|
| Real Estate Panel. See photo gallery below. All photos: G.Hoekstra |
By Terry Hadley
Title sponsor: TD Bank Group
Presenting sponsor: McCarthy Tetrault
Supporting sponsors: Real Estate Board of Greater Vancouver; Vancouver Regional Construction Association
Vancouver is not experiencing a real estate bubble that is about to burst, a panel of industry experts assured The Vancouver Board of Trade, while moderator David Podmore, chairman and CEO, Concert Properties Ltd., said he was “very optimistic today on where we are headed.”
Podmore, who kicked off the lunch panel event, said that although the number of people employed in the Lower Mainland’s construction industry had dropped from 130,000 in 2008 to 100,000 in 2009, numbers have again increased to 136,000 in 2011.
“We’re seeing strong activity in the construction sector and, of course, that’s a mirror of what’s going on in the local real estate industry,” he said, adding the industry is being supported by strong immigration and because Canada is still relatively cacooned from the rest of the economically turbulent world.
Richard Wozny, principal, Site Economics Ltd.
Richard Wozny, the first speaker on the panel, outlined how a region’s infrastructure adds value to the property market, especially to future development sites as opposed to existing property. He gave the example of adding transit to Landsdowne which has been successfully capitalized by Richmond and Burnaby, resulting in a 60 per cent hike in that area’s property prices. The problem, he said, arises when new growth is unable to pay its share of new infrastructure. Income tax as a source of revenue is declining for government, which will at some stage start looking to maximizing revenues from real estate.
In the meantime, Wozny said Vancouver’s high value real estate is warranted because it scores highly in all three areas of infrastructure: hard infrastructure (roads, sewers); soft infrastructure (hospitals, schools) and environmental infrastructure (clean water and a pleasant place to live). He was confident we are not in a real estate bubble, with a large source of high-end buyers coming from China, providing the continuation of low interest rates.
Ward McAllister, president and CEO, Ledingham McAllister Properties Ltd.
Ward McAllister also dismissed the notion of a real estate bubble, defining it as a state of the market when supply outstrips demand causing rapid price deflation and “the bubble” to burst. He said there are simply too many people coming to Vancouver from other provinces and from all over the world for that to be the case. He said in terms of supply, the building of 16,300 units in the Vancouver region predicted for 2011 is still well under the ten-year average of 30,000 start-ups. This is expected to increase to 17,500 next year, but demand will be driven by a net migration of 52,000 people into the province this year alone (42,000-45,000 in Vancouver), rising to 61,000 (46,000 in Vancouver) in 2012. This influx of people will require 17,500 to 21,000 new units a year.
“So simply looking at immigration numbers, we are going to be undersupplied for the next two to three years,” he concluded.
While higher prices and interest rates could slow the market down, McAllister was confident interest rates will remain unchanged because there is too much unrest in the world’s economy. He said this year, prices have risen 19 per cent over last year and the Canada Mortgage and Housing Corporation (CMHC) predicts a four per cent increase next year when the market will normalize.
“So no bubble conditions in this market and I don’t see it in the foreseeable future,” he concluded.
Eugen Klein, president-elect, Real Estate Board of Greater Vancouver
Vancouver property has recovered and exceeded the losses suffered over the last three years but with growing uncertainty over the world’s economy, the Greater Vancouver housing market this month officially moved from a balanced market to a buyer’s market, Klein announced. “Said in another way, supply is outpacing demand,” he said.
However, the next best thing for real estate to having a strong economy is being next to a strong economy, and the Asian economy has fulfilled that role, according to Klein. Since the beginning of 2011, there has been a noticeable influx of wealthy buyers, particularly from Mainland China. They have purchased high-end homes in Richmond (detached homes rising in price by $200,000 over 12 months), West Vancouver (up by $275,000) and the west side (up by $400,000). A total of 953 properties sold on the online Multiple Listings Service (MLS) for more than $2.5 million between January and September 2011 – almost as many as the three previous years combined.
Although overall, demand has dipped and supply increased over the past year, there has not been much movement in home prices and most economists predict flat or moderate growth in 2012, Klein said. Commercial permits are up eight per cent year-to-date, and there is heightened interest from U.S. retail brands wanting to establish a greater presence in Canada where consumers are currently spending more dollars per retail square foot than in U.S. retail properties. Retail construction is alive and well, with five million square feet of new retail space planned over the next three years in Abbotsford, Port Coquitlam, Richmond and South Delta. There are also four office towers totalling 1.5 million square feet to be completed by 2015 in the downtown core – essential for sustainable living.
“In putting the commercial and real estate sectors in perspective, the Lower Mainland remains a very desirable place to live and work; more and more, we’re being compared to other world-class communities and our real estate metrics and economics will continue to reflect that,” Klein concluded.
Title Sponsor:
TD Bank Group
Presenting Sponsor:
McCarthy Tetrault
Supporting Sponsors:
Real Estate Board of Greater Vancouver
Vancouver Regional Construction Association
Media Partners:
The Vancouver Sun
The Province