Local Real Estate News

Hard to Believe!

Closet-sized condo at $395,700 'a deal' in London

Raphael Satter

Associated Press

Tuesday, January 23, 2007

LONDON - Location, location, location. Almost anywhere else, the tiny dilapidated studio wouldn't attract much more than mice. But this is London and the six-square-metre former storage room -- slightly bigger than a prison cell and without electricity -- is going for $395,700 Cdn.

The closet-sized space in the exclusive Knightsbridge neighbourhood may be only "about the size of a ship's galley, said real estate agent Andrew Scott, who's handling the sale. "But it's permanently anchored to one of the wealthiest neighbourhoods in the world."

At more than $5,126 for about a third of a square metre, the mortgage buys a spot within walking distance of tony stores like Harrods and London's iconic Hyde Park. Originally conceived as a maid's room, the apartment at 18 Cadogan Place hasn't been used for years and is littered with trash bags and crumbling paint.

A coffin-sized shower is en suite, and storage is provided by a shallow closet and 25-centimetre-deep shelves cut into the wall. Two hot plates and a small sink make up the kitchen. Two dirty windows allow light to filter into the basement room, and the fire escape could conceivably double as a shared patio.

With no electricity or heating, Scott said it would cost an additional $69,700 to make the room habitable.

"It is an investment," he said, as he stretched his arms the width of the room, laying his palms flat on opposite sides of the wall.

The sale of this dark, mildewy room illustrates the astronomical rise in property values across London, which in the past year has seen average residential property prices increase 22.4 per cent, to about $830,000, according to figures released Monday by Rightmove, which tracks the British property market.

Prices in London's most desirable neighborhoods have grown even faster, with average house prices in the borough of Kensington and Chelsea -- where Cadogan Place is located -- rising 61.8 per cent over the past year to a jaw-dropping $2.6 million.

Ultra high-end property prices in London are the most expensive in the world, with some recent sales hitting $6,900 for about a third of a square metre -- making the Cadogan Place studio a bargain by comparison, according to research published last year by CB Richard Ellis Group Inc.

Similar properties in New York can go for $6,200 for about a third of a square metre.

Scott said he already had three offers on the property, which might go to auction. Size, he added, is in the "eye of the beholder."

"If you thought of this as the cabin on a boat, you'd say, 'It's pretty spacious,' " Scott said.

© The Vancouver Sun 2007

Mortgage News

Hello There
Just thought I would update with the latest news from a couple of the lenders.
Genworth (GE) is now doing a 40 yr amortization.. Firstline Mortgages (CIBC's sister company) is now participating in it. The rest of the lenders will probably follow suite soon.
Res Mor Trust is also participating in a 35 yr amortization with GE along with also qualifying a client with a much higher debt servicing of 44%.
For example a client who earns $60,000 per yr and could previously purchase for $235,000 with 5% down ($13,750) Payments on a 25 yr am to be $1360.00
Now with the new program can go as high as approximately $380,000 with 5% ($19.000). That is based on a 5yr At 5.25% and taxes $1300 net and MF of $200. Payment would be $1929.24.
That is $150,000 more mortgage to qualify on than on a 25 yr am!!
Firstline is working on the same 44% as ResMor  with a 4o yr am so it will push it higher.
The insurance fees are a little higher. For the 40yr with 5% it is 3.35% instead of 2.75%.
Call anytime with questions
Cheers

Has the Bubble Burst?

The housing bubble. What do our experts say?
Since 2001, we’ve been hearing about our doomed housing market.
From a serious downturn to a full-blown bubble burst, the naysayers continue to capture our attention and heighten our concerns.
    Is there any truth to the prophesized collapse?
    To find out, we asked some experts.
    “The fundamentals underlying housing demand in Vancouver are positive and will remain so next year,” reports Gregory Klump, Chief Economist at the Canadian Real Estate Association.
    These fundamentals include a strong economy, high employment and income growth, and low interest rates.
    Urban Futures Institute economist Andrew Ramlo expects international immigration will accelerate, along with in-migration from other provinces as baby-boomers start to retire and head west. “I also see job growth remaining positive, given rising investment in public infrastructure such as the RAV line, the Gateway Project and the Olympics,” says Ramlo.
    What would have to happen for a bubble to occur?
    Several telltale signs must exist, says Helmut Pastrick, Chief Economist at Credit Union Central of BC. “A necessary condition is a high level of speculation,” says Pastrick, who defines speculation as a market characterized by large numbers of investors buying homes which they hold for short time periods, typically less than six months.
    To gauge speculation Pastrick uses Land Registry data. It indicates that in Greater Vancouver, just seven per cent of properties are being bought and resold in less than six months. In 1981 this rate was three times higher and in 1990 it was about twice as high.
    The most speculative activity is the downtown Vancouver high rise condominium market.

    There, 20 per cent of properties are bought and resold within six months.
    For evidence of a bubble, analysts typically look for a telltale parabolic (hockey stick-shaped) increase in home prices.
    “This isn’t the case right now,” explains Klump. “Home price increases in Vancouver have risen significantly in the past few years because of high demand and tight supply,” explains Klump. “In the past few months, increases in average price have slowed.”
    Now that sales are returning to more normal levels and new listings are on the rise, Greater Vancouver’s housing market is becoming more balanced, concludes Klump.
    And, while prices are at an all-time high, the majority of home buyers can still afford a home for two reasons:

• most first-time buyers (about 20% of the market) typically pay less than the benchmark price, buying condominiums or townhomes in suburbs; and
• most buyers already own homes and are benefiting from rising prices as a result of increases in home equity position.

    With sales starting to slow, can our market hold up or should we expect a marked slowdown?
    “Most figure that a slowdown is inevitable given the run of growth we’ve had in the past few years. But, nobody is speculating that the slowdown will be a decline, just a more moderate rate of growth,” says Ramlo.
    Sauder School of Business at UBC professor Tsur Somerville, agrees. “The market is slowing, but slowing is not a collapse.”
    Somerville is most concerned about the downturn in the US economy and its impact on us. “The US is still one-third of the world’s economy so we’re sensitive to a slower US economy. It impacts our tourism and softwood lumber industries.”
    Somerville also thinks that public infrastructure projects like the Olympics and the convention centre are positive for our tourism industry. And, overall Somerville thinks these negatives and positives add up to a soft landing.
    But, cautions Somerville, “Investors are still a bit of a wild card. We don’t know how they would respond to a price decline – whether they will sell or hold.”
    “Since most home purchases are bought as principal residences and are held for a long time period, short-term price swings are less important than the longer-term trend,” reminds Pastrick. “In the last 45 years, home prices have doubled more than five times. The long-term price supply outlook remains favourable owing to continuing demand growth and ever present land supply constraints.”
    These market fundamentals would have to shift both dramatically and rapidly for us to hear a resounding pop coming from the housing market, explains Ramlo. “In the absence of any rapid changes, the only pop to be heard should be in the naysayers assertions about a burst.”
    That said, the strong period of growth we have seen since the late 1990s will inevitably be balanced by a period of much more tempered growth in the near future. This more moderate growth could help address issues of affordability that have arisen over the past couple of years.

RRSP HOME BUYERS PLAN

RRSP HOME BUYERS PLAN ("HBP")

The HBP is a program that allows individuals who are first time home buyers to withdraw up to $20,000.00 from their Registered Savings Plans to buy or build a home for themselves. The Plan may also be utilized if funds are used by or for a related disabled person to acquire a home which is more accessible or better suited to the needs of the disabled person.

The information contained on this page is for individuals who are using the HBP for their own purpose. If information is required with respect to withdrawing funds to assist a related disabled person, please contact your financial advisor.

Individuals do not have to include eligible withdrawals in their income, and the RRSP issuer will not withhold tax on these amounts. The withdrawal may be in a single amount or there may be a series of withdrawals throughout the same year, provided the total of the withdrawals is not more than $20,000.00. If the qualifying home is purchased with another person, each person can withdraw up to $20,000.00.

All withdrawals must be repaid to your RRSP's within a period of no more than 15 years. Generally, you will have to repay an equal amount to your RRSP's each year until you have repaid the entire amount withdrawn. If you do not repay the amount due for a year, it will be included in your income for that year.

Funds may only be withdrawn from an RRSP under which the borrower is the annuitant. If another person (spouse) contributed to the RRSP, the borrower is the annuitant of the RRSP, even if the spouse deducted the contributions from taxable income. If an individual contributed to their spouse's RRSP, the spouse is the annuitant of the RRSP and may withdraw the funds, even if the individual has deducted the contributions from his or her income.

A number of conditions have to be met to participate in the HBP. These include the following.

1. There must be a written agreement to buy or build a qualifying home. This means a Contract of Purchase and Sale, not a pre-approved mortgage.
    
2. The qualifying home must be intended to be used as the principal place of residence by the borrower no later than one year after buying or building it. Once the home is occupied, there is no minimum period of time that it must remain occupied as a principal residence. Also, there may be situations where the qualifying home is not occupied by the end of the 12-month period after being bought or built. The borrower may still be considered a participant in the HBP because he or she intended to occupy the home as their principal place of residence no later than one year after buying or building it.
    
3. The individual must be a first-time home buyer. For the HBP, a home buyer is not considered a first time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal, the home buyer or their spouse owned a home that they occupied as a principal place of residence. The definition of a first time home buyer for the HBP is different than the definition of a first time home buyer for purposes of the Property Transfer Tax. To be eligible as a First Time Home Owner for the Property Transfer Tax you must have never owned a home at any time, not just in the last 5 years.
    
4. The HBP balance on January 1 of the year of withdrawal has to be zero. In other words, if a borrower has used the plan before, the withdrawal that was made in the past must be repaid entirely.
    
5. Neither the borrower nor his or her spouse can own the qualifying home more than 30 days before the withdrawal. This means that a withdrawal may be made for a qualifying home purchased in the last 30 days, but not more than 30 days. If the RRSP is locked in and funds are not available for more than 30 days after completion, a withdrawal under the HBP is not allowed.
    
6. The borrower must be a resident of Canada when he or she receives funds from their RRSP's under the HBP and up to the time a qualifying home is bought or built.
    
7. All withdrawals from your RRSP's must be in the same year and certain forms are required to be completed for Revenue Canada.

To view the government information brochure, please visit the federal government website at:

http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/withdrawals/hbp/

Please remember that this program may be changed at any time by the federal government.

Compare Vancouver to World Wide

Keeping track of the Jones worldwide Greater Vancouver’s superb quality of life – its scenic natural beauty, moderate climate and high level of services – make it the third best place to live in the world and the best place in Canada.     That’s according to a new quality of life survey by Mercer Human Resource consulting, which measured 39 indicators including health, education, climate and availability and quality of housing in 215 cities. Only Zurich and Geneva ranked higher.     But is our quality of life making us too popular?     In the past few years, Greater Vancouver has experienced record home sales.     The main drivers have been low interest rates, rising incomes and high consumer confidence.     A shortage of buildable land and product coupled with demand has lead to high home price appreciation.     Is this making Vancouver unaffordable? Right now, the benchmark price of a detached home in Greater Vancouver is $610,382.     We are using year end (2005) numbers in the above chart to ensure comparability.     The average sales price was $655,936 in January. In February it was $705,141. In March it was $699,871.     How does Greater Vancouver stack up when it comes to affordability? By international standards, Vancouver remains very competitive. Over, and over, we’re reminded that timing is everything in real estate. If we’re waiting in hopes that the market may be showing signs of slowing in the coming years or prices may be coming down, consider this. How does Greater Vancouver home prices compare worldwide? Area In Canadian $ REBGV Detached Median price (2005) 490,800 REBGV Detached Average price (2005) 587,972 Calgary REB 1,6 306,271 Anaheim-Santa Ana-Irvine 2,3 838,313 Honolulu 2,3 714,850 New York Manhattan 1,5 3,785,082 New York-Wayne-White Plains 2,3 602,170 San Francisco-Oakland-Fremont 2,3 867,149 San Jose-Sunnyvale-Santa Clara 2,3 902,044 London 1,4 748,468 Paris 1,5 1,493,905 Tokyo 1,5 605,805 Sources: REBGV, CREA, CREB, NAR, ODPM, Paris Chamber of Notaries. Notes: REB - Real Estate Board. 1. Average 2. Median 3. Detached 4. Multi-unit dwelling 5. Apartment 6. Dec. 2005 Note: Since benchmark prices are not available worldwide, to compare international home prices, we use the median and average prices.     As the 2010 Olympics draws closer, global attention will focus on Greater Vancouver. As visitors arrive and experience our clean air, sparkling mountains, vast outdoor recreational opportunities and safe environment, our popularity – and our home prices - will likely continue to increase.

Local Market Conditions

The current market is a sellers market. The market is brisk and many home sales are selling above the asking price with multiple offers. Current inventory levels are low in all categories and price ranges. Interest rates are still attractive and the BC economic forecast remains strong.