[Architype]

Here's an article from the Globe, I'm not sure if it's been posted anywhere else.


URBAN DEVELOPMENT

Vancouver construction boom levelled by skittish lenders, high costs


FRANCES BULA
Special to the Globe and Mail
October 9, 2008

Vancouver developers say the housing-boom party is over in this region, as condo pre-sales have dropped to a sluggish trickle, lenders have become increasingly skittish about financing projects and high construction costs continue to wreak havoc.

Architects, developers, consultants and industry representatives all say there's been a massive slowdown, as many projects are facing the same kinds of pressures that the company building the Olympic athletes village is grappling with.

Others may not have the magnitude of problems facing Millennium Developments, which is having to go to its lender for a contingency reserve to cover $65-million in cost overruns on the $1-billion project. That's after having put in $25-million of its own money for overruns already as it scrambles to finish the largest residential-construction project in the province by this time next year. That refinancing made headlines this week because the City of Vancouver is part of those negotiations.

But, more quietly, others in the industry are seeing projects go over budget because of construction costs, seeing pressure from lenders to put up more of their own equity and seeing some developments simply get put on the back burner by developers or lenders unwilling to plunge into the current turbulent market.

Rest of article here:
http://www.theglobeandmail.com/servlet/story/LAC.20081009.BCDEVELOPMENT09/TPStory/National

[Yume-sama]

I don't think we'll see as many new buildings, that is for sure. I don't think our bubble will pop, though. We just seem to have caught that Cold going around. That's what happens when you sit next to that annoying guy who keeps sneezing (USA).

[Metro-One]

:previous: good analogy ;)

[muzhav84]

is this from the BC version of the Globe, or national?

I've noticed the Globe tends to be really hard on BC and Alberta, while propping up Ontario. Ontario's condo market is in major trouble, 100 times worse than BC's. They are overbuilding still, and there will be essentially entrire buildings put back on the market by investors who can no longer make mortgage payments... if you think the investor buying in Vancouver is/was bad, Toronto was insane! plus, their domestic demand is slower than here, and they have much more exposure to the financial meltdown than we do

[vanman]

The globe get's giddy whenever there is negative news from the west.

[deagleman]

The boom times are definitely gone in my opinion.

I live and work downtown and have seem my condo value depreciate substantially. Even friends who put up their homes for sale in the suburbs have told me of lowering asking price by over 100k! The commodities sector has been hit very hard and I've heard of many companies going into hibernation and laying off anywhere from 10 to 100% of their staff.

Real estate, IT, IR, retail, you name it, have also been getting very sluggish lately as well.

Many people here are also heavily in debt using their home equity as an ATM. I always wondered how these people spent hundreds of dollars a night partying and driving expensive cars on a Vancouver salary...
Contraction and debt does not go well in my opinion.

With the global slowdown all but certain, I think things will get much much worse before it gets better.

At least I have the Olympics to look forward to.

[Yume-sama]

I really do not see evidence of prices downtown decreasing, they are no longer going up so fast, but they have not gone down. I suppose there are a little bit more on the market than there was which leaves some bargaining room. My building is going strong, and another one I have been watching has been going up consistently.

[Coldrsx]

capital will be very difficult to obtain in coming months so dont expect much action regardless...

[Chikinlittle]

I really do not see evidence of prices downtown decreasing, they are no longer going up so fast, but they have not gone down. I suppose there are a little bit more on the market than there was which leaves some bargaining room. My building is going strong, and another one I have been watching has been going up consistently.

To the contrary, ask a Realtor how many price reductions are seen on active downtown listings each and every day - normally 15+. Prices are coming down, even downtown. I think, however, that downtown properties likely will not see as much decline in pricing (on a % basis) as a lot of outlying areas will, but we will see.

And furthermore, I would think that a lot hinges on the current financial and credit situation. If we end up being affected by that locally to a large degree, all bets are off on where our real estate market is heading. Historically, any market corrections in the LOCAL real estate market have lasted for 12-18 months (we're roughly 5 months in now), and have seen prices drop from 15-30% normally. Having said that, none of the previous market corrections over the last 30 years had seen a runup in prices and activity like we have seen in this cycle, so that could affect how long and how far we drop this time - the credit/financial mess only makes that situation even scarier.

In any case, I would 'normally' predict that we will have a relatively soft landing by the end of 2009 with slow increases in pricing forward from there, but only time will tell.

[Yume-sama]

I suppose it depends on what price range you are looking for downtown. Personally I have been looking at things in the $750,000 to $2 million mark and they have remained rather steady for the past few months. It is true that things haven't been selling as fast, so I guess time will tell. I personally think Vancouver will be fine, because we honestly really are not THAT effected by it. We have no reason to be, other than some investor paranoia. We aren't in a position like Alberta, that has seen oil prices halved in the past month or so, their whole budgets are out of whack and everybody is going crazy. We just need some investor confidence to return, and I think it will.

If anything, the Canadian dollar plummeting could spur some more foreign investment. It's almost 30% cheaper for Americans to buy here than it was just a few months ago when we were up 10 cents on them :P

[twoNeurons]

Prices always come down slower than they go up. People hold on to places at prices for longer.

There may be a lot of places "listed" at a certain price, but how many are actually closing.

[baggab]

The higher the price the less liquidity, thus less updated prices.

[geoff's two cents]

Things will not be racing along at breakneck speed the way they were but, in my opinion, the province and city have timed their infrastructure upgrades very well. A new subway line and bridge (Golden Ears) can only help the region weather the storm better. I would expect another major building boom - particularly along the Canada Line corridor and in the major regional town centres - as soon as things pick up again.

[b5baxter]

"Free" markets always operate in cycles. There are always downturns.

For every bubble there are always people who say "this time it is different."

And every time they are wrong.

The only questions now are - How far down will real estate go (10, 20 or 30%)? And for how long?

[baggab]

Things will not be racing along at breakneck speed the way they were but, in my opinion, the province and city have timed their infrastructure upgrades very well. A new subway line and bridge (Golden Ears) can only help the region weather the storm better. I would expect another major building boom - particularly along the Canada Line corridor and in the major regional town centres - as soon as things pick up again.

Wouldn't that be a negative?

As projects complete less jobs are available. Thus less people that would work or live here.

2008 is pretty much when all the projects are completed. With 2009 winter for these facilities to be tested.

Banking on the corridor developing is only a small positive compared to the amount of listings that has jumped in the last 6 months. For the last 5 years we had active listings around 10 000 - 11 000. Look at what they are now.

January 2008 listings were at 10 000ish. Now they're at 20500 - 21000 in 9 months a double in supply.

The demographics, aging population doesn't help as boomer's, largest portion of the population in their 50s with the most income head into their golden years.

It also doesn't help that it takes 70% of income to buy a place around here.

[SpongeG]

i think most people arer waiting to buy - you hear people say it alot around here - they are going to hold out until after the olympics - there is a belief that prices will start dropping in 2010-2011 - even moreso than they are dropping now

[sacrifice333]

January 2008 listings were at 10 000ish. Now they're at 20500 - 21000 in 9 months a double in supply.

The demographics, aging population doesn't help as boomer's, largest portion of the population in their 50s with the most income head into their golden years.

It also doesn't help that it takes 70% of income to buy a place around here.

I don't claim to know anything about how much things may drop by or when, but I personally feel that as time goes on and commodity prices rise again, populations continue to increase, congestion gets worse, population ages, inflation rises, families decrease in size.... that we will see prices of smaller homes (condos, townhouses, attached dwellings) maintain or increase in value (potential after some sort of 'correction') and that suburban single-family homes values will stagnate / decrease in value.

The value proposition of the single family suburban North American home dream is continually diminishing.

[jhausner]

i think most people arer waiting to buy - you hear people say it alot around here - they are going to hold out until after the olympics - there is a belief that prices will start dropping in 2010-2011 - even moreso than they are dropping now

Has that happened in other Olympics cities? I was under the impression that in most Olympics host cities, prices go up after the Olympics as there is typically more International demand. That would be reflected here in Vancouver I think as we'll see an influx of foreign investers and purchasers.

All speculation of course but I'd be interested to see if Olympic cities see a drop after or an increase or if it even has any noticable effect.

[twoNeurons]

Has that happened in other Olympics cities? I was under the impression that in most Olympics host cities, prices go up after the Olympics as there is typically more International demand. That would be reflected here in Vancouver I think as we'll see an influx of foreign investers and purchasers.

All speculation of course but I'd be interested to see if Olympic cities see a drop after or an increase or if it even has any noticable effect.

From what I've read, the opposite happens. Hype around the Olympics bring the hope of higher prices from locals, however, when that doesn't materialize, generally the prices drop.

Anyone here wanna move to Salt Lake City?

What the Olympics CAN do is give a city the impetus to increase the quality of life by building infrastructure. However, Vancouver didn't have a major problem with infrastructure that is being solved by the Olympics and this Quality of Life Tax is already baked in.

In addition, in these tenuous times, people aren't looking to move to another city or country where people pay an even higher percentage of their income towards housing. They're looking to conserve their losses.

I'm no expert, though.

[Coldrsx]

did you just compare van to SLC?

[Coldrsx]

Calgary very much took off after the 88' olympics and even more so from the recognition of Canmore, Banff, and Lake Louise. The advertising and tourism was invaluable.

I believe the same will occur for van...

[SpongeG]

i heard about some couple in yaletown bought their condo a few years ago for $380,000 and they were caught up in the "omg i must buy now" mentality that was going around for a while here and they bought a crappy unit as they thought it was a great investment - overlooking the alley and just didn't adhere to the real estate ideal of location location location - anyway the way the market is now they cannot the sell unit that they thought was a great investment at the time and have had to price it below what they paid for it - i think something like $365,000

the buyers just aren't as in much of a hurry now and not jumping intop crappy units like they did a couple years ago

i know there is a condo just off davie - its on the second floor - its view is the alleyway and the druggies etc who hang out at that corner - you all know it - behind the produce store near the macs... and liquor store/blenz...

anyway they are asking $550,000!!! for it - its a horrible location - who wants to have bums hanging outside their windows all night, smelling the dirty alleyway - trust me it stinks in the summer

anyway - if anything crappy units are not moving like they used to

[cornholio]

The boom was over for atleast 6 months, where prices will go is anyones guess but one thing im sure of is that they will go much lower. Someone mentioned location location as being important, that is so true because what you will see is the suburbs and units/houses in bad locations take the bigest hit. Anyways for someone in say Surrey center buying a condo for 300,000 within the last 6 months I could see the value going down to below 200,000 within less than a year...though if you have a job and live in it then you can just stick it out...but if you are a investor who wants to(needs to) sell it and have overstretched your self so cant just sit on it then you in deep shit(and deserve it because it was pretty clear that this was going to happen).

[ssiguy]

Vancouver is still, even with recent declines, by far and away the most expensive city in the country.
According to recent Oct1 2008 stats in Vancouver for every house you buy you could buy 2 similar homes in Toronto and 3 in Montreal.
Even if prices dropped by 50% they would still be higher than anything east of Alberta.

[SpongeG]

i can't imagine prices will drop that much like $500,000 condos going back to 1994 levels - probably won't happen

as long as I live here it will never be affordable unless i marry rich ;)