experts: real estate column Monday, April 26, 2004

'No Inflation' But Prices Rising Everywhere

Single family home prices skyrocket while new condos struggle

By Ozzie Jurock

This article appeared in The Vancouver Sun on April 17, 2004

San Diego up 29% (and 40% in 8 suburbs!!!), the median average price of a house in San Francisco is $636,000 (US!). Los Angeles is up 23%, Nanaimo up 29%, Parksville up 32% (Parksville? Parksville!), Vancouver used condos 23% ... But new condo prices are down 20%, following a trend that has been set in motion since last September. Hmm, what is going on ... are we selling smaller units? Likely. Are completed buildings having a more difficult time to attract tenants? Are more tenants buying with the hard to understand 'let's fuel the fire, no money down' CMHC unlimited amount financing? Yes, yes, and yes.

Since 1995 I have been arguing to buy Vancouver condos ... now the presale frenzy makes me wonder whether all the investors buying today will find the tenants to pay for their investments tomorrow ... when they are completed. In our newsletter we have warned about rising vacancies in Toronto, Calgary and Edmonton. (Toronto now at a 14 year high) We also have voiced concerns about Vancouver. The official vacancy rate is really useless, since CMHC only reports on buildings of 3 suites and up and the individual 'investor units' are not included. These investors - as much as 50% of new purchases will be looking for tenants. Real rates are likely already in the 5 - 7% in the Westend and downtown. Take a look at the 'for rent' ads of the Vancouver Sun, then try and get a copy from 2 years ago. The volume of new ads has increased sharply. As an owner of a rental unit: Love 'em (tenants) or they'll leave ya ...

Which brings us to the blowouts! CONDO SELL OUTS IN ONE DAY? NO WAY!

Screaming headlines about "one day sell outs" of condo projects in Vancouver and elsewhere are, like the Elvis spottings, a little too good to be true. The fact is most of these projects are marketed intensively to pre-qualified buyers months before the ribbon-cutting. The day of the "first opportunity" to buy does give some buyers their first look at the property - or in most cases a look at mock-up suite or perhaps a floor plan and amenities list - but not the first crack at buying.

Case in point: The Qube on West Georgia was advertised everywhere for a "Grand opening March 27 at noon", but if you walked to the building on the 20th, it was open and salespeople told of it being "80% sold already".

We think that vacancies will continue to rise ... particularly, when you see the 'blow-out presales'. Reminds us of the crazy years from 1989 to 1994, when condos were hot, and we wonder whether we will see 1995 to 2000 when they were NOT!

Major Point: We don't knock the marketing - it works. Actually we love marketing. But good marketing does NOT necessarily mean good value. Some of today's pre-sales selling at $500 per foot with few amenities, no parking, no locker ... you scratch your head, not at the developer, but at the faith of the buyers. Or is it folly?


  1. Take a deep breath.
  2. Don't get carried away.
  3. Know what you are buying, what the suite will look at when finished.
  4. Don't buy over or beside a garage entrance.
  5. What amenities are included in the project? (e.g., security, fitness area, playground)
  6. Is the balcony, hallway etc. calculated in the square footage of my unit? What square footage precisely is used to calculate my common area cost?
  7. Do you own your parking spot or is it leased? What about a locker?
  8. Ask for:
    1. Copy of Builder's Guarantee. Warranty details - what items are covered and for how long.
    2. Check the building's design. Some buildings are more prone to leak than others.
    3. Check for guarantees for all appliances: stove, refrigerator, dishwasher, garburator, exhaust fan, microwave, washer dryer.
    4. Manuals, instructions and guarantees for fireplaces, hot water tank, security system.
    5. Copies of floor finishes guarantees, brand names and colours of all carpets, vinyl flooring, ceramic tile, etc., spares or extra materials for repairs. Of course you should also have this general info:
      • What is your Builder/Developer's reputation? Ask for satisfied buyers in previous projects?
      • What is your Builder's rating for After Sales Service? Call Better Business Bureau.
      • When will the project be completed? What happens if it is not completed on time?
      • When do they expect registration of the condominium corporation to take place?
      • How many phases are there in this project? When will they be built?
      • How much of the building has been sold offshore? How much local?
      • What is the total deposit required? What is the deposit schedule?
      • Does the builder carry insurance for non-completion? (We hear of one 1/4 share development in Osoyoos going down!)
      • How is my deposit money handled? In trust? With whom?
      • What can I expect closing costs to be? What are the approximate property taxes for my proposed unit?
      • What warranty is included? How long, who guarantees? What weather shield guarantee from the builder?
Major Point: Too much to ask? No way. Ask, ask, ask and if you don't get good answers - walk away. This is particularly so if the builder is small, unknown or from offshore. We advise anyone looking at a pre-sale situation to remember that as the person with the money, you are in charge. Don't rush yourself into signing for a pre-sale deal if you have any doubts. Yes, in this new unlimited financing world - you can own anything you want, make sure you want what you own!

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