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Western Perspective: Housing downturn should be seen as an opportunity

Frank O’Brien, Western Investor, September 2008

As Western Canadian housing prices laddered up incredible level after another, and as rental rates tightened to zero per cent vacancy, the call went out for government to create affordable housing.

That is now possible due, ironically, to the greed that created both the boom and the current downturn.

Just months ago, people were camping overnight clutching brochures and afraid they would miss the chance to spend $600 per square foot for a city condominium or a suburban rancher. Many buyers opted for zero-down payments and 40-year mortgages just to get their foot in the door of their first home, damn the price.

By 2006, more than half of all the new Vancouver condominiums were being purchased by investors, some buying 10 units at a time. It was not uncommon for bidding wars to erupt at open houses, driving the price well above what the vendor was asking.

Imagine if someone had said at the time, “Look, there is a nice neighbourhood where prices have stopped rising, where vendors are eager to sell and there is plenty of selection. The mortgage rate is still near historic lows, and renters are lined up to help with the mortgage.”

Buyers would have immediately swamped that enclave.

Well, today, there are many such neighbourhoods, not only in Metro Vancouver, but across BC and Alberta. There are scores of Lower Mainland condominiums priced under $200,000. In smaller towns, you can find condominiums for half that price. For the first time in years, first-time buyers can choose from a smorgasbord of listings without fear the vendor will laugh at their low-ball offer.

Affordable housing has returned and we should be seizing the opportunity. The market lull allows investors to get into a market most thought out of reach. It also allows a forward-thinking federal or provincial government to provide lower-cost housing, simply by snapping up new condos in troubled projects – we could name names – and turning them into assisted rental units.

The current downturn is not as bad or as broad as most think. In BC for example, 140,000 residential properties are expected to sell this year, which is the same level as in 2004, when the market was said to be booming. By year end, according to forecasts from reliable Landcor Data Corp., buyers will spend $61 billion on BC housing, just a shade under the all-time record set in 2007. The sales recovery has already started in Edmonton. In Regina, house prices were up 28 per cent this summer compared to a year ago.

We agree with real estate consultant Ozzie Jurock that housing prices in Western Canada will be higher 10 years from now, probably much higher, than they are today.

Investors and governments should be thankfully scouting the market right now to take advantage of today’s opportunity.