IN THIS WEEK’S FACTS BY EMAIL:
- SURVEY QUESTIONNAIRE SUMMARY
- NORTH VAN CITY ZONING OPENS INVESTMENT PLAY
- ‘EVOLVE’ ALMOST GETS IT RIGHT IN MOODYVILLE
- SALES OF RENTAL BUILDINGS SLUMP BUT PRICES DON’T
- CMHC HOUSING ISSUES: “PROBLEMATIC” MEANS POTENTIAL?
- CLOSER LOOK AT THE OKANAGAN, ESPECIALLY KELOWNA
- RESIDENTIAL LAND CRAZE HITS TORONTO
- EYEBROW RAISER: NATURAL GAS BANNED AS OF MAY 1
- WORDS I HATE
Review Of The Questionnaire
First, thanks for taking part in the survey. This was the largest ever response to our survey (41% of all subscribers took the time. Thanks). Second, thanks for kudos, for admonishments and for darn good suggestions. (DETAILS BELOW)
• International •
I’ll be in Europe with my Clan for the next few weeks and will report back to you some of the real estate values of London, Stockholm, Copenhagen, St. Petersburg, Hamburg, Berlin, Dresden and other major cities. We also keep an eye on BC and Canadian issues while away. We will try and do some podcasts from Europe – which you will find at www.youtube.com/jurockvideo (push the ‘subscribe’ button).
• Canada •
CMHC Housing Issues: “Problematic” Means Potential
You need a codebook to read Canada Mortgage and Housing Corp.’s national Housing Market Assessment, released this week for Q2 2017. When it says “strong evidence of problematic conditions” and “overevaluation” it means “a good chance to make some money as a real estate investor.”
Victoria is “problematic” and has “overvaluation”, for example while “conditions have improved” in Regina, Montreal and Quebec City.
For investors, Victoria is seeing a near zero vacancy rate, multiple bids on all types of homes and rising prices. Regina, Montreal and Quebec City are, in comparison, deadbeats as far as potential appreciation or rising rental income are concerned.
Vancouver, Toronto and Hamilton are all “problematic” while Moncton and St. John’s are not. But we know where we would sooner be investing,
Major Point: Here are CMHC’s most strongly problematic cities: Victoria, Vancouver, Hamilton and Toronto. The weakest problem cities are: Ottawa, Moncton, Halifax and St. John’s.
Residential Land Craze Hits Toronto
The housing and condo market in Toronto is roaring and the craze has spread to the sale of land with residential potential, according to ace appraiser Altus Group. Sales of residential land in the first quarter of this year, at $1.55 billion were worth more than all the sales of office and industrial real estate. There were 171 residential land sales in Q1, a 52% increase from Q1 2016. The difference with Vancouver, where residential land also leads all commercial sales, is that Toronto has huge tracts of land. For instance, two of the biggest sales in Q1 was 73 acres that sold for $175 million and 91 acres that sold for $130.7 million.
Major Point: In Vancouver it is not uncommon to see infill land (for example a service station on West Georgia) sell for the equivalent of $30 to $40 million per acre. In Toronto, even in this boom, residential land is selling for around $10 million an acre.
Major Point: The Foreign Buyer tax will cool the SF home sector of the market – as it did in Vancouver, but it will recover and Toronto house prices will keep heading up.
• British Columbia •
Closer Look The Okanagan, Especially Kelowna
In our Outlook issue we recommended Kelowna as an outright buy in 2015 and 2016 and this January we called it one the best landlord cities in BC.
Now, Kerkhoff Construction is shutting down the sales centre early for its 21-storey condo tower in downtown Kelowna because the 109-unit project is already almost sold out after coming to the market in November 2016. “Sales have proceeded well beyond our expectations,” says Leonard Kerkhoff, “We expect to sell out well ahead of projections.” There are only 4 townhomes and 22 condos left in the complex and Kerkhoff expects them to sell (prices from $389,900 for a one-bedroom condo to $1.6 million for a sub-penthouse) before the sales office closes June 3.
Kelowna’s housing market is white-hot right now, with the inventory falling 37% this March compared to 2016 and sales up 58%. The average listing is selling within 10 days.
In fact, the entire Okanagan is on fire for investors because profits go where people go and people are going to the Okanagan.
Together with Vernon, West Kelowna, Peachland and Lake Country, the greater Kelowna area has a population of 256,216, up 7.46% since 2011. Kelowna proper has a population of 127,380, up 8.6% in five years, as one of the fastest growing metropolitan areas in Canada. The city’s population is growing due to in-migration from the Lower Mainland, Alberta and elsewhere in BC as opposed immigration. The population of the greater Kelowna area, is expected to hit 451,553 within 18 years.
The Kelowna real estate market has sizzled over the past year, as the average price for a detached house rose 15.5% to $598,500 in March 2017. The average price for apartments increased nearly 18% to $312,000, over the same period. As of February, 12% of all buyers were coming from the Lower Mainland and another 10% from Alberta.
There were 2,196 housing starts in Kelowna in 2016, up 72% from 2015. According to Central Okanagan Economic Development Commission (COEDC), building permit values have increased 84 per cent over the past five years.
Aside from Kerkhoff, other big developers are busy in the area. Kelowna is seeing an a 11-storey, 101-unit tower by Aquilini Development and Construction, to be completed in late 2017; a 20-storey condo project by Mission Group downtown; Aqua, a 400-unit complex by Mission Group to the south of downtown; and another 207-unit Aquilini tower downtown. Among the low-rise projects, there’s a six-story 40-unit project by Edgecombe Builders Group in downtown; a multi-phase project called Central Green by Mission Group which will see its first phase complete in 2017; and a $150 million, 600-unit project by Westcorp south of downtown. Across the lake several large resort developments are either in the construction or build-out phase. These include West Harbour by Troika, which will be built out in three phases, the first with 250 units; New Monaco in Peachland, a large project in the planning phase.
In Kelowna’s suburbs on the eastside of the lake, there’s the ongoing development at McKinley Beach; Diamond Mountain in Glenmore, a 250-acre new single family neighbourhood under development; and in Lake Country, Lakestone by Macdonald Development Corp., which has plans to be built out to 1,365 homes, and The Lakes, a 300-acre planned neighbourhood.
Kelowna has the advantage of a highly diversified economy, rooted in agriculture, construction, health care, tourism and education, and with a growing technology sector that already employs 7,600 people and generates $1.3 billion in economic activity. Major employers in this space include Disney Interactive. Also, new film sound studios have just opened in both Kelowna and Vernon.
Major Point: Kelowna’s rental vacancy rate is 0.6%, according to CMHC, among the lowest in Canada. We advise smaller investors to buy condos for rentals and appreciation (Example: MLS 10130450, two-bedroom condo for $159,900; and $179,900 for MLS 10130034, a two-bedroom corner-unit condo). But there are some interesting bigger offerings: for example, a 26-unit apartment rental building complex (2 buildings) on a 0.78 acre lot near downtown Kelowna listed for $4.9 million by HM Commercial Group. This pencils to $175,000 per suite, but it could have value added. As always, we are not recommending you buy any of these deals, just find them interesting examples of the Kelowna market. You gotta schuss them out yourself.
• Vancouver •
Sales Of Rental Buildings Slump But Prices Don’t
Sales of rental apartment buildings in Metro Vancouver have slumped but the prices remain at eye-popping levels. Despite what you hear from agents, the introduction of the foreign-buyer tax in August of last year had a big effect on sales of apartment buildings, which are counted as residential for the tax. A study of sales worth more than $5 million is revealing. Before the tax came in, 43 such building sold for a total of $472 million. After the tax came in, 30 buildings sold for $262 million. Following a scorching first of the year, the last half of 2016 was slowest six months since 2014.
The reason is that foreign investors, mostly from China, are not buying for rental income or based on capitalization rates (which are now in the skinny 2% range or even lower): they are buying the land for future development. As Avison Young notes in their Spring 2017 Multi-Family Investment Report, released this week: “Offshore buyers have a different investment criteria and highly compressed cap rates are less of a factor in their decision making.”
Major Point: After a brief consideration, foreign buyers are coming back into the Metro Vancouver apartment rental market and are competing with domestic investors. A number of deals worth more than $20 million have already gone firm in the first three months of this year (and we expect at least two long-time held portfolios to be sold by summer). If you still own an old apartment building in Metro Vancouver, cash out this spring, especially if there is any chance of land lift. You will get more money now than you will make renting the apartments for the next 10 years – and invest in outlier emerging markets (Abbotsford, Kelowna, Kamloops, Nanaimo and Langford are good bets).
North Van City Zoning Opens Investment Play
There is a lot of talk in Vancouver real estate about meeting the needs of the “missing middle” – those too rich for social housing but too poor to afford the million-dollar-plus price tag of homes large enough for a family. Like many working families.
So far of course it has mostly been all talk, but North Vancouver is an exception. It has not only moved aggressively to increase density zoning in both detached and multi-family neighbourboods, it has convinced new home builders to get into the act.
And it has made the upscale community a great place for real estate investors to be looking, despite the high entry prices.
North Vancouver City – which incidentally has seen a 10% population surge in the past five years to 52,898 people – now allows three housing units on each detached hot: a secondary rental suite and a laneway housing. Secondary suites have been allowed in the city since 1993 and laneway houses since 2010, but previously a homeowner could not have both. Now they can. Also, the homeowner can choose to live in any of three units, which means an owner could downsize and collect rental income without moving off their lot. Also, only two parking stalls are required for three dwellings
Brilliant. The only step missing is the ability to stratify the laneway houses, but the zoning provides an investment opportunity.
The city’s rental vacancy rate is 0.3%, among the lowest in Metro Vancouver.
So here’s the opportunity, even for a flipper. The detached housing market in North Vancouver is slow right now. Sales, at less than 90 houses a month, are half of what they were last spring, before the foreign-buyer tax came in and most are in the surrounding North Vancouver District.
The average price of a detached house in the City is from $1.6 million to $1.8 million and prices have not moved much in three months. You may find a buyer willing to negotiate.
So, you buy a detached house, say in Central Lonsdale, with a secondary rental suite. You then apply for the laneway house and have an architect draft a plan for it (Click House and other modular plans are also available). You don’t actually build the laneway house.
Then you list the house for sale, offering it as a potential three-unit rental investment package. Keep in mind that North Vancouver condos are selling for an average of $606,000 and townhouses for $890,000. Old rental apartment buildings are selling for $345,000 per door. The extra rental adds great value.
Major Point: There is an opportunity to leverage the North Vancouver City detached house into an attractive rental package worth much more money. Wise to get onto this early because, as the spring selling season starts and investors catch on, prices will increase.
Evolve Almost Gets It Right In Moodyville
Moodyville in North Vancouver City had all the old detached lots rezoned two years ago to allow high-density multi-family development and Guildford Brook is now building an innovative townhouse project that nearly gets it right. The 46 townhouses, all 1,700-square feet with 3-4 bedrooms, include some with lock-off suites of legal rentals that the owners can use as a mortgage helper or a nanny suite. Good idea. But the Evolve is also being built to Passive House standards. Bad idea. While Passive House does cut energy bills (you can heat a standard room with two light bulbs) it requires such thick walls that it reduces the living space and also requires air-tight construction, solar panels and less window space.
Major Point: There are good reasons why Passive Houses have never caught on. Using this excessively high energy standard will add to the cost of the townhouses. No presale prices are set yet, but we figure the big townhouses will be listed north of $1.5 million, and Passive House can add up 10% to 20% to the price.
Words I Hate
A few weeks ago, I started this section on words or phrases that I think are overused and that bug me.
- Literally (always used whenever it is NOT literal)
- At the end of the day … (used by everybody at the end of every statement)
Several Subscribers took up the “oft repeated, but meaningless words we hate” and added:
- Back to the drawing board
- Thrown under the bus
- Par for the course
- “Incredible” and its synonym “unbelievable”. These words are routinely used to describe things that are ordinary and banal.
Today I add:
- Actually (when it isn’t)
- Believe me (say that and I will not)
You are welcome to shoot me yours!
Eye Brow Raiser: It’s Official: Natural Gas Banned On All New Homes In Vancouver
On Friday morning, April 28, the City of Vancouver presented an Update to the Green Buildings Policy for Rezoning that comes into effect May 1.
- It requires any buildings that need rezoning to reduce their greenhouse gas emissions by 50% to 70% (and go to zero emissions by 2030). It means the elimination of the use of natural gas space or water heaters in new homes or other new buildings.
- This means higher utility bills, as natural gas is about 1/3 the price of electricity – so this will drive up consumer energy costs.
- Access to renewable natural gas will be restricted, as the option to choose it as an energy source will not exist.
- New builds won’t be able to use natural gas fireplaces, gas ranges or gas barbecues. Also, concrete balconies will likely require a thermal break and all condos and rental units will need mechanical ventilation (not just air pressure in hallways). Think much more expensive.
Major Point: This is Vancouver’s new zero-emission building bylaw, which will add a lot to new construction costs for homes but have a zero effect on global greenhouse gas emissions. Currently, all of British Columbia contributes 0.18% of global emissions. But who are we to fight city hall?
The United Nations is a joke. Apart from the fact that most nations don’t contribute a nickel to the operation and dominate the management of it, it has become a toothless laughingstock of the world. Last week another NUTS event: The Shariah-observant Kingdom of Saudi Arabia was just elected to sit on the U.N.’s Commission on the Status of Women, a group ostensibly devoted to defending the natural rights of women.
This UN nation has some of the strictest laws governing women in the world!!!
It will now serve on a panel that is “tasked with promoting gender equality and the empowerment of women across the globe.”
Surprised? Well, the Saudis, also sit on U.N. Human Rights Council.
Major Point: How did they get elected? By secret ballot. Likely from the dozens and dozens of nations that contribute nothing, murder its citizens and vote against anything that the UN ostensibly stands for.
1. Quesnel, 2 bdrm suite, right by the hospital downtown. $84,900;
2. Kelowna, check out the deals above.
(As we have stated many times, you are welcome to send in your ‘best deal’. There are no fees from us, nor any guarantees that your deal will be featured here or even is a good deal. It is up to you to study, evaluate and negotiate. Look up our disclaimer under the Hot Property section on your website. Interested parties – go to your website and get in contact directly with the owners/realtors or write to firstname.lastname@example.org)
A summary of the questionnaire results
Thanks you for participating and caring.
Facts by Email:
- Approve Length 89%
- Question Section 93%
- Toolbox Section 67%
- Books Section 54%
- Words I Hate Section 59%
- Hot Properties to Inbox 88%
- New Ozzie Podcast 82%
- Miss Hotline? No 72%
- Do you submit your own deals? No 92%
- Do you know how to upload deals? No 79%
- Do you know hot properties are sent to you earlier by 3-7 days? No 65%
- New Mobile look: Liked 61% | Don’t use mobile 39%
- How do you read the FBE? Web 9% | Email/Fax 83% | Both 8%
- If there was no web version would that bother you? Yes 28% No 72%
- Ozzie’s Thoughts 89% Liked
- Deals Section 86%
- Search Function 59%
- Mortgage Calculators 52%
- Daily Worldwide Stats 59%
- Did you know BCRED Listing is free? No 82%
Breakdown of the content for easy reading
- Western Canada
- Plots of the Week
- Best Mortgage Rates
- The above content structure is liked between 91% – 99%
- Recommended Reading yes: 82%
- Eyebrow Raiser yes: 99%
- How to info 89%
- Ozzie’s Weekly Thoughts: (Whimsical/Motivational) yes 93%
- Are you listening to Hotline? Yes 17% No 83%
- Ozzie’s videos? Yes 78%
- Would you rather have video then hotline? 79%
- Are you on the text alert system? Yes 35% No 65%
- Do you attend the deeply discounted Real Estate Landrush or Outlook conferences? Yes 58% No 42%
- Are you getting what you expected? Yes 98%
- Do your podcasts on YouTube with a quick text/mail alert
- Podcast is more convenient for me (also: I never listen to podcasts)
- What is a podcast?
- Great Idea!
- Podcasts – It’s the way of the future is it not?
There were a total of 169 comments on the podcasts and over 200 other suggestions. A lot of them complimentary *blush*! Thank you very much for participating.
We have started a Podcast/YouTube section at www.youtube.com/jurockvideo – under Real Estate Talks.
Currently there are two radio excerpts (from the Michael Campbell show 5 minutes each) and one on Tax Liens/a conversation with a US tax and foreclosure expert (20 minutes).
Many suggestions we have received we will incorporate and we have enjoyed the many kudos. The things that you have pointed out to us that we could do better, we will make every effort to do so (better instructions on Hotline, faster contact information on Hot Properties, more eyebrow raisers, etc.).
Thank you very much for participating.
WONDERING ABOUT THE HOTLINE?
Hotline Text Alert System and Hotline Code Changed
To get on the Hotline Text Alert System and receive a text update when the Hotline is ready, please text ‘Jurock‘ to the number ‘393939‘ and you will be added to the system. You will receive no more then one text a week.
The Hotline Code has also been changed. Our new Hotline access code is 8080. The Hotline phone number is still 778-328-8887.