What's Happening in BC
Prime real estate conquers
fears of a credit crunch
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There may be a credit crunch grinding through global real estate markets, but Vancouver's prime property deals appear largely immune, local experts say.
For the few top assets that do come up for sale, lineups of prospective buyers create resistance against any downward pressure that lenders could have on prices.
"It's the lesser properties being affected," said Eric Poon, a realtor with Vancouver-based Macdonald Commercial.
"You're not going to find any issues with anything in downtown Vancouver."
Poon, who specializes in retail commercial buildings and development sites in the $1 million to $20 million range, just sold a retail and office building in Yaletown that generated no shortage of interest from prospective buyers.
"We had multiple offers on it, and there was competition among the [bidders]."
Poon only has one other property on the market - a high-quality development site in the Broadway corridor. He said he would not be surprised to witness multiple bidders like he did when selling the Yaletown property.
"There are a lot of people with a lot of money right now that needs to be placed," said Poon. "There's more money than property."
Avtar Bains, executive vice-president of Colliers International Vancouver, noted that best-of-breed assets - those with a prime location and quality leasing space, and that are viewed as ideal long-term investments - are in some cases positioned to fetch a higher value today than a year ago.
"In the province, the deals are still getting done, more so than other jurisdictions in Canada," said Bains, adding that what's changed is the types of investors that are able to chase after quality real estate
"The debt markets have changed," he said. "They're taking people out of the marketplace, because [some buyers] rely on leverage or debt," he said.
Indeed, the credit meltdown has shaken the confidence of many lenders.
Loan-to-value ratios in Vancouver have decreased from between 70 per cent and 75 per cent a year ago, to between 60 per cent and 65 per cent today, requiring buyers to put up more cash at the time of purchase.
"The buyer profile is different now because not everybody can borrow under the same parameters that they used to be able to borrow under," said Brade Wise, executive vice-president of Churchill International Properties.
This has created opportunity, said Wise, for those with access to large pools of cash such as established real estate companies, well-financed private buyers and such institutional investors as pension funds and real estate investment trusts.
20 foreclosures
a week reported
New Westminster real estate educator and investor Kap Hiroti, who tracks B.C. foreclosures using B.C. Supreme Court filings, says the volume of foreclosure proceedings initiated in the province has risen from 10 a week in 2006 to 20 a week today.
The surge needs to be put in context, however. While Statistics Canada and many other agencies don't track foreclosure numbers, the Canadian Bankers Association regularly reports the number of mortgages in arrears.
While not all properties with mortgages in arrears enter foreclosure (Hiroti says it can take as many as three missed payments for a foreclosure proceeding to begin), the trend in arrears is telling.
Stats gathered from the country's major financial institutions indicate that mortgages in arrears have increased over last year but remain well below the levels seen between 1998 and 2002.
More than 0.5 per cent of all mortgages in B.C. were in arrears a decade ago. Today, just 0.15 per cent of mortgages are in arrears - a proportion that has been relatively stable in recent years.
Andrew Bury, a partner in the Vancouver office of the Gowlings law firm, says it's busier than it was a year ago. Still, it's nowhere near as busy as in the late 1990s.
"It's not like people are filling up courtrooms with foreclosures," he said.
Land costs send
buyers east
B.C. builders of all stripes are seeking opportunities in other, less expensive, western provinces.
Dairy farmer Martin Hamming pulled up stakes and left Delta to set up in Manitoba last fall because the cost of land in B.C. undercut the business case for his operation.
Meadow Ridge Contracting Ltd. of Chilliwack has been eyeing opportunities in Alberta because the cost of land in this province makes it too expensive for small builders like itself to do business here. Meadow Ridge's Chris den Hertog says that prices here are running $200,000 an acre, while southern Alberta has desirable sites for $70,000 an acre.
Some industrial users are also pursuing opportunities in Alberta, which Vancouver real estate consultant Ron Emerson recently told the Canadian Property Tax Association is a prime location for B.C. companies seeking development land at prices that make sense.
While co-ordinated planning on the part of Metro Vancouver municipalities would help ease the land crunch, Emerson also believes marginal agricultural land should be considered for new dev elopments.
It's a view MJ Whitemarsh, executive director of the Canadian Home Builders' Association of B.C., shares.
"There is land in the ALR that's not arable. You'll never be able to grow anything on it, and it could be removed and provide well-needed land for housing," Whitemarsh said.
The Schacter Team - Walnut Grove Realtors