Monthly Archives: April 2010

Issue 6 – April 2010

GREATER (METRO) VANCOUVER

APR 2010 QTLY UPPER-TIER REAL ESTATE UPDATE

ARE WE BACK TO A STRONG MARKET?

We have on a few occasions commented on the real estate market being considered strong only when the upper tier reflects price strength (or an increase). This would seem to be the case at the moment in Greater Vancouver considering the 2010 1st quarter figures (see below).

We have heard from many geographic segments within Greater Vancouver that this is a good time to sell (well, better than this time last year anyway). If this is true, does this automatically imply that now is therefore a bad time to buy? Only if one believes that market values are turning and will start moving down.  This will only happen if buyers collectively retreat from making the decision to buy. Our belief is that the demand for “re-housing” will not drop with any significance in the short term. This belief is based on a few factors. Firstly, the fact that numerous property seekers have pre-approved mortgages at rates below those seen in the new “rate sheets” of the major lenders. These mortgages have to be drawn down before their terms expire – anything from 30 – 90 days.

Secondly, a one-time phenomenon (until the next one-time phenomenon 😉 ) – that of the July 1st introduction of the HST. New construction in the upper end will be impacted. The rebate rules (for those who would like the text of the November 19, 2009 Ministry of Finance statement please visit http://www2.news.gov.bc.ca/news_releases_2009-2013/2009FIN0017-000647.pdf ) do lessen the “increased 7%”. HST on a $1mm unit would be $43,750 higher [$70,000 – 26,250]; a $2mm unit $113,250 higher [$140,000 – 26,250]. Remember that the property developer (builder) will now be claiming, as an input tax credit, all the 7% (PST portion of the HST) that they have paid in the construction of the property for sale and will thus have a lesser cost of construction equivalent from, say, 40% to 70% of the PST portion (7%) of the tax that they would formerly have passed on to the end purchaser. They now have the flexibility to pass on some or all of this saving in the way of a reduced unit price to the buyer.

Will this double whammy, tax and rate increase, mean the end of civilization as we know it? Again, an opinion – no. The “Chicken Little” reaction is not called for, although, obviously these incremental economic factors have, at least initially, some effect on prices and activity. Affordability does impact demand and will almost certainly put the brakes on the recent round of housing price inflation evident in the general (lower level) real estate market.

The tax impact of this collecting of PST – 7% on hitherto exempt items, is, in the case of “new” real estate really a “wealth tax” (or in economic parlance a form of progressive taxation) impacting those who can afford the higher priced new dwellings harder than those not able to afford these luxury items.

Now the first quarter 2010 figures extracted from the REBGV database upon which we have based these comments.

Detached homes sold [$2MM and above] 2010 – 190 listings sold vs. 2009 – 72 sold (an increase of 164%). Highest sale $10.06MM (’10) vs. $4.7MM (’09). This property – on West 2nd Avenue, sold in Feb ’10 after 535 days on the market, originally listed at $12.88MM. 7 bed/8 bth it is an 11,646 sq ft structure on a 100 x 338 mature park-like lot – An elegant 15 yr old Point Grey mansion. Truly a home of provenance.

Attached homes, those best described as townhomes and duplexes [$1MM and above] 2010 – 64 units sold vs. 2009 – 14 sold (an increase of 357%). Highest sale $3.89MM (’10) vs. $3.18MM (’09). This property on Homer Mews which sold in Mar ’10 after 14 days on the market was listed at $4.25MM. A luxury Arthur Ericksen designed [The Ericksen] view, waterfront home on False Creek. 3bd/3bth  townhome with 2500 sq ft of living space.

Apartments [$1MM and above] 2010 – 112 units vs. 2009 – 36 sold (an increase of 211%). Highest sale was $5.35MM (’10) vs. $5.4MM (’09). This West Cordova property [Two Harbour Green] is a 3 bed/3 bth Coal Harbour 2400 sq ft. unit with an unbelievable outlook.

Wither the direction of this “upper” market, post June? Let’s see how things unfold and if this strength persists.

Again, visit the website to see the new developments.  We continue our commitment to keep you up to date on Vancouver’s … www.HomesOfProvenance.com – the “go to” site for Upper Tier Real Estate analysis and jumping off point for market listing information.

To join the group getting the e-mail version of this “update” – send a request now to info@HomesOfProvenance.com and you’ll be assured receipt; phone us at (604) 626-2526 or visit www.HomesOfProvenance.com