Today’s breaking real estate news, here.
I am in Vancouver for a couple of days, where the shores of the inner harbour are bristling with sea-blue, aquamarine and pale green condo towers. This place is condo crazy. The host of the radio show I was on talked nostalgically about the $1.6 million rented condo he was forced out of when the owner (who bought it for $750,000) decided to sell. He would have bought in a flash, he told me, but just did not want to borrow a mill.
Another local, a real estate entrepreneur and financial consultant, told me yesterday he had clients in his office this week – distraught. They bought five units in a new building for flipping purposes, but since the market’s turned sour – and since the local condo board outlawed rental units – they can’t sell, and they can’t rent. Financial Armageddon looms.
This is a city obsessed with condo crack, and on a desperate daily obsessive spree to find the cash to feed the habit. I’ve seen this movie. It ends badly. — Garth
Who’s buying Vancouver’s zillion-dollar condos?
The hottest ticket in Vancouver this week was not for a concert or a play, but a lunch hosted by the Urban Development Institute. And they call this place No Fun City.
The guest speaker was local condo merchant Bob Rennie, whose take on the city’s unrelenting real-estate market is considered by many to be as reliable as government bonds. The event was sold out weeks ago.
To call Mr. Rennie a condo seller doesn’t quite do him justice. In the past 10 years or so his company – Rennie Marketing Systems – has sold more than 10,000 units. Last year, sales totalled $1.5-billion. Not bad for a kid who grew up without much on the city’s east side – long before homes there became million-dollar lottery tickets.
The 51-year-old’s success has helped him put together a much-prized personal art collection, buy a gold Bentley coupe and purchase the zillion-dollar home he lives in.
Mr. Rennie is constantly evaluating and judging the market, betting on where it is – and isn’t – going. For the past decade, that’s been pretty easy. The sales-and-price trend in Vancouver has graphed in pretty much one direction: up. But many in Mr. Rennie’s audience this week were anticipating he’d be forced to deviate from his usual cheery script.
In fact, hours before he rose to speak, media outlets were reporting private-sector forecasts that showed the Canadian housing market cooling. Scotiabank warned that price gains from housing would ease in 2008 and slow down further in 2009.
If there is a slowdown under way, Vancouver seems to be immune from it. At least, if we’re to believe the mind-boggling numbers provided by Mr. Rennie.
Consider this: Of the 2,743 condominiums expected to be finished this year, nearly 90 per cent are already sold. There are 2,925 condos scheduled to be completed in 2009; 98 per cent of those are sold. And 83 per cent of the 714 that will be finished in 2010 are gone.
Many of the condominiums are attached to luxury hotel developments. Mr. Rennie is selling 123 units at the Ritz-Carlton, which is scheduled to be completed by 2011. Actually, he’s already sold 60 per cent of them at an average of $2,300 a square foot. That’s right, a 1,000-square-foot condo in downtown Vancouver that you can’t get into until 2011 will cost you $2.3-million.
Mr. Rennie said he used to joke that the per-square-foot cost of a condo in the city would be 2010 by 2010. Well, 2010 a square foot has come and gone.
The Ritz is asking $29-million for its penthouse suite, by the way. The one in the Residences at the Hotel Georgia sold recently for $18-million. And Mr. Rennie just unloaded the penthouse at the Shangri La, which isn’t even completed yet, for $16-million. Three years ago, that same penthouse, not yet built and 1,000 square feet smaller, was on the market for $5.3-million.
Can you believe these numbers?
Who’s buying up all the condos in the city? Well, a good percentage of the purchasers, as it turns out, are offshore investors, people making scads of money in China and Korea, Iran and Europe. And now, according to Mr. Rennie, Russia’s nouveaux riches are moving into the market in a big way.
Personally, I don’t get it. There are other cities in North America that have far more going for them than Vancouver but have not witnessed nearly the same run on their real estate. Chicago is one that comes to mind.
In Vancouver’s case, the old real-estate adage – location, location, location – seems to be true. The value of the city’s land and housing seems to be mostly about where the old town is situated.
Yes, you can live an outdoorsy lifestyle here. And there are some great restaurants. But let’s face it, much of the architecture is third rate and the city is bereft of the kind of cultural institutions that define great cities; that define the world-class city Mr. Rennie believes Vancouver is.
I don’t see it. Not yet.
Now, having foreign investors gobbling up the condo market isn’t all bad. Many have no interest in living in the units they own. They probably don’t even know what they look like. So they rent them out to people who effectively pay the owner’s mortgage, which is how the rich get richer. But the investor condo has become an important supply of rental housing in the city, which is dwindling at an alarming rate.
Who knows where this is all heading. Listen to Mr. Rennie and there appears to be no end in sight to the fantastic escalation in real-estate prices here. He may be right. In Paris, real estate is now so expensive investors are buying 1/11th of an apartment, according to a story in yesterday’s New York Times.
Anyone want to go in on a condo with me?
NS realtor sells green homes only 
New homes being built on an assembly line just outside of Toronto.
Hello Garth. I don’t know if you have time to respond to personal emails like this but I have been reading your “Greater Fool” website. I have not yet read your book but plan to as soon as I leave work today. My husband and I bought a 1250 square foot semi in Ajax, ON in 2003, we moved in in 2004. We moved to Ajax from East York because we could not afford to buy a house in Toronto even though we would have preferred to do so. We bought a small home because we didn’t want to buy more than we could afford even though we were now having to commute and still had childcare to pay for. We paid 191,000 for the house. I know that back in 2003 the market was very much in its upswing. I’m wondering you would assess that we paid too much for that house and if we decide to sell next year (when our five year mortgage comes up for renewal), if that would be a mistake?
I would appreciate any advice, guidance, thoughts that you have time to offer,
Sue
There is no correct answer to the questions, since this is your principal residence and it needs to be right for you – your space needs, location and financial reality. How far do you commute? If you have to drive back into the city every day, that’s a two-hour round trip in decent traffic, and three in bad weather. How much does that cost now, at $1.30 a litre? What’s your house like? Modern construction techniques – especially on lower-priced link homes – are appalling, and the life span of these places will be desperately short, before subflooring needs replacing within 30 years (most East York homes are in good shape after eighty).
I have no way of knowing if you paid too much, but at less than $200K, I seriously doubt it. As to selling, why delay? The market’s just starting its decline now, with listings rising and sales falling. Price levels will be next, and by this time next year we will be in the full flower of a widespread correction. What on earth are you waiting for? Sell now with a hefty deposit and a long close, then buy that home in the city at a reduced price and with far better long-term, prospects.
HI Garth,
We are in the process of selling two condos in Kingston, Ontario. I am also currently reading your latest book trying to gain some insight about whether to then buy, rent or live full-time in our RV. We are considering re-locating to Ottawa to be closer to family and because we really like this city. Any advice?
Ron
Good time to sell, bad time to buy. You’ll do much better next year than now, so rent. As for living in your RV, well, if chemical toilets and sleeping in a closet turns you on, knock yourself out.
The Ottawa market has yet to feel the sting of what’s coming, partly because price increases have been more moderate than the GTA, and partly because of a couple hundred thousand civil servants and the bubble economy the feds have created there. However, this is changing. The condo building I rent in – the city’s most upscale – has a supply of units for sale which cannot find buyers. BTW, my landlord, an investor, subsidizes me heavily, as do virtually all condo owners these days. Poor sops.
Mr. Turner,
I just enjoyed finishing your new book. After reading it I have an unanswered question regarding waterfront property in central Ontario (Bancroft, Muskoka) area. I have always wanted to purchase a property up there but have found the prices to be out of control. You referenced the Florida real estate taking a dive so would it be foolish to think it would not happen to Ontario’s cottage country? Going by the population pyramid in your book and your advice to homebuyers to purchase where the boomers are. Is it safe to say that these summer destinations will be immune to any real estate dive since boomers may move there after retirement? If it is not safe, what area of Ontario should i be looking at in order to get the most value for my cottage dollar?
Thanks for taking the time to read my e-mail.
Ian
One of the greatest myths perpetually perpetrated by the real estate industry is that cottages – especially in the orb of magnificent, world-class (gag) Toronto – are immune from market swings and will always climb in value. The reality is just 7% of the Canadian population own recreational properties, which means the other 93% do not.
Another reality is that a large number of these seasonal places are financed with money borrowed against the equity of urban residences. That means when city real estate starts to be pinched, financially stressed owners will dump the cottage before they part with their principal residence. Already sales levels in Muskoka, Collingwood, the Kawarthas are in decline. By this September prices will be in full retreat.
Hi Garth,
I read your book and am very quickly becoming addicted to this site. I live in Regina, where real estate has shot up like a roman candle. I sold my home a few months ago, and we made a tidy profit. I am watching this whole situation with disbelief. The media and realtors continue to tell everyone we are in a boom. Yet, except for a few more restaurants nothing has changed here. My wife and I plan to move to Edmonton area, but with their market blossoming, I don’t think we will be buying too quick. Am I wrong on my perception of what may be happening here. What are you seeing and hearing at your end? Is Saskatchewan turning into the mega powerhouse as everyone thinks? Your thoughts please and maybe some words of advise. Thanks and keep up the good work.
Clarence
Regina and Saskatoon are flukes. Prices were unbelievably low by the standards of most Canadian cities, so when oil money sloshed in from Alberta, and as the potash business took off on the back of a global agricultural crisis, the reaction was predictable. The rush higher in prices represents a catch-up phase for these prairie cities, and most of the gains will hold. I’m glad you sold and made some money, so don’t blow it now.
Edmonton’s market has retreated substantially over the last year, and is now a haven for buyers. If you shop hard and bargain even harder, you should be able to translate a middle-of-the-road Regina house into a starter home in the Albertan capital. If you are smarter, you’ll buy in one of the communities which ring it, and where prices have plunked back to earth.
Addicted to this site? You could do worse.
The hottest ticket in Vancouver this week was not for a concert or a play, but a lunch hosted by the Urban Development Institute. And they call this place No Fun City.
