trees surrounded as we were getting ready to leave. We moved out and a couple of months passed…. nothing. We went trick-or-treating in the old hood and low and behold he’s rented the house out to two students for a year. How fast things change.”
- Double Down at VREAA 28 November 2012 at 9:58 am & 10:02 am
A $1.4M gift, care of somebody else’s debt commitment.
Still Leaky After All These Years – “Our landlord, who bought new in 2008, is in a tough spot. Bought as an investment for about $450K, could sell for about $380K today.”
“[I've been] living in Vancouver as a renter in the same building for 7 years. Have seen since moving in telling signs the building had moisture issues. Finally are going through rain-screening right now. It is costing each owner $120,000. So glad I am a lowly renter, and not the couple who moved in 2 years ago who were in a bidding war and decided to waive inspection.”
- machino at greaterfool.ca 30 Nov 2012 1:43pm
“We have friends that spent low six-figures in special assessments and had their buildings shrouded in green wrap for up to a year. Now many stratas are only able to get insurance with $100K deductibles (or more) and guess who pays the deductible when your sink leaks?
In our building (supposed high-end, granite, SS – etc) our landlord (who bought new in 2008) is in a tough spot. Bought as an investment for about $450K, could sell for about $380K today – not to mention their mortgage payments, strata fees, taxes and maintenance. At least they can write-off their losses, at least until CRA figures out there is no ‘expectation of profit’.
Their maintenance costs are high because of shoddy construction and cost-cutting.
No question renting is a ‘steal’ compared to ownership and certainly less risky.”
- Snowboid at greaterfool.ca 30 Nov 2012 12:27am
“Vancouverites labor under the delusion that we live in Southern California and not southern British Columbia. For this reason, we tend to build structures that would be appropriate in the Mojave Desert but certainly not in a rain forest such as the West Coast of Canada.
For the last 20 years, the landscape in the lower mainland has been covered with envelope reconstruction projects galore. Some are being done for the second time. We simply can’t get over our infatuation with Adobe stucco.
It’s absolutely appalling to see the soggy rot underneath these porous exteriors. Toronto has nothing on us when it comes to building inappropriate structures. We have hundreds upon hundreds of them in varying stages of repair.
On the bright side though, it does keep a lot of construction trades busy.”
- Mister Obvious at greaterfool.ca 30 Nov 2012
3955 Blenheim Street, Vancouver West Side
2,595 fin.sqft + 900 unfit.sqft 1927 SFH on 53×110 lot
Current owner paid $1,180,000 back in December 2009.
Listed for sale April 2012 $1,998,000
Listed for sale 14 Aug 2012 $1,699,000
Price reduction 26 Nov 2012 $1,599,000
Blurb extract: “ALERT!!! Investors/Contractors. Upper flat lot 53′x110′ on the Westside of Blenheim. … Easy to build a 4000 sqft mansion with a lane-way house. … New solarium extension 35′x15′ built from ground up by the Fourseasons with warranty. … Reno-permit and engineer drawings in place. Easy to show. Highly Motivated Seller.” [hat-tip 'westsidefrank'; thanks to Village Whisperer for info re past pricing]
If we weren’t locked in the jaws of a speculative mania in housing, this house would very likely still be a simple, functional bungalow going about its business.
As it is, it’s highly likely that it will now be torn down, along with all the work that has gone into what were apparently planned to be flip-renos. Misallocation of resources, again.
I suspect Froogle Scott would have some thoughts on this.
Anybody know any earlier sales history on this property?
‘The State Of Construction In Vancouver’ – “The townhouses are for sale for $2M to 6M, they are unsold, and, it seems, already in need of repair.”
“I live on the top floor of a high rise in the South Granville area and can see the roofline of the new townhouses at 16th & Granville from my living room. Yesterday, in the teeming rain, I spotted someone tossing a white sheet of plastic over the edge of the facade in what appeared to be an attempt at blocking a leak. The townhouses are for sale from $2 to 6M, they are unsold and, it seems, already in need of repair. This is the state of construction in Vancouver.”
- Observer at VREAA 1 Nov 2012 9:59am
When a market rewards workers more for quick, shoddy work than it does for genuine honest craftsmanship, building quality will obviously drop. That’s human nature.. why do it right when you can get paid the same (or even more!) for doing it poorly, and doing it quickly?
Realtor/Speculator On ‘The National’ “Trying To Sugar Coat The Ugly Reality That Prices Are Tanking”
CHRIS BROWN: “At first glance Philip Chan’s property in popular Kitsilano would seem to support those who believe the crash is upon us. It’s a very nicely finished 1,700 square foot newly built unit in a triplex. Back in March it came on the market for $1.79 million, including sales tax. It’s now 1.57 million. That’s an almost 12 percent price drop.”
PHILIP CHAN: “I think the market actually during the last six months has adjusted downwards. I think everybody know about that. And it went up too fast and it’s just taking a little bit of an adjustment.”
CHRIS BROWN: “Describing a $200,000 price drop as an adjustment is just the kind of thing those who believe the market is unsustainable seize on. They argue it tries to sugar coat the ugly reality that prices are tanking. Chan, who built this home is a realtor who’s also trying to sell it, doesn’t believe that.”
PHILIP CHAN: “Unit like this, I think you can find no more than 10 on the market at this moment. How much can it drop?”
CHRIS BROWN: “At his Kitsilano property owner and realtor Philip Chan is sounding confident the market won’t slip much further from the 10 or 12 percent it already has.”
PHILIP CHAN: “Nobody can predict the future, so if you see that the market is healthy enough and you can afford to do it, do it. You can either sit by the ballpark and you watch the game or you can go down and play the game. You might get hurt or you might win.”
- excerpted from ‘Vancouver Housing: Bubble or Bust?’, The National, 20 Sep 2012. [Transcription generously provided by 'AP'.]
Noteworthy for the following:
1. Another realtor who is also a real estate speculator. (How many people in Vancouver have their livelihood and their investments all tied up in the RE sector?).
2. Strongly biased commentator being presented by the media as a potentially valid source of information about the market.
3. “It’s just taking a little bit of an adjustment.” = ‘It’s Only A Flesh Wound’. Price drops thus far are significant because, along with high inventory and dropping sales volumes, they herald far larger price drops to come.
4. “How much can it drop?”. Well, triplexes like this in Kits will perhaps sell for about 500K-600K in the trough, so the answer is “more than 66%”.
5. “Nobody can predict the future…” Faux market agnosticism, and weasly self-contradiction. He’s already predicted the future by saying “How much can it drop?”, now he says “Nobody can predict the future”. Thinly veiled CYA?
6. “…so if you see that the market is healthy enough and you can afford to do it, do it.” What does ‘afford’ mean? Afford the monthly payments? Or afford to watch your net worth drop by $1,000,000?
7. “You can either sit by the ballpark and you watch the game or you can go down and play the game.” Noteworthy for:
(i) the sporting metaphor (Vancouver RE is, after all, “a sport“), and
(ii) the kind of bravado that has been very common amongst the bulls all the way up. (Have you got what it takes to play the game?) It’s looked silly to those of us who saw what it was on the way up. It is now an appeal of last resort.
8. “You might get hurt or you might win.” Love the lottery innuendo (“Hey, You Never Know!”). Quite alright for a couple of bucks on a flight of fancy; less so for a $1.57M bet.
The Mayor – “This is further evidence that Vancouver’s economic action strategy is working to create highly skilled and high-paying new jobs” [... in RE related industries.]
“While the news is full of warnings about a national housing slowdown and shaky global economic future, the Vancouver region has had a building boom almost equal to pre-recession years.” …
“Some cities are crowing about their success, as Vancouver did last week, noting that it has processed building permits worth $1.1-billion in construction value for the first six months of the year.” …
That prompted Mayor Gregor Robertson’s office to issue a statement about the encouraging numbers and the reasons.
“After keeping taxes low, and maintaining permit processing times despite higher volumes, this is further evidence that Vancouver’s economic action strategy is working to create highly skilled and high-paying new jobs,” he said.
- from ‘B.C. building boom nears pre-recession levels’, G&M, 3 Sep 2012
We’re hearing innumerable stories about existing condo stock that isn’t selling, and yet there seems to be more construction going on than ever before. It appears our city has become even more overly dependent on the RE industry in recent months; it’s almost the only game in town.
Throw gasoline on a waning fire and things look bright for a few seconds more.
3129 E. 6th Ave, Vancouver
Sold – August 5, 2011 $715,000
Attempted sell as a pre-sale new-build house??? $1,068,000
Listed and cancelled multiple times
Finally listed the original tear-down – Abandoned the build – June 20, 2012 at $759,800
Sold for $700,000
With all those transaction and holding costs – this has to be a $50,000 loss and no success on the build.
Given the builder that owned it – it is probably a good thing that it never got built because it would have probably been a P.O.S.
This is getting boring – I could post stories like this all day. Richmond is going down!!!!!
Also – Most of the West Side sales (other than new) are going for 10% below assessed.”
- ZRH2YVR at VCI 14 Aug 2012 10:00am
“He told the receptionist that he wanted to talk to the doctors about having their senior patients informed about the housing options available in such a convenient location on West Broadway.”
“I was waiting in my GP’s office Monday when a man came in looking like a drug rep. He identified himself to the receptionist as a representative of Mosaic wanting to talk (he had packages in the two doctors’ names) to the doctors about the new development at Broadway & Bayswater. The receptionist put him off but he became quite insistent – he was asked why and told the receptionist that he wanted to talk to the doctors about having their senior patients informed about the housing options available in such a convenient location on West Broadway (btw, it is not assisted living, merely small condos over retail). He was sent on his way but I smelled desperation in the man – did he really think that he would be able to have doctors shill his development..?”
- local observer at VCI 1 Aug 2012 12:30pm
“As part of the work being done by the Mayor’s Task Force on Housing Affordability, re:THINK HOUSING, an open ideas competition, has been launched to generate a broader discussion of possibilities for Vancouver’s affordable housing crisis. Aimed at everyone who has an interest in affordable housing, from the general public, to designers, planners and architects, to philanthropists, non profits and financial institutions, the Ideas Competition seeks to create the space for provocative, bold new ideas that address Vancouver’s affordability challenge head-on.”
Submissions closed on 29 June, 2012, and can now be viewed HERE. [Hat-tip 'terminalcitygirl'.] Images above are from two of the submissions.
We note there are no “Educate-the-public-about-asset-manias-and-thus-crash-housing-prices” submissions.
“James K. M. Cheng Architects Inc. submitted a rezoning application to the City of Vancouver that outlines a plan for a multi-use site at 750 Pacific Blvd., known commonly as the Plaza of Nations. Commercial use would include small-scale retail, hotel, office, restaurants and cafes, while community use would include a sports-science centre, a daycare and an ice rink that could serve as a part-time practice arena for the Canucks.
The proposed pièce de résistance is a residential structure, with between 1,700 and 2,000 units, that takes the form of a giant arch. The development would provide a mix of housing types and include private ownership and purpose-built rentals for residents of various ages and income levels, according to the application.
James Cheng said the arch-shaped building will serve as a window through to BC Place. “Vancouver has been criticized for having so many towers, and everything looking the same,” he said. “What we tried to do is create an urban piece that is strong enough to stand up to the stadium, but still have a relationship to it.” —
“The developments in that section of our city, which is our largest and last big waterfront property, should be a special place,” said Councillor Raymond Louie. “For a long time, it sat empty. This is an opportunity for us to develop it in a sustainable fashion where it is able to serve the people who will eventually live there, but the wider community as well.”
- from ‘Proposed complex would pump life into dead zone’, G&M 4 Jul 2012 [hat-tip Joe]
A tad reminiscent of Paris’ ‘Grande Arche de la Defense’ (above), only even more poorly proportioned and even less pleasing on the eye.
Bad sci-fi design. (“Could I get my star-fighter through that?”)
White Rock – “Who the hell do they think will buy this stuff at these prices? Especially when so much more is being readied every single week? “Overbuilt” doesn’t begin to describe it.”
“It was so interesting biking through White Rock the other day. Even if I wasn’t an ardent bear, it would have been hard to miss the sheer number of For Sale sings. I have no idea if the official totals reflect it, but there sure seems like a ton of them when you’re on the street, sometimes several in the same block. Three or four carried the “New Price” message.
But on top of that, the flood of new product and new developments just…doesn’t…stop. We rode past at least a half-dozen new condo/townhouse/SFH developments that day alone. Meanwhile, back here in my own between-the-border-crossing neighbourhood, construction continues unabated. They’ve opened up a whole new section of land since my photo essay a couple months ago (building roads, infrastructure, etc) that looks big enough to handle a hundred townhouses and dozens of row houses.
You gotta remember that there are already 90 (!!!!) listings just in this mini-neighbourhood alone, nearly all of which are new. And unloved, apparently. These places were being snapped up a year ago, but not now. The weekend open houses here are seemingly drawing nothing but flies.
There’s one house in particular that bears mentioning. It’s situated where prospective buyers can’t miss it when they drive into the area, and it’s been in a constant state of “open house” for the last two months. Yet there it sits today, un-purchased, while dozens more just like it are nearing the final stages of completion.
Honestly, who the hell do they think will buy this stuff at these prices? Especially when so much more is being readied every single week? “Overbuilt” doesn’t begin to describe it.”
“Talked to a friend tonight who just moved into a $700K rental apartment at UBC. The wood-framed building, on leased land, is two years old and floors are already sagging.”
“Talked to a friend tonight who just moved into a rental apartment at UBC. Building is two years old and floors are already sagging, so much that her closet doors keep opening by themselves, and drawers have a hard time staying closed…
Market value? $700,000, for a wood frame condo on leased land.”
- jumpin in at VCI 30 may 2012 10:48pm
“What’s the Difference Between A Shed And A ‘Laneway House’?” [Drum-roll] “About $268,000!” [Cymbal]
“Alexis Lum is building a laneway house in his parents’ backyard for three reasons: It’s more affordable than a two-bedroom apartment; he can rent it out if he decides not to live there; and he can have privacy and independence from his parents, while being close enough for regular family dinners.”
“I do love mama’s cooking,” he said, adding that he’s sharing the investment with his brother, Antoine, 31. Lum, 28, is a French secondary school teacher at Southpointe Academy in Tsawwassen.
Lum’s situation is pretty typical: laneway houses have been allowed in Vancouver since 2009, and usually they are built as a way for parents to help their adult children get into the pricey Vancouver housing market.
Lum grew up in the Dunbar house behind which he’s now building the laneway house for about $270,000, and he’s really excited to get the keys.
“I love it. It’s absolutely fantastic — it’s a beautiful, small house,” Lum said of the two-bedroom home in his parents’ backyard.
Michael Lyons, vice-president of marketing for Smallworks, a builder of laneway homes in Vancouver, said that at least half of his customers are building these small houses at the back of their lots for the next generation.
“They can’t afford to buy in the neighbourhood where they grew up. People want to stay close to their family,” he said.
The cost to build a laneway home averages between $250,000 and $270,000; that price includes preconstruction costs of $11,500, excavation and site work of about $30,000 to $35,000 and another $175,000 to $200,000 for the construction, Lyons said. “By the time the dust has settled, you’re in the $250,000 to $270,000 range.”
“With the benchmark price for all residential properties in Greater Vancouver sitting at $679,000 and housing affordability a significant problem in the Lower Mainland, a laneway house could be considered a bargain.”
“We made a decision to support laneway homes as a way to make home ownership more affordable and also to build up the city’s rental stock,” said Colin Lawrence, mortgage development manager at Vancity.
The next generation can get the financing themselves and pay the mortgage, Lyons said, adding that right now a laneway house adds about $300,000 to the value of a property.
For homeowners looking for rental income, a laneway home would also be a good investment.
The mortgage on $250,000 would cost about $1,200 a month, Lyons said, but laneway homes can rent out for as much as $2,000 a month on the west side, or $1,700 a month on the east side.
“Basement suites are renting out for $1,600 or $1,700 a month for a two bedroom on the west side of Vancouver,” he said. “It’s not surprising that a detached house — where you don’t have to live below someone with their kids running around or playing piano above your head — would rent for more.
“You’ve got lots of light, you’ve got two floors and you’ve got two bathrooms. Of course it’s going to be valuable.”
- from ‘Laneway eases path to ownership’, Vancouver Sun, 7 May 2012 [hat-tip Yalie at vci]
All part of the ‘This Is Vancouver; Accept Less For More’ ethos.
We dare anybody to attempt to justify the $270K cost for that structure, sans land costs.
Entire actual houses cost that or less all over the continent.
We’ve collectively gone completely insane.
Group hysteria. Emperor. Clothes.
And it goes without saying that the vast majority of these 500sqft structures will be built with ‘equity’ ‘extracted’ from the fantasy value of the main house, via HELOC.
“Adds about $300,000 to the value of a property”?
Let’s talk once “the dust has settled”.
“I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”
“Some of you might remember my photo essay from a few weeks ago, re: the non-stop construction insanity in my South Surrey neighbourhood. Well, one of those 200-plus new homes just came on the market. 3000 sq ft and a decent sized yard (one of the few new homes around here that does). But I tells ya, it sure *seemed* like it was slapped together in a month. If it’s like everything else they’re puking up down here, it’ll be looking pretty rough within a year. And don’t get me started on the landscaping. Does “dirt” count as landscaping?
Anywho, the place is just seven or eight doors down from our $1600 rental on Zero Ave. In other words, we both face the US. Thing is, we face a forest. They face low-rent apartments (including the obligatory crappy looking exteriors, broken cars, etc, etc) in a lousy neighbourhood of Blaine. A neighbourhood that won’t be upgraded in any of our lifetimes. They’re also close enough to the Pacific Highway border crossing that they’ll awake to the sound of long-haul semis shuffling around night after night after night.
I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”
For backstory, be sure to read:
‘Gord Goble – South Surrey Building Blitzkrieg; Thoughts and Images’
We share Gord’s fascination with the market.
“It was a big gamble at the time but I had more guts than brains. Sometimes being too smart is not going to get you there. If you study things too much you’re going to miss out. If you know too much about a deal chances are you aren’t going to buy it.”
Joe Segal’s first foray into real estate came when he had a surplus $100,000 from his retail business that he used to buy a building.
And from there he’s developed a multimillion-dollar real estate portfolio. One property he bought for $600,000 is now worth $150 million, he said.
Segal looks at each project and measures the risk/reward ratio.
“If I can digest the risk I’ll take a shot and I’m entitled to the reward,” he said.
But you have to be able to make a decision, he said.
“If you can make a decision and make it quickly you’re at an advantage,” Segal said. “If you dilly-dally and your banker won’t listen to you, you’re at a disadvantage.”
Natale Bosa, the president of Bosa Development Corporation, the company behind projects like Citygate near the Telus World of Science and Newport Village in Port Moody — jumped at the chance to get involved in Citygate, buying one of the parcels in 1988.
He then bought a second piece before being offered the rest of the development.
“It was a big gamble at the time but at the time I had more guts than brains,” Bosa said.
And he was able to find a banker who would lend him the money on short notice.
“You’ve got to have a nose for it,” the 68-year-old Bosa said. “You’ve got to really believe in what you’re doing. You’ve got to feel it’s going to work. And fortunately it’s worked for me.”
And a little ignorance can be a good thing.
“Sometimes being too smart is not going to get you there,” he said.
“If you study things too much you’re going to miss out. Because if you know too much about a deal chances are you aren’t going to buy it.”
- excerpt from ‘Vancouver’s real estate moguls share trade secrets’, Vancouver Sun, 12 Apr 2012
All credit to people who know to make hay while the sun shines.
These guys were fortunate with their timing, and one of them basically admits to getting lucky with at least one ‘big gamble’.
Translating this into advice on how to behave in the current Vancouver RE market would be ridiculous. It’d be a bit like taking investment tips from somebody who’s just hit their colour five times in a row on a roulette wheel.
But we know that won’t stop some people from taking this as advice all the same; the “Be bold or move to Podunk” crowd. For many it’s attractive to know that you can make a killing in Vancouver RE by not studying things too carefully.
“When I look at the actions of governments, I cannot figure out whether they are mostly stupid or mostly dishonest.”
“For most of us, housing is our biggest expense. One out of every five dollars we earn goes to build, buy, rent and run our homes. Facing high home prices, large personal debts, and an uncertain economy, fewer Canadians can buy a new home today than in the past, and they are choosing to rent instead.
Unfortunately, in many cities finding an affordable place to rent is nearly impossible. The most immediate problem is supply. Vacancy rates under 3 per cent push rents up. In Vancouver and the Greater Toronto Area, it’s 1.4 per cent.
Vacancy rates this low force our young people to move out of the city, threaten seniors on fixed incomes, and have a negative impact on local businesses.
That’s why this spring’s federal budget must put Canada’s rental housing market on solid ground, by pursuing low-cost, high-leverage policies that get jobs on the ground and build housing Canadians can afford.
Building and renovating rental housing will give cash-strapped Canadians more affordable housing options at a time when they’re being increasingly priced out. It will also create thousands of construction jobs to replace the 50,000 lost to slower new housing starts.
We’re calling on the federal government to use its spring budget to introduce cost-effective market incentives to encourage private-sector investment in rental housing.
• Low-interest loans underwritten by the Canada Mortgage and Housing Corporation (CMHC) to finance new rental construction.
• Tax reform to encourage owners to renovate and retain rental properties, providing an incentive to preserve affordable rental housing.
• Help for landlords to make rental housing more energy efficient, reducing costs and easing pressure on rents.”
- Gregor Robertson, Mayor of Vancouver, in an article co-authored with Joe Fontana (Mayor of London, Ontario) in the Toronto Star, 7 Mar 2012
This from the discussion at vancouvercondo.info 12 Mar 2012:
“Why build apartments when developers can make quick and obscene profits on shabbily built condos and walk away even before the expiration of their faux warranties?
The only thing that will truly encourage construction of rental stock is a return to sanity in housing prices.”
- chilled, 12 Mar 2012 10:30am
“…“they” will start building affordable, quality rentals when people stop buying high-priced, crappy condos.
The construction industry is simply doing what makes them the most money. If you want someone to blame, blame the buyers and the governments which enable them.”
- patriotz, 12 Mar 2012 5:02pm
“Right, like the current government that decided to give ten grand to people buying a first home, which is to say, they decided to give ten grand to any developer who sells to a first time buyer, which is to say that they arranged for it so that rentals would have to bring in ten grand more to be competitive with sales. As often happens when I look at the actions of governments, I cannot figure out whether they are mostly stupid or mostly dishonest.”
- N, 12 Mar 2012 5:45pm
By the way: A plan for “tax reform to encourage owners to renovate and retain rental properties” means that tax-payers will be subsidizing landlords; this will apply even more government-backed upward-pressure on housing prices in Vancouver.
Governments can really make a hash of markets. Case in point: the CMHC itself was created with the idea of making housing affordable; by mis-pricing the risk of lending, they have supported a speculative mania in housing and made housing less affordable.
Frequent readers know our position very well:
No government can design a solution for Vancouver’s dilemma; we are trapped in a monstrous speculative mania, there is no way through but price collapse.
Government policies may precipitate the collapse, or they may give cocaine to the dying racehorse and let it limp along for a while longer (drawing in even more buyers for the slaughter), but, whatever a government does will not put off the inevitable outcome of a bubble.
‘Frontier Centre’ Opinion – “High home prices can only be solved from the supply side. Open portions of the Agricultural Land Reserve, but only to high density development.”
“Vancouver is in desperate need of new solutions to ease its worsening housing affordability crisis. The 8th annual Demographia housing affordability survey released by the Frontier Centre found that Vancouver has the second least affordable housing market next to Hong Kong. On average, and assuming zero interest, a house in Vancouver would cost the median family more than ten years income. Three years is the threshold after which a market is considered unaffordable.
Mayor Robertson recently announced the launch of a new task force to tackle the housing affordability crisis. The only way to tackle this problem is to focus on getting more housing units on to the market.
Much of the debate around housing affordability descends into discussions about manipulating housing prices by freezing out market mechanisms.”
“In order to balance the concerns of housing affordability and urban sprawl, the city of Vancouver should strike a compromise: open portions of the ALR, but only to high density development. This may not be the optimum solution for families that would prefer to purchase single dwelling homes, but a significant influx of new units would be a countervailing force against runaway home prices. This would also put downwards pressure on housing in the rest of Greater Vancouver. Though opening up broad swaths of the ALR may be the ideal, this seems like a reasonable compromise.
This type of solution would rile people on both sides of the political spectrum, but it would be a dramatic improvement over the status quo. High home prices can only be solved from the supply side. The choice between maintaining the ALR as constituted or opening up portions should be obvious. Infill development can only go so far towards solving Vancouver’s housing crisis.”
- from ‘Time for Real Solutions to Vancouver’s Housing Affordability Crisis’, by Steve Lafleur, New Geography, 9 Mar 2012. Lafleur is a Policy Analyst with the Frontier Centre for Public Policy.
Assuming that “high home prices can only be solved from the supply side” leads most looking for a solution to consider ways of building new supply, and Lefleur offers a version of such a plan. But we note that, like almost every other commentator wrestling with Vancouver housing affordability, he leaves out the most obvious and necessary next step – an implosion of the bubble.
When the mania ends and prices begin their long descent, supply will come from what we’ve referred to as ‘speculative holders’ – not just the obvious flippers and developers, but all Vancouver owners who have been holding property because prices are rising. Most don’t even see themselves as speculators, but they are just that. And, when prices start their relentless decline, their reason for holding will evaporate and they will come to market. There will be lots and lots of supply, without any need to actually create more product. Seems counter-intuitive, but, there it is.
Vancouver will still have sore need for a sensible housing policy thereafter, but the milieu in which it will have to be made will be very different from that which faces us today.
“My parents toured a show home in a recently constructed, $1 million+ development, and my dad, a former contractor, was shocked at the shoddy construction and low-quality building materials.”
“My parents live in South Surrey and my dad is a former contractor. They toured a show home in a recently constructed, $1 million+ development, and my dad was shocked at the shoddy construction and low-quality building materials.
My spouse and I have been looking at condo rentals in Vancouver and we would not even rent, let alone buy, most of the newer ones. I can’t tell you the number of doors askew, floorboards creaking on uneven floors, and paper thin walls we have encountered.
Not to mention the ridiculous floor plans–why do people need 2.5 bathrooms when there no space for a kitchen table? The condos seem to be designed for roommates or childless couples, not families.”
- Sheesh at VREAA 2 Mar 2012 9:52am and 12:28pm
“We bought a house with some family help and moved out, but decided to keep the condo because we couldn’t sell it while it was tarped up.”
“My wife and I bought a two bedroom condo (Vancouver suburbs) when we had our first child. Had a second child, things were fine. Had a third child, and things went off the rails. The third ended up having a laundry/pantry room as a nursery with a portable crib. At the same time the condo (our building, but not our unit) sprung a massive multi-million dollar leak.
We bought a house with some family help and moved out, but decided to keep the condo because we couldn’t sell it while it was tarped up. We rented it out (for less than the mortgage payment) to a family that burned every countertop, the carpet and the vinyl balcony deck with a hot pot. They moved out and another family moved in – with a cat, and with a kid that drew on walls. All while we were paying out an ever growing series of special assessments for the building repairs.
We finally decided to cut our losses and sold the condo for half of what we paid for it. Net net we LOST an amount equivalent to the original purchase price.
Moral of the story: Don’t buy a home that doesn’t match your stage of life and that you don’t plan to be in for a good 10-15 years. And don’t buy a leaky condo.”
- Leaky Condo Hell at VREAA, 29 Feb 2012 at 7:59am
The chart above from Bloomberg shows Canada’s housing investment as a percentage of gross domestic product, and the declines in inflation-adjusted house prices that follow when this ratio tops 7 percent.
“Canada may be on the cusp of a “severe” housing correction as real estate investment surges above a tipping point relative to economic output, according to George Athanassakos, professor of finance at the Richard Ivey School of Business. “Eventually, everything boils down to demand and supply,” Athanassakos said in a telephone interview from Western University in London, Ontario. “Whenever this ratio goes over 7 percent, it signifies overinvestment in housing and two or three years later, we have a severe correction.”
Canada’s housing market is booming as historically-low interest rates fuel purchases, driving up home prices and adding to record household debt. Canada’s ratio of housing investment to GDP has averaged 5.8 percent over the last 50 years and is currently at about 7 percent, based on Statistics Canada figures as of the third quarter of 2011, Athanassakos said. Housing investment includes spending on new homes, renovations and real estate transaction fees.
U.S. housing prices plunged by a third between the peak in July 2006 and November 2011, according to the S&P/Case-Shiller Composite-20 Home Price Index. By comparison, Canadian housing prices rose 30 percent in the same period, according to the Canadian Real Estate Association.
“We have experienced bubbles and busts before in Canada, it’s nothing new,” Athanassakos said. “I don’t know why this time would be different.”
- from Canada Housing Poised for ‘Severe’ Drop, Doug Alexander and Ilan Kolet, Bloomberg, 17 Feb 2012 [hat-tip 'Told-you-so-in-2007']
We’re joking a bit about the “#47″ thing — but there do seem to be an awful lot of articles in the US and international press about a Canadian housing bubble.
We haven’t been headlining all of these articles, but this one is noteworthy because of its focus on the ‘third’ fundamental, namely ‘price’ to GDP. (The other two fundamentals, of course, are price:rent and price:income). By all of these measures Vancouver RE is overvalued, likely by a factor of 2 to 3.
“I have repeatedly sent MLS listings of $1m+ houses to people in the UK who reply with comments like “looks like a nice house, if you’re a serial killer.” (Example, MLS#V898254 1723 Napier Street, $1.21M.)”
- Aldus Huxtable at VREAA 3 Feb 2012 4:00pm
And, an obliquely related comment regarding contemporary build quality:
“I don’t get it. How can a house made from woodchips and glue cost [so much] to build? In Europe, a house like this would only be used as a movie prop to blow up.
Could someone explain this to me: Why do Canadians insist on using the shittiest building materials even on high end properties? Can’t a multimillion house be built using a real building material, like reinforced concrete?”
- bubbly at VREAA 3 Feb 2012 at 11:26am