March 11, 2015 – March 18, 2015 #09
Whatever there be of progress in life comes not through adaptation but daring.”- Henry Miller
IN THIS WEEK’S FACTS BY EMAIL:
CALGARY ACTIVE LISTINGS UP 102%!
LAND RUSH UPDATE: LAND PRICES HARBINGER OF WHAT YOU WILL BE PAYING FOR CONDOS AND RETAIL LEASES
FACE IT: THE FOREIGN BULLDOZER BUYER HAS ARRIVED
LATEST IMMIGRANT INVESTOR PROGRAM FELL FLAT, EXTENDED
NOT ONLY FLOWERS BLOOMING IN VICTORIA
PER-DOOR APARTMENT RENTAL PRICES IN CANADA
ARE BUILDERS THE CANARY IN THE COAL MINE?
STRATA DISPUTES KEPT OUT OF COURT
BRAND NEW EDMONTON DUPLEX – SIDE BY SIDE $439000
- Face It: The Foreign Bulldozer Buyer Has Arrived
- Latest Immigrant Investor Program Fell Flat, Extended
- Not Only Flowers Blooming In Victoria
- Per-door Apartment Rental Prices In Canada
- Here Is A Snapshot Of The Landlord Market
- Are Builders The Canary In The Coal Mine?
- Strata Disputes Kept Out Of Court
- The Numbers, The Numbers – Fraser Valley
- The Numbers, The Numbers – Toronto, Calgary And Edmonton
- !!!Landrush CDs Available Now!!!
- Hot Property
Land Rush Update: Land Prices Harbinger Of What You Will Be Paying For Condos And Retail Leases?
Lucky ones who attended the recent Jurock Land Rush conference in Vancouver have already received a solid briefing on the power of land: from small town B.C. to big U.S. cities it is the dirt’s value that undermines the foundation of real estate investing.
But a week after Land Rush, a pair of studies on land sales in Metro Vancouver reveals just how powerful the role of land has become – and
how some wily and patient investors have teed up a way to buy huge swaths of land at a fraction of the price everyone else is paying.
At Land Rush, uber investor Rudy Nielson explained how raw land turned a near-bankrupt real estate agent into the largest
landholder in British Columbia.
Star realtor-investor Kelly Fry of Keller Williams Elite Realty explained how buying a Langley house with land
development potential can parley an all-in $109,830 investment into decades of rental income, a 22% ROI and golden exit strategy.
Of course, all real estate is about the land. Take a look at your house assessment; it is a rare B.C. property where a building is worth
more than the land beneath it.
And, based on that truism, the fall LandShare report from Colliers International gives an idea of why your Metro Vancouver house,
condo price or even commercial lease rates could be even higher soon.
An example is a 0.36-acre parcel of raw land (it was once a service station) at the corner of Cambie and West 41st Avenue in
Vancouver. It sold this year for $15 million to a Richmond condo developer: that works out to around $45 million per acre. The site
is planned for a 12-storey condo/retail building with a record-breaking price of $402 per buildable foot,
Land is now the largest commercial investment sector in Metro Vancouver, worth more in straight dollar volume than all the industrial, office and retail property and multifamily sales combined! In 2014 an
astounding $3 billion was spent in the region on just 642 parcels of land. As a comparison, total sales of all the apartment buildings and all the
industrial buildings together came to $1.4 billion. (There is a message there! Caution!)
This phenomenon is really only happening in Vancouver and driven largely by offshore speculation, In Calgary, as a comparison, land made up just 12% of the dollar volume (compared to 50% in Vancouver) of commercial real estate sales last year and that
was down from a 15% share in 2013. In Toronto, the built environment dominates commercial real estate: office towers, big shopping malls and apartment
Here are some other jaw-dropping examples of recent land sales in Vancouver. All of these are destined for residential development, or residential with a
– A half-acre lot on West King Edward sold for $11.25 million.
– A 0.75-acre parcel on West 63 Avenue sold for $12.6 million
– Less than half-acre sold on Cambie Street at West 27th for nearly $9 million.
– In East Vancouver, a developer paid $8.3 million for less than half-acre (21,127 square feet) on Kingsway Avenue. And some suburban prices are
also seeing double-digit millions per acre.
But one group of savvy investors with a long-horizon have been buying up prime suburban land for a fraction of what developers are paying for old service stations and tear-me-down houses.
An investor syndicate bought Coquitlam’s Westwood Plateau golf course this month for $14.7 million
! The golf course, surrounded by housing, covers 270 acres. The price works out to $54,000 per acre, a fraction of the cost that even
agriculture land is selling for in the Fraser Valley.
The reasoning is this, according to someone who was close to the transaction: golf courses don’t make much money. There is huge demand for homes. Coquitlam will eventually need more land for housing. At some point,
say five years from now, the investors can either get permission to carve some of the golf course off for housing, or work a swap with the city, exchanging
some golf course land for city-owned land elsewhere in the municipality. If just 10% of the Westwood golf course land was released for homes and sold at
current prices, it would double the original investment.
Another example: Mylora golf course on Sidaway Rd, Richmond
that sold for $5.5 million or $147,000 an acre and is not in the agriculture land reserve. This compares with the $42 million that Polygon Group paid this year for
9.5 acre-land development site on Cambie Road in Richmond or the $5.3 million that Morrison Homes Ltd. recently paid for less than two acres on No.4
Road in Richmond.
Major Point: Buy land and hold. It is an old real estate maxim that seemingly makes even more sense to today’s investor. Just remember: Markets turn when the last
developer paid too much for the land. Note: Olympic Village! Other areas of B.C., like Kelowna might also be a play, where ALR land keeps developable land
is scarce and expensive.
As we have preached for 10 years… For the well-heeled investor: Look not only at golf courses, but mobile home parks, go-cart tracks and
waterslide parks: property that has the potential of land redevelopment.
Face It: The Foreign Bulldozer Buyer Has Arrived
IT IS TIME TO LEARN HOW TO DRIVE THE THING
We stand in wonder at the naivete of most pundits, media and politicians trying to get a handle on what is often referred to as the possibility of
rising foreign ownership in B.C., especially Vancouver, real estate
The latest head shaker is from the esteemed David Mulroney, Canada’s ambassador to China from 2009-2012 and a former senior foreign policy
adviser to Prime Minister Stephen Harper. Mr. Mulroney suggests that “an open debate” about the risks and benefits of Chinese money in
Canada’s housing market would be useful. Others count dark windows in Coal Harbour condo towers and read BC Hydro meters, and then timidly
suggest that foreign buyers are, maybe, buying a lot of Vancouver homes. Canada Mortgage and Housing Corp., straight-faced, estimates that
less than 3% of Vancouver condo investors are from out of the country.
Others say that, maybe there should be a tax or other restriction on foreign buyers.
Let’s face it:
A foreign-money fueled bulldozer has already changed the Vancouver real estate market forever and is now doing the same to the rest of the province!
In the past two years alone, a single investment group from Mainland China – flying under a BC numbered account – is thought to have bought $200
million worth of Lower Mainland real estate!
Downtown hotels, golf courses, office buildings, multi-family buildings and, of course, land. Always the land. (Shenzhen, China-based Brilliant Circle Group recently bought 232 acres in Anmore-Port Moody as an example. Other Chinese investment groups
prowling Canada for bigger deals include Evergrand Group out of Guangzhou; and Shanghai-based Greenland Group.
As Australia has learned, it is impossible to put restrictions on foreign buyers when their friends and families have already been living in the
country for decades!
We can’t and we shouldn’t try to stop any foreign buyers in any case
(after all, Canadians are the biggest foreign buyers of U.S. real estate and we would righty bristle if we were restricted from snapping up that
cash-flowing Phoenix or Las Vegas rental condo.). But we can make it work for us. I don’t mean collectively: I mean you and me as investors.
There are some simple rules, according to agents who deal consistently with Chinese buyers that can make your property stand out as an investment.
The same rules should work with any foreign buyer group:
– Don’t use “call for offers” or blind bids when offering a larger property. Instead, set a price and back it up with
comparables, assessments and appraisals. (Landcor.com is a good quick source for B.C. Properties.)
– Don’t be insulted by low-ball bids being offered. This is often the opening gambit in price negotiations.
– Qualify the buyers and buyer agents. Ask for proof that the offshore funds are available. Currency restrictions can delay
getting funds transferred from China and other foreign countries.
– Prepare good visuals, maps and property details. Make more detailed information – if it is a larger project – available via a
password-access online site for qualified buyers. Translate headline details into the local language.
Embrace the opportunity
of investing and owning in a world-class city envied by people from around the globe. Who cares where the investors come from? Most of us – or our families –
came from somewhere else. The idea is to enjoy life, share the future and create opportunities together.
Latest Immigrant Investor Program Fell Flat, Extended
From the South China Morning Post this week:
Canada’s new millionaire migration scheme appears to have flopped amid doubts about its suitability for rich Mainland Chinese, forcing
authorities to quietly issue a lengthy extension to an application window which was supposed to have ended Feb. 11.
The Immigrant Investor Venture Capital (IIVC) pilot programme, which will grant permanent residency to immigrants who are worth a minimum
of C$10 million (HK$62 million) if they hand over C$2 million for Canada’s government to invest on their behalf, will now take applications until April 15. That extends the application window from two weeks to a total of 11 weeks, suggesting the
scheme has fallen well short of the worldwide cap of 500 applications. (Only 50 would be allowed in under the pilot program.)
Immigration industry sources had doubted the costly scheme would hit the application cap during the original window, and questioned whether the government
was sincere about the programme. They said the scheme’s strict requirements – applicants must speak English or French, have a Canadian tertiary
qualification or equivalent, and undergo a financial audit – would deter Mainland Chinese millionaires.
Canada’s defunct Immigrant Investor Programme (IIP),
which the IIVC scheme replaces, was the world’s most popular wealth migration scheme, thanks mainly to rich Chinese applicants.
Major Point: From 2007 to 2013, 81 per cent of all Chinese applicants to the IIP said they planned to live in British Columbia, representing 61 per cent of applicants
worldwide. About 37,000 investor immigrants are known to have activated permanent residency in BC from 2005 to 2012, nearly all settling in Vancouver. Many
others likely arrived after landing elsewhere in Canada.
Not Only Flowers Blooming In Victoria
After what seems a decade – actually about eight years – in hibernation, the Greater Victoria real estate market woke up last month. MLS
sales of detached houses hit the highest level since 2008 with 285 sales. That is more than10 a day during February.
Sales of all types of homes reached 542 units, up from 412 in February 2014.
Also, there has been a number of big real estate deals recently: the Bay Centre downtown sold in February for an estimated $100 million;
and Nat Bosa’s family bought the venerable Fairmont Empress Hotel.
Also note that there has been very little new home construction for the past few years. This means inventory is down across the board: MLS listings were
down about 8% last month to 3,840 homes of all types.
Major Point: Still not enjoying previous heights, there is new life: The Victoria Real Estate Board’s benchmark price for a detached house in the
Victoria core was $557,000, up 1.3% from February a year ago. The benchmark on the West Shore was $406,900, about the same as 2014. Condominium prices in
the region increased 4.4% over last year to $289,200 while townhouses increased slightly to $400,900.
Per-door Apartment Rental Prices In Canada
VANCOUVER VALUES START TO WEAKEN
The average per-door price of Vancouver rental apartment buildings
was down 8.5% in 2014 from a year earlier, but still by far the highest in Canada, according to national study by Colliers Canada.
The survey found the average price in Vancouver was $231,135, far ahead of second-place Toronto, at $156,517 or third place Calgary, at $155,049.
Remember, as we noted last week,
Vancouver prices are skewed because of the number of apartment buildings being sold as development sites, in such areas as Kerrisdale and Marpole,
which can drive per-door prices much higher that the cap rate would suggest on an income-producing property.
Last year there were 107 multi-family sales, which is up 7% from the 100 multi-family sales in 2013. The dollar value of last year’s land sales was $639
million, a 16.3% increase from 2013, according to transactions through the BC Land Title and Survey Authority, as compiled by the Real Estate Board of Greater Vancouver’s Commercial Edge study released last week.
HERE IS A SNAPSHOT OF THE LANDLORD MARKET
What does it all mean? Vancouver is overpriced and over bid due to land development potential; Toronto may turn out to be the best bet for multifamily investors, followed by Montreal. Edmonton and Calgary will be a hard place to find
property since rents remain strong and vendors are reluctant to let go of cash cows in a suddenly shaking economy.
Are Builders The Canary In The Coal Mine?
We gave coverage last November to Nobel prize-winning economist Vernon Smith, 84, who recalls his family’s farm foreclosure in the 1930s.
Smith awarded the Nobel Prize for Economics in 2002 for his work in empirical economic analysis, is a professor at Chapman University in
California and president and chair in finance at the International Foundations of Research in Experimental Economics.
Smith’s message to a Vancouver audience: a downturn in the housing market was precursor to the Great Depression, the 2006 “great recession” and
virtually every other recession in-between.
The key indicator, Smith said, is housing starts. Homebuilders, he said, are much more aware and reactive to changes in
the market than typical homeowners or buyers. Early in 2006, starts of U.S. housing suddenly began falling from record highs while all other economic
indicators were still increasing, Smith noted. A year later, home construction had virtually stopped, U.S. home equity had shed $500 billion in value and
the world was in the grip of the worst economic crisis in 100 years.
Well, housing starts in Canada were down for the fifth consecutive month in February, according to the latest figures by CMHC, though most other
economic signals are strong.
The seasonally adjusted rate of urban starts decreased to 140,722 in February, from 171,950 in January, reflecting broad-based declines in the majority of
the provinces. Just saying.
This week I received 2 very well and thoughtfully written (but long) questions on whether I have turned negative. After all, the housing market in the
Lower Mainland is booming? The short answer: Long term; No. The long answer … What do you use as the ‘Lower Mainland
Market’? The mad price being paid in the Westside or the sharp losses experienced by White Rock condo buyers? A subscriber reported that in the Miramar
development in White Rock, units that sold originally at $550,000 are now $420,000. There are dozens of other buildings in the Valley that are not
participating in the crazy markets of Vancouver. Just saying.
Warning: Outlandish prices paid for land (see above) PLUS falling housing starts. As we said in our Outlook issue, sitting with cash is not a bad
thing at this time.
Strata Disputes Kept Out Of Court
We may not have run this item – last week the B.C. government introduced,
“Amendments to the Civil Resolution Tribunal Act (CRTA) that will improve access to justice by requiring parties who use the justice system to resolve their minor strata to use the Civil Resolution Tribunal (CRT), Canada’s first-ever online tribunal.”
Sounds innocuous enough, but then we heard from lawyers, big lawyers like Bull Housser warning about the “potential impact of new legislation which was just introduced that will make it mandatory for strata property disputes to go through an online dispute
resolution process rather than proceeding directly to court.”
Major Point: Makes us think the new legislation (which is not mandatory by the way) may have merit for strata owners and Strata Corps! Sounds wonderful to us. Anyone that has used the ‘court process’, the incredible even unbelievable costs for both sides and the years of
fighting … would welcome an experienced Tribunal. The only thing is: What is considered minor?
The Numbers, The Numbers – Fraser Valley
Sales of all property types in the Fraser Valley increased by 21 per cent with demand for two property types in particular – single family detached homes and townhomes – outpacing supply.
1,337 sales up from 1,102 sales in February of last year.
7,864 active listings, a decrease of 4 per cent compared to February 2014’s 8,210 active listings.
“It was our busiest February since 2007,” says newly elected Board President Jorda Maisey.
The benchmark price of a Fraser Valley single family detached home in February was $581,400, an increase of 4.2 per cent compared to
February 2014 when it was $558,100.
The benchmark price of apartments also decreased year-over-year by 1.8 per cent, going from
$193,200 in February 2014 to $189,700 in February 2015.
Across Fraser Valley, the average number of days to sell a single family detached home in February was 41 days,
ten days faster than last year. Townhouses on average took 55 days to sell; one day faster than last February, while Fraser Valley apartments sold on
average in 70 days, on par with February 2014.
The best February since 2007! Early March also indicates continuing strength. We’ll watch it carefully.
The Numbers, The Numbers – Toronto, Calgary And Edmonton
Major Point: Toronto –
VERY strong overall price increases (+8%), Single family homes up 9%, condos up 2% active listings down by 9%. Bodes for continued strong spring. Calgary listings (both single family and condo) took it on the chin – up over 101%, prices off across the board. Edmonton surprises (only)
listings up 31%, but prices even. (LOOK UP SOME Hot Props here.)
1. River Heights area (Coquitlam), over 10,000 sq. ft. lot, 1700 sq. ft. on main floor, bright and sunny living room with vaulted cedar ceilings. Oversized Master with 5 piece ensuite. For the car buffs there is a 4 car garage. Price: $799,900;
2. Edmonton 1 bedroom condo. Price: $95,000 (rented at $950.00);
3. Edmonton 2 storey 3 bedroom duplex. Price: $325,000 (basement suites potential);
4. Edmonton brand new side by side 3 bedrooms 1500 sq., double garage custom build duplex with 10 years new home warranty near downtown. Price: $439,000.
Anyone can submit a deal to be offered
here. There are no guarantees, you must do your own due diligence. For contact info go to your password protected website.
!!!LANDRUSH CDs available now!!!
If you like the cd set for the whole conference, it is now available at $87.77 on our website. HOWEVER, FOR YOU OUR SUSBCRIBERS WE KEEP THE
CONFERENCE SPECIAL PRICE OF $47.77. Call Max at 604-683-3222 or email him at firstname.lastname@example.org.