experts: real estate column Monday, January 28, 2008

Riding The Real Estate Waves

What to do during times of uncertainty? Ozzie Jurock has some advice and looks at B.C. areas that offer value and prices that still make sense.

By Ozzie Jurock

In a normal real estate market, by following some time honoured principles, forecasting should be quite simple.

The problem is we are not in a normal real estate market. For the last 10 years worldwide we have been creating cash out of thin air and that is accelerating. That cash is competing with the cash that you and I earn and is driving everything of real value higher. Add to this the debacle of the U.S. sub prime market and the worldwide credit crunch and there is no doubt that we are in for an extended period of serious financial adjustments.

So what should we do? There are opportunities all across this province, but remember, while today you can buy anything you want, make sure you want what you own. These are crazy times.

We like most of B.C., but here are areas we like first:

We like all of Vancouver, but particularly Dunbar between 10th Avenue and West 34th for its proximity to the University of B.C. and the fact it is still somewhat affordable.

Main and Broadway, for its proximity to the south shore of False Creek, its Canada Line and SkyTrain links and for condo prices that still make sense.

North Vancouver's Lower Lonsdale is transforming into Yaletown North minus the high prices.The $250 million Pier Project will add tremendous value.

We like Richmond's Steveston (Granville Island meets West Vancouver). Great ambiance and still affordable.

If you are into big homes, Port Moody's Heritage Mountain and Coquitlam's Westwood Plateau still have 4,000 square foot newer homes for under $800,000 and Port Moody's Newport Village has great mountain view condos.

New Westminster has some excellent new condo buildings with great water views at $200 per square foot less than downtown. The Quay have a great market and fine waterfront vistas.

Then there is Maple Ridge's Albion Development area, Langley's Willowbrook neighbourhoods, and Fort Langley's Yorkson Village. Together with Mission, all will benefit from the twinning of the Port Mann Bridge, the new bridge replacing the Albion Ferry and the new connector roads.

Farther afield there is Chilliwack (Sardis' Garrison Crossing or older homes downtown) and Hope (still asleep) for the cash flow seeking investor.

Kamloops has great cash flow (low cost condominium apartments and a healthy rental market make it hard to get hurt).

On the Island, Nanaimo and nearby Cedar, Deep Bay between Courtenay and Qualicum, and Black Creek and Saratoga Beach in the Comox Valley may be good bets.

Mining centres like Smithers and Williams Lake have seen solid new employment and sharply lower vacancy rates. Price to rent ratios make sense there.

Some of the ski resorts also make sense (there is an $11 million expansion at Cranbrook Airport for international jets), particularly when you buy in the older parts of town in ski resorts like Kimberley, Rossland and Revelstoke.

Baby boomers are getting older and are heading to retirement towns like Vernon. We also like Salmon Arm and the whole Shuswap for retirement. The Sunshine Coast with Gibsons (you can commute from there) and Powell River are worth a look.

Whistler prices are set to move up after a three year lull.

When we look at the past, enormous booms were followed by equally enormous reversals - but even if today we somehow manage a soft landing, it behooves us as smart investors to be professional about our goals and our investments.

Such as insisting that the real estate debt is serviced substantially by the rental income and that the cost - i.e. fixed mortgage interest - actually gets paid off eventually. Building equity with tenant's money is a principle that should never be overlooked by amateur investors! Interest only doesn't hack it.

Vancouver had a spectacular year in 2007.The average home in Vancouver clocked in at $811,000. The average new home sold at $1.1 million, the average condo sold for $407,200, up some 15 per cent over the previous year. (Even the average used condo came in at $376,000.) Unit sales were 12 per cent higher in December 2007 and active listings were eight per cent lower than December 2006 at 8,286. Low inventory and strong sales predict a strong spring ahead. 2007 was a very strong year indeed and the first half of 2008 looks good, but there are land mines. Our prices are VERY high, our affordability is zero, but this is offset by huge capital investment, large foreign investment, low, low unemployment, very low vacancy rates. We would not be surprised to see a reversal some time this year, but remain convinced that 10 years from now we will see prices much higher yet.

Published in West Coast Homes + Design, January/February 2008

Ozzie Jurock is a Canadian real estate adviser and author of Forget About Location, Location, Location. He is featured in Donald Trump's latest book, Trump: The Best Real Estate Advice I Ever Received. Your can reach him by email at oz@jurock.com or at www.reag.ca.




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