By Ozzie Jurock
More than 1,000 Canadians will turn 60 years of age every day this year. In British Columbia, 46,000 people hit the big 60 by the end of 2006. (Famous people who have turned 60 in the past year include U.S. president George W. Bush, Dolly Parton and Cher.)
You need to know little more about the potential retirement real estate market. British Columbia, which already has the highest ratio of seniors in the country, will continue to attract a grey wave of retirees, many of whom represent the wealthiest retirees in history.
Not only have they made a fortune in their own homes ... the new wave of retiree is a 'dual-pension income' retiree. Wives have been working now for a lifetime too. In fact when we talk to Realtors in the Okanagan or on Vancouver Island we hear of retired couples - even from so-called economically challenged areas like Manitoba or Nova Scotia - plunking down several hundred thousand in cash.
This year, therefore, is the time to consider investing in retirement communities, either for your own golden years or to cash in when the wave hits. JREI has written in the past that - if we wish to benefit - to make sure that we understand today's retiree. While concerned with security today's retiree is not looking to live in a ghetto. The retired couple of today is not feeble, they are active and walkable - beaches, forests, riverside are important.
Many retirement communities miss the boat if they think today's 65-year-olds walk with a cane and want to sit in a rocking chair. More likely they challenge you to race to the corner store. What is worse ... they may beat you! I have skied the last few weeks with such a 'retired' couple. She - 68, he 74 ... and sorry to say - they can leave me in the dust anytime they want to!
We have all heard of the booming Okanagan. JREI has recommended Vernon, Kelowna, Osoyoos, Oliver and dozens of other communities for years. Primarily because it was a drawing point for retirees ... farmers from the prairies, rat race escapees (not only retirees) from the Lower Mainland and so on. But these areas have become quite pricey. In this issue we take a different approach. Today's retiree is looking for less hustle and bustle but great natural environments and lower prices, he may strike out into new territory.
In this issue we look at some coastal resource towns in B.C. where recent troubles in the forestry sector have led to a dip in housing values. Towns that nevertheless have good infrastructure and excellent recreational facilities and are close enough to a major city to attract retirees.
We have found over the years that residents of resource towns react quickly to threats to the local economy, which is often dominated by a single employer. Blue-collar workers are likely to pack up and leave, a simultaneous move that spikes listings and often creates a dip, sometimes quite transitory, in the local housing market.
Such may be the case with the towns we profile below, all of which have seen a sudden rise in listings and a corresponding drop in average prices in the past three months.
Strange how perceptions change. A year ago when the last major employer at Squamish closed, a local realtor told us it was a good thing because the smell of the pulp mill hindered real estate sales in the trying-to-be-trendy downtown. The January 2006 closure of Western Forest Products Inc.'s wood fibre pulp mill followed the earlier shutdown of the town's only sawmill and the BC Rail work yards, which basically gutted the town's blue-collar employment in less than five years.
Last year, the Sea-to-Sky highway centre was abuzz about a $100 million, 100-acre waterfront development of hip condos and cool retail space that was about to start on the town's former industrial waterfront.
Well, today, the proposed big waterfront developer, Qualex-Landmark, has left town, real estate price increases have reversed and, suddenly, those 200 wood fibre union jobs are sorely missed.
As we reported, David Baxter of the Urban Futures Institute in Vancouver recently warned that the Squamish residential market could well be overbuilt if current trends continue. Baxter estimates that 12,700 residential units, mostly condos, are planned for the Squamish district between now and 2031, enough to accommodate 35,000 people, which is twice the number living there now.
Currently, there are 600 new condo units under construction downtown with an additional 2,000 units proposed, according to the town's planning department. New projects have listing prices starting at around $320 per square foot.
After posting among the highest house price increase in the Lower Mainland since 2001, Squamish was the only market tracked by the Greater Vancouver Real Estate Board to show a price decline in December 2006 compared to both a year earlier and three years earlier. Today, at an average of $419,000, the average detached house price is down 9% from 2004.
Of course, Squamish still has a lot going for it. Close to both Whistler and Vancouver, it will benefit from the $600 million upgrade to the Sea to Sky Highway, a new university, and eco-tourism. If you are looking for recreational property, now may be the time to try your low-ball offers. This month there are 29 detached houses listed for sale, double the number on MLS in December, and nine of these are priced under $400,000. There are 49 condominiums for sale on MLS in Squamish, up from 9 at the end of December.
Powell River, Port Alberni and Crofton/Cowichan Valley are other examples of a resource towns where lower prices may be expected this year as fears over layoffs lead to higher listings and prices that have tracked lower in the past few months.
Catalyst Paper Corporation, Powell River's biggest private employer by far, was taken over in a hostile bid by New York City investment company Third Avenue Management LLC last September. In December it announced it is eliminating 108 jobs in the Powell River pulp mill operation by the beginning of 2008, from a total workforce of 409. Third Ave now also has control of the Catalyst's mills in Crofton and Port Alberni. (Note!)
The layoffs in Powell River will largely be taken up by early retirement, but the psychological effect on the historic mill town will lead to a rise in homes for sale, a slowdown in sales and lower or moderating prices after a sharp run up in the past 2 years. An online poll conducted by the local newspaper found that 82% of residents thought the mill layoffs would have a negative effect on Powell River's economy. Markets are the stories people tell about them...
A single-family house in Powell River that was assessed at $138,900 in 2006 is assessed at $171,100 in 2007, a 23 per cent increase, reports BC Assessment.
Yet, we found a dozen detached houses under $200,000 this month in Powell River, half of these under $160,000.
A condominium apartment that was assessed at $104,200 in 2006 was assessed at $138,900 a year later, a 33 per cent increase.
You can find condominiums, even two bedroom suites, for under $100,000.
Meanwhile, the Powell River's apartment vacancy rate has plunged to 1.7%, according to Canada Mortgage and Housing Corporation (CMHC). This compares to a vacancy rate of 5.3% in October 2005 and 18.1% in October 2004. The average rent for a two-bedroom apartment is $545.
The real future for Powell River appears to be a retirement and recreational market. There are great golf courses here. I played the Myrtle course last summer - a fine course. In the rural area, the average assessed house price is up 22% to $254,000, but there are some nuggets. We found a FSBO 1,200 square foot house and a workshop on a 6.5-acre site, backing on a lake five miles from town, for $269,000 (604-485-4717).
Powell River is about 125 km north of Vancouver, reached by two ferries, or a 15-minute floatplane flight. A stunning coastal area, with outstanding oceanfront, off islands including sandy Savary and large lakes, it also has an excellent regional hospital and a large recreation centre.
This spring may be an ideal time to be buying for the long term in Powell River, for example buying a retirement home. Real estate prices are among the lowest on the coast.
Port Alberni, population about 30,000 in the region, is in the near centre of Vancouver Island, with an 80 km inlet that reaches to the Pacific Ocean. It is about an hour's drive west of Nanaimo and has excellent recreational (including golf) and medical facilities. It is also the last major town on the drive to the Pacific Rim and high-priced Tofino and Ucluelet. We did recommend Pt. Alberni for the last few years, but became a lot more cautious last summer/fall ... when we found (too many?) investors swarming the town and selling to each other at ever higher prices.
The major employer is the Catalyst pulp mill, which laid off 60 workers last fall and has warned that it won't invest to upgrade the mill. Last fall, Port Alberni council voted to reduce Catalyst's industrial taxes by about $1.5 million between 2007 and 2011, but the company is demanding the tax cut be doubled. Company officials have said then that unless the city addressed its tax concerns and local unions made concessions, the company would shut down its main paper machine, costing 300 jobs.
There are serious concerns about the mill's viability, which is at least partly to blame for a dramatic increase in the number of homes for sale. At the end of December, for instance, there were 157 detached houses for sale, up from 44 in December of 2005, while listings for condominiums apartments had doubled to 37 units. However, 14 of the condo listings are for pre-sale units in a single new complex (now under construction, 2 bdrm ocean view condos start at $189,900).
Assessed values for a detached house have risen about $35,000 to an average of $179,100. Strata apartment assessments rose to an average of $117,300 from $70,100, reports BC Assessments.
These prices are still among the lowest in the mid-Island market.
There are more than 40 detached houses listed for sale in Port Alberni under $175,000 and while we found some condominiums under the assessed value, there is a shortage of lower-priced condos. The best buys and choice appear to be in detached houses. The Port Alberni apartment vacancy rate, according to CMHC, is 4.2%, the highest in the mid-Island, and up from 3.6% in 2005.
Crofton, with 1,000 employees at the Catalyst pulp mill, is the economic anchor of the Cowichan Valley (another area we urged you to look at 2 years ago) situated between Nanaimo and Victoria. The Valley is home to Lake Cowichan, where a rush of new developments and retirees have driven assessed single family house prices to an average of $212,400, up 18% from a year ago, and condominium prices up 26% to $64,700.
The Crofton mill has been the focus of intense environmental pressure for the past three years as rock and roll legends such as Randy Bachman have protested the mill's pollution. Catalyst has also demanded tax breaks from the local municipality and the union contract came up last year and has yet to be ratified. In other words, locals are worried about the future of the area's main employer.
Despite the spike in assessed values, average sale prices and sales began to drop last November as listings increased, according to statistics provided by Coast Realty Group. The average MLS price dropped nearly $20,000 between mid-November 2006 and the end of December, to $237,400, ending down 7% from December 2005. Listings of detached houses shot up 32% in the same period, to 300.
Lot values fell 16% to $102,000 and, for all of 2006, lot sales were down 4 per cent from 2005. (Waterfront lots are not included in the survey.)
Some deals are emerging. We found a nice four-bedroom renovated house in Youbou (a lakeside village which we featured before) with a lake view for $199,900. The apartment vacancy rate for the Cowichan Valley area is 1.9%, according to CMHC.
The forestry industry, especially the pulp markets, are cyclical and all of the towns mentioned above could emerge stronger than ever. Right now, though, there is an opportunity to secure coastal retirement real estate in these markets at relatively low prices.For more real estate investment advice, visit Ozzie Jurock's website at Jurock.com. Ozzie is also featured in Donald Trump's new book The Best Real Estate Advice I Ever Received.
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