National Post June 16, 2006
British Columbia has become a field of dreams for homebuilders and homeowners alike. Remember the catch line from the movie? It was, “If you build it, they will come.”
That memorable phrase applies to almost anything with four walls and a rood on Canada’s West Coast. A booming economy, a surge in immigration and a shortage of land in the Lower Mainland means the demand is at gold rush levels and prices are soaring.
“We are looking at our third best-ever year for new construction,” says Peter Simpson, chief executive officer for the Greater Vancouver Home Builder’s Association. “We have just revised estimates for housing starts up to 20,500 this year. The major challenge our members face, however, is a shortage of land. There is just not a lot available.”
The market for resale homes is equally brisk, says Rick Velouche, president of the Real Estate Board of Greater Vancouver. Its 8,600 agents have about 13,000 properties listed for sale in the Lower Mainland, down from a third from the usual supply on hand.
“Over the past two years, we have seen resale prices rise by 46%,” he says. “The only bargains left are well outside the city. The farther you have to drive, the better the prices.”
Nor is the Vancouver area the only centre of buying and selling activity. Thanks to new regularly scheduled services by airlines such as WestJet, recreation and weekend properties on Vancouver Island, The Gulf Islands, Queen Charlotte Island and the interior, especially in the Okanagan Valley, are in high demand.
“Accessibility is the biggest change I have seen in 35 years of business,” says Rudy Nielsen of Landcor Data Corporation, which tracks all residential sales in the province. “Regularly scheduled flights at reasonable prices have opened up great new chunks of the province. They have created a boom in prices.”
That boom is reflected in sales figures. Last year B.C. saw 166,254 residential properties change hands, compared with 143,698 a year earlier. Those properties sold for a cumulative total of $48.5 billion, compared with $37 billion in 2004. By comparison, the value of all residential sales in British Columbia was just $15.9 billion in 2000.
At the same time, there is a fundamental shift taking place in British Columbia’s residential market. Rising costs of single-family homes have seen condominiums take over leadership of the new home of choice, especially in the Lower Mainland.
Where, five years ago, Vancouver new construction represented just 40% of all condos built in this province, this year the Lower Mainland is home to 80% of all new condos right across B.C., Mr. Simpson says.
“A great part of that is because of cost,” he says. “Today, 94% of all new single family homes cost more than $350,000. People are willing to accept smaller spaces in high or mid rise structures or townhomes because that is what their budget can afford.”
But even then, a dramatic shortage of land in Vancouver is driving prices sky-high, says Bob Rennie, president of Rennie Marketing Systems, which has about 50 condo projects on the go in British Columbia.
“Right now, 80 projects are selling at more than $600 a square foot and others range up to nearly $2,000 a square foot. It is all because of a shortage of land,” he says.
The price of condos, however, seems reasonable compared to the selling prices of homes in West Vancouver, where neighbourhoods command the highest selling price in Canada.
“The average home price here was $1.485 million last year and I think you can reasonably expect that to go up again this year,” says Eric Chistiansen of Angell Hasman & Associates (Eric Christiansen) Realty Ltd. “Right now there are only 230 properties for sale in West Vancouver, compared to 308 last year. In fact, there are only about 1400 properties of all kinds for sale on the North Shore right now.
“At any given times, there will be 10 buyers looking for a property with a oceanview and when one comes up about every three months, all 10 will bid on it.”
Nor are sky-high prices restricted to the Lower Mainland.
Kelowna on Lake Okanagan has projects such as the Royal Private Residence Club, where top-of-the-line condo units go for up to $2,289,000
The housing boom is also changing the province’s demographics. Surrey is within a hair’s breadth of overtaking Vancouver as British Columbia’s largest city, Mr. Velouche says.
“The farther out you go, the lower prices become,” he says. “That is what accounts for the growth centres east of Vancouver. It is the only direction growth can take. You have the U.S. to the south, the ocean to the west and the mountains to the north.”
The problem there, however, is that the province has strict controls over changing the use of existing agricultural land and that policy represents a bottleneck to growth. Even with relatively cheaper land, housing costs as far east as Pitt Meadows, a half hour’s drive from Vancouver’s city limits, can present challenges to first time buyers.
“I would think the average single-family house would go for $400,000, a townhouse for $260,000 and a condo for $214,000,” Mr. Velouche says. “Last year, the same condo wouldn’t sell for $190,000.”
Nor is there much relief in sight for hard-pressed buyers, suggests Neil Chrystal, president of Polygon Homes Ltd.
“Once again the province is attracting significant immigration,” he says. “Last year, for example, we had almost 43,000 people more here from outside and inside Canada. That’s 43,000 people looking for a place to live.”
“With built in demand like that, the market seems very highly to continue strong.”