experts: real estate column Thursday, July 20, 2006

Kootenays Luring Buyers

The Kootenays, especially the East Kootenays of British Columbia, are now the prime destination for Calgarians looking for recreational and investment real estate.

By Ozzie Jurock

The Kootenays, especially the East Kootenays of B.C., are now the prime destination for Calgarians looking for recreational and investment real estate.

Their appetite, backed with economic muscle from the strongest provincial economy, has helped to change the focus of the Kootenays from mining and forestry to tourism, especially ski and golf.

In many of the small Kootenay towns, there are more golf courses than traffic lights.

Parts of the area have witnessed some of the most dramatic price appreciations in B.C.

Lake Windermere near Invermere, for instance, now has the most expensive lakefront real estate in the province, while towns like Fernie and Golden have seen sharp price increases in resort-type condominiums and chalets.

Fairmont Hot Springs and Kootenay Lake are among the areas most recently discovered by Albertans, with a subsequent rise in prices.

But it would be wrong to think that the Kootenays are now overpriced. In fact, for what the area offers now and its potential as an Alberta - and increasingly foreign buyer - all-season playground, prices are still a bargain.

We are not talking here of the resort ski condos, though they are still relatively affordable, but the type of rural and small town real estate that is low priced right now and will be in demand for the rest of this century.

There are literally scores of detached houses in the East and West Kootenays priced well under $150,000.

So, pretend you're a wily young Calgary oil analyst looking for recreational and investment land in B.C. or eastern Alberta.

You want something you can drive to in three to four hours or fly to within an hour, with both winter and summer seasons (must have a lake) and is less expensive than your $300,000 house in south Calgary, or the $500,000 to $700,000 chalets of Banff or Canmore.

But you want something that will see price appreciation while you are enjoying it.

Major Point:

First, remember the principle that a chairlift and a parking lot is NOT a resort.

Second, watch for the news: "Money being invested ... new high-speed chairs added ... new airport expansion."

Remember that "proposed resorts" may take 15 years to find financing and get done - and that personal use and investment never really work (you will want to use it when you get the highest rent per night, such as spring break, Christmas and so on).

Look for the "two legs" - summer and winter uses. What of golf courses, lakes and other recreation than just skiing?

Third, when buying new, check out the developer: what has he built before? Can you talk to someone who has bought from him? How strong is his financing? Particularly now, when costs are rising, can he finish building the units?

Fourth, timeshare is not real estate. Think about it: a 200-suite building needs 10,000 investors (it will NEVER get sold out).

A 10th share would need 600 ... a quarter share would need 48 investors in the same unit.

Hotel-type units are not real estate. They are a business first and the onerous restrictions of some hotel investments CAN (and have) killed investments.

Quarter shares are VERY expensive to maintain (the average in the Kootenays runs $300 to $450 per quarter share, or $1,200 to $1,800 per month - before debt servicing).

Itfs better to find three friends and buy a regular suite where maintenance is likely $50 each - and you can use the rest for mortgage payments and taxes.

Are there some hotels well run? Are there some quarter shares that make sense not just to developers, but also to the buyer?

Yes, there are - but YOU MUST UNDERSTAND what you are buying.

The secondary market is weak; used quarter shares are harder to finance. So, read, read, read things like the prospectus and offering memorandums, or hire someone who can.

Here is what the Alberta visitor will find today - and the markets any investor should be looking at to get in the path of the investment wave that is just starting to roll over the Rockies.

East Kootenays

Within an hour of Crowsnest is the B.C. town of Fernie (which we have recommended for six years), where a more established town and a well-financed ski resort make real estate a better buy.

Resorts of the Canadian Rockies (RCR) operates Fernie Ski Resort as they do resorts in Lake Louise and Kimberley.

Fernie is ranked among the top 20 ski resorts in North America, and prides itself on its black diamond powder; you bring your A game to these slopes.

Ski hill condos are in the $300,000 to $450,000 range, and even a one-bedroom listed at an "aggressive" price worked out to $328 per square foot, plus $240 a month in condo fees (still better than a quarter share $1,200 per month) ... but no thanks.

Too expensive, now. Condos close to the hill, like the Ridgemont area, are in the $185,000 to $195,000 range.

In the town of Fernie where it looks like a lot of residents are aging 60s flower children you can find rental houses for $165,000, and nice family houses in the $240,000-$250,000 range. Ridgeview Estates offers investors a 15 per cent return and first kick at a condo when built at "builder's price."

We also hear of a 2.4 hectare (six-acre) development of 110 units planned near the new Greg Norman Golf course that is looking for investors. Have $3 million?

Head a bit out of town to the lake district, though, and you can find a five-acre lot near Bednorksi Lake for $220,000 (with a modular) and lakefront lots at Lake Koocanusa for even less.

BC Assessments says a typical house in Fernie is now assessed at $272,000, up from $204,000 a year ago.

Golden

For those who come into B.C. from Banff or Jasper, the first serious resort town is Golden, where Ballast Nedam Canada Ltd. built the Kicking Horse Mountain Resort a decade ago and is still building a $100-million master planned community of hotels, condos, chalets and retail that won't be complete until at least 2010.

Golden is about 2.5 hours from Calgary and is one of the reasons that prices here have soared.

Three bedroom ski townhouses at Kicking Horse Mountain can easily top $600,000, and the average assessed value for a Kicking Horse chalet in 2005 was $712,000.

An 81-hectare (200 acre), master-planned subdivision, Canyon Ridge, is selling both detached house lots and multi-family sites (1-866-344-5055). Expect lot prices to be at or above $300,000.

The larger rural properties, boasting spectacular views, are particularly sought-after. Example of current listings: 10.5 bare hectares (26 acres) 15 minutes from town: $299,900; a 0.4 hectare (one acre) lot with an older house and mountain view: $300,000.

Most Golden area homes on this year's assessment roll "are worth more than they were on the 2005 assessment roll, and market movement appears strong when compared to previous years," says Kootenay area assessor Jim Norton. "A typical single-family home that was assessed at $194,000 in the summer of 2004 was assessed at $223,000 in the summer of 2005."

Cranbrook

With 18,000 people, blue-collar Cranbrook is the regional centre of the Kootenays. Cranbrook has two large sawmills and a pulp mill and is the service centre for the Elk Valley, Westar Mining and Fording Coal mines in the area.

The airport expansion at Cranbrook has changed the logistics of the entire East Kootenays, as it has daily air links to Calgary and Vancouver and it is still expanding.

On Feb. 21, in fact, Cranbrook accepted bids for a runway extension at the airport, which will accommodate larger aircraft, such as the B767- 300, to offer direct flights from North America and European airline charter operations.

Cranbrook has no ski resort, itself, but the airport is within 20 minutes of ski hills at Fernie or Kimberley. You can also spend some time admiring some of the lowest price real estate in the Kootenays. We found cabins with lake views for $45,000; small rental houses in town for $69,900; and 20 detached houses listed for less than $150,000. There are also four older condo units for sale for $59,000 each, and better condos (one bedroom) for under $80,000.

Nice lakeview building lots are under $70,000. Cranbrook may not be a trendy resort town, but it has more recreation, shopping and medical services than any other Kootenay towns and it is central to great skiing, golf and lakes.

Dollar-for-dollar, it is a good buy in the area, especially now before the 767s start landing at the airport. The typical assessed value for a detached house in town: $160,000.

Kimberley

Kimberley perhaps best represents the changes that have swept through the Kootenays in the past few years.

When the Sullivan mine shut down near there six years ago, you could buy a detached house in the town of 6,400 for less than $50,000 and some residents feared for the future.

Today, you would be lucky to find a decent house in Kimberley for under $200,000 and new condos on the local ski hill are selling for $350,000. Some residents commute to Elkford to work in the coal mine, but it is tourism that is now the main action in town.

Right within the city limits are the Trickle Creek Golf Course, the Bootleg Gap Course and the Kimberley Golf Course.

The excellent golf and great skiing has allowed Kimberley to fight off recession and attract fresh investors, mostly from Alberta and Vancouver but also from Europe and the United States.

When Edmonton-based Vinterra Properties put 48 luxury condominiums on the market near the Trickle Creek Golf Course ranked as one of the top 10 courses in Canada it nearly sold right out.

Prices for the three bedroom, 1,300-squarefoot condo suites range from $360,000 to $390,000 (no restrictions on usage, they are sold as freehold strata units).

The Trickle Creek Golf Course, where it costs $99 to play 18 holes, is a nine-iron away from the Kimberley Ski Resort village.

The best deal in town is maybe the old company houses.

Sized about 800 square feet, the solid little houses were selling two years ago for around $80,000.

Now, the worst ones go for $120,000, but average closer to $200,000 for the best locations. Investors like them because there are no condo fees and they are fairly easy to rent.

An older six-plex in good condition in town recently sold for $310,000 and a 16-plex is still available for $800,000.

Rents are still cheap in Kimberley, with two bedroom apartments for $500 per month and small houses in the $650 range.

According to BC Assessments, a Kimberley house that was assessed at $110,000 in July of 2004 is at $155,000 in the latest assessment (assessments are 50 per cent higher in Kimberley this year across the board.)

Wasa Lake waterfront lots, near town, are assessed around $375,000.

Retail may be a good investment, because space in the Bavarian-style downtown is inexpensive and Kimberley attracts about 120,000 visitors a year during the ski season, and more in the summer.

Lease rates average $10 per square foot and the for lease signs that once papered the Main street storefronts are slowly coming down.

On the eight-lift, 68- run Kimberley Alpine Resort ski hill, plans are afoot for another hotel/condo development next to the Marriott Trickle Creek Residence Inn.

The Marriott hotel/ condo suites are sold under restrictions of personal use of 30 days per year and placed in a rental pool for the rest of the time (Ill pass).

A multi-family site on a 1.4 hectare (3.5-acre) parcel that could house up to 44-condos was recently sold at the resort for $800,000.

Kimberley residents have also approved funding for a new swimming pool and sports complex, which will be complete within the next two years.

Kimberley is one of only four towns in B.C. that uses a flat tax rate, which is now $686 per residential property (which makes taxes on condos very expensive it is a flat tax, PLUS a percentage.) The city also weighted property taxes onto commercial property owners, with a ratio of 2.22 to residential, which is lower than the provincial average of 2.50.

West Kootenays

As one moves further from the Alberta border, the mountains and the prices get much lower.

We found nearly 100 detached houses for less than $150,000 listed on MLS in the West Kootenays this month.

There is real estate action in the West Kootenays, especially around Trail, which is the economic centre.

Australian builder Stephen Upton is teaming up with a Fruitvale resident to build the first new subdivision in Trail in a decade, for instance. The Foreshore Development Corp. plans to build seven houses and two duplexes on about 0.8 hectares (two acres) of riverside property.

"Were glad to see that someone is finally going to do something with this property," says Trail Mayor Dieter Bogs.

"It is a prime location. A number of people have looked at it over the years."

Sydney-based Upton has owned a house in nearby Rossland for 18 years, where he and his wife come to ski every winter.

"This lifestyle has caught my heart," he says. "It is getting harder and harder to go home to Sydney, which is a bit of a rat race like Vancouver."

He could have been speaking for a growing number of people who are transforming the Kootenays into an all-season playground and a top real estate investment.

Major Point:

The Kootenays represent one of the most diverse and attractive recreational real estate markets in Western Canada.

World-class skiing and golf, a huge number of lakes and parks plus good air and road access make it an all-season area where it is possible to rent property year-round - and prices are still rising for those who pick their spots carefully.




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