Monthly Archives: April 2011

Issue 10 – April 2011

GREATER (METRO) VANCOUVER

APR 2011 QTLY UPPER-TIER REAL ESTATE UPDATE

IT SEEMS WE ARE IN A BULLISH MARKET

Once again we are seeing a real estate market where the upper tier is reflecting significant price increases. Considering the 2011, 1st quarter figures (below).

Many geographic segments within Greater Vancouver believe that they are witnessing a good time to sell. 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 back off from making the decision to buy. Our belief is that the demand will not drop with any significance in the short term. Again, this belief is based on two factors. Firstly, the fact that a proportion of property seekers have pre-approved mortgages at rates below those seen now 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 the continuing existence of the HST. New construction in the upper end will continue to be impacted. HST on a $1mm unit is $43,750 higher [$70,000 – 26,250]; a $2mm unit $113,250 higher [$140,000 – 26,250]. Remember that the property developer (builder) can claim, 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. Who knows whether this will be voted down in the referendum? The “knee jerk” punishment of politicos may, sadly, overshadow any argument regarding intelligent tax reform.

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.

Yes, we are seeing some build up of inventory. This is a statistical fact despite a significant year over year rise in the number of units sold so far this year vs. those sold in the same period last year. Talk of an impending “buyers’ market” in various geographical locations is prevalent and, yes, the “bubble” word is being used in national and some regional press discussion. Remember that real estate “performance” is regionally determined and all markets do not move in lock step. Just as we must resist aggregation on a city wide basis, it is more important to avoid doing so on a province wide and country wide basis if we are to come to grips with “what is happening here ?” and “how do we personally deal with it?” Dealing with it depends on the potential buyer or seller wanting or needing to deal with it now. By this we mean buying or selling a home. We stress the word home as the greater proportion of participants are those owning or contemplating acquisition. We must not, however, believe “growth cycle” to be synonymous with rocketing prices. “Growth” in number of transactions is a product of confidence from the demand side of the equation and may be coupled with realism in expectations by those wishing to sell their current homes. It seems that we have been trained to think of cycles only in terms of average price. A healthier approach would be to think in terms of activity and not price. Alas we are constrained by the inevitable questions – “are we paying more than we should?”  – and “are we receiving less than we could get?” How do we break free of this mind set or is it simply an inevitability in our monetarily controlled lives?

Now the first quarter 2011 figures extracted from the REBGV database upon which we have based these comments.

Detached homes sold [$2MM and above] 2011 – 518 listings sold vs. 2010 – 190 sold (an increase of 172%). Highest sale $16.8MM (’11) vs. $10.06MM (’10). This property – Belmont Ave, Pt.Grey sold in Mar ’11 after 32 days on the market, originally listed at $19.8MM. 6 bed/8 bth it is a 9,785 sq ft structure on a serene, park-like lot – A splendid, Point Grey view mansion with a 741 sq ft courtyard. Truly a home of provenance.

Attached homes, those best described as townhomes and duplexes [$1MM and above] 2011 – 103 units sold vs. 2010 – 64 sold (an increase of 61%). Highest sale $7.138MM (’11) vs. $3.89MM (’10). This property at 3838 Cypress St which sold in Jan ’11 after 24 days on the market was listed at $7.588MM. A spectacular and unique 5bd/7bth Shaughnessy townhome on the Heritage “A” list, formerly the estate of Eric Hamber, B.C. Lt. Governor, with 7530 sq ft of living space. An amazing Home of Provenance.

Apartments [$1MM and above] 2011 – 158 units vs. 2010 – 112 sold (an increase of 41%). Highest sale was $7.1MM (’11) vs. $5.35MM (’10). This Yaletown property [1000 Beach Ave] is a 4 bed/6 bth, 6841 sq ft., 2 level penthouse with private elevator, 4 car garage and an unbelievable 360 degree outlook.

It will be interesting to see how things unfold in this segment of the market in the second quarter 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