'World loves Vancouver . . . a very safe place to invest . . . to park money'
Couresy of Vancouver Sun March 27, 2010
The thousands of international visitors who came to Vancouver to take in the Winter Olympics may have come and gone, but investors in many parts of the world won't soon take their eyes off the real estate in the city's core.
That was the message delivered this week by the veteran organizer of new-home project sales and marketing campaigns, Bob Rennie, to a gathering of about 250 real estate agents in the Jameson House sales centre on West Pender. Jameson House is a 37-storey residential tower that was stalled during the height of the recession when it suffered a loss of financing, then headed to the courts for restructuring.
The Games, Rennie said in a 10-minute state-of-the-market address, made Canadians feel "unbelievably positive" about themselves, a feeling that's reflective of the way offshore investors view downtown Vancouver real estate.
"I don't think, as positive as I am, that I understand how [much] the world loves Vancouver," he told the group. "It's a very safe place to invest, it's a safe place to park money ... Yes, we went through a nine-month downturn, but from last September, it's been pretty amazing. If you have a house listed for $1.6 million on the westside, you just wait until Sunday and you count the offers you're going to be presenting. That doesn't happen anywhere else in North America."
Rennie reminded the agents, however, that when it comes to international demand, there are two distinct real estate markets in the Lower Mainland: the market in the suburbs and Fraser Valley, where there is "a constant supply of products, predominantly based on local incomes," and the market in the city core, the one fuelled by outside sources.
"We have China," he said. "I don't think we understand how much they'll follow the entrepreneurial footsteps of Hong Kong -- out of Hong Kong and into Vancouver -- especially given the turmoil of America. In America, everybody is nervous.
"If you look at the market of downtown Vancouver, the westside markets, and markets with constrained land supply and constrained inventory -- that's where outside eyes [are focused], whether it's China, whether it's Korea, whether it's Europe ... I don't think until six months before the Olympics we really saw Russian money here. It's coming."
Bosa Properties' Jameson House, a condominium development designed by world-renowned architect Norman Foster, represents one of the last luxury developments likely to be erected downtown, Rennie told the group.
"Look at Jameson House -- it's like waterfront: it's an eroding market," he said. "We're just not going to see a lot more of it. I think that the luxury market is sort of capped at the amount that's coming on."
Jameson's loss of financing in the fall of 2008 was followed by a struggle to restructure under court protection from creditors. One condition of the restructuring was that the project's pre-sale contracts be held in force, even though a number of buyers had fought for the right to rescind their deposits and get their money back.
Of the 138 Jameson homes, 34 remain available.
Rennie told the gathering that the recent downturn has created a "new economy" -- and that's created a new, more conservative mindset for consumers.
"In the old economy ... we were going to have more and more and more, and retire earlier. Now we're going to have to work a little longer. I forget who said this, but it's no longer about the return on my investment, it's the return of my investment."
Also changed is Rennie's thinking about mortgages, given recent predictions that interest rates may be heading upward in the coming months.
"What I've been telling everybody with more than one property is, over the last two to three years, float," he said in an interview. "Over the last year to 18 months, we've been saying you should lock in half your portfolio for five years and let half of it float.
"And now we're telling everybody, go take five or seven years because the buyer that's buying with the minimum 25-per-cent down, or even 10-percent down ... can't afford the risk. So go lock in. Rates are extremely low right now, and we're urging everyone that's buying in a pre-sale: go lock in your mortgages now. I don't think we should gamble with our principal residence."
Interest rates may represent a guessing game, but so too will be the effects of the looming harmonized sales tax, set to take effect on July 1, on residential purchases, Rennie suggested.
"It's how the offsets, how the developers are going to pass those through to the consumer, and I don't think everybody's figured that out yet," he said. "We just have to see how things move along. is it going to be that people are going to buy seven-per-cent more, or will they just buy seven-percent-less household?"