Saturday, March 17, 2007

Who is Buying these New High-End Condos?

h/t to Roger Need for suggesting this post. I'll leave it up top for a few days to see if we can drum up some good insight and discussion and so I can complete some school work too.

Let's start with Shutters Spa and Residences: I used to see this advertised all the time in the TC. Not today. Anyone know how much the starting price was? Anyone own a unit?

Sister project to Shutters is The Falls: Their website says starting price is $389K, but the TC has an advert today for a 6th floor, 1 bed, 708SF unit for $409K. I guess if you don't mind living above Starbucks and her jazz-lite till 10 pm you can save yourself $30K and live on the 2nd floor.

Prefer golf to the downtown spa lifestyle? Money to burn? Have no fear, Victoria's got it here: The Sayward Hill project offers "million dollar views for free", and all you'll need to get started on this new, exclusive lifestyle is a mere $720K for over 1800SF of living space looking over the par 3 pitch and putt and Cordova Bay Golf Club.

Don't want to spend that kind of cashola? Don't plan on making Victoria your home more than one week per month? Not a concern here at Parkside Victoria where for just $125K you can get luxury living at a quarter of the price. My favourite thing about this development? When I enter in my criteria into MLS (you know, under $200K) this one always comes up. I figure we buy a share, live at home with the in-laws 3 weeks per month and live it up the rest of the time. Maybe we'll make some career moving contacts?

Like urban living without the condo? Well Redstone just may be for you. Priced between $485K and $659K these homes without the size and hassle of the real thing offer urban living in a unique "masterpiece of architectural design". Another sister property, Vicino, in James Bay is over 60% sold and starts at just $349K.

And the final piece in our luxury living puzzle? Bayview. Now I can't find any Internet links to back up these claims, but I'm pretty sure Mike Harris and Brian Tobin are involved in this project... at least as unit owners (I clearly remember the unveiling featured Alan Lowe, and the two aforementioned ex-politicos.

So what is the point of this post? Well, first off my cynicism and lame attempts at humour should not be misconstrued as contempt for any or all of these projects and what they bring to our city. I'm glad they are here and feel open to the idea of more. I think responsible development is generally good, especially if it considers the community and gives back perks in the form of green technologies and public green spaces. It means more natural financial gain for business owners and employees alike in this town and hopefully a reduction in the reliance of seasonal tourism for some businesses.

But really, who can afford to live in these places at these prices? Let's use Sayward Hill as an example because it is probably median price for luxury in this town. I can't back that up, but for this hypothetical it seems to me that is unnecessary.

Purchase Price: $720K... I'm a shrewd negotiator so I got them to eat the GST.

Down Payment: $180K or 25%. I'm a savvy investor, I know the market is high, my returns in stocks will likely be better so I won't keep all my cash in RE.

Monthly mortgage payment: $2700; I'm a high net-worth person, the banks appreciate my business, I have no trouble getting 5% interest rate for 5 years.

Fundamentals: if $2700 represents 30% of my available monthly income, as it should, then my monthly income is somewhere around $9K give or take a few hundred depending on how the bond market is doing this month. What do I have to have in my savings to generate that kind of dough? Only about $1.7-1.8 Million if my bond yield is around 5-6%.

We had a really interesting conversation with 5 adults whom I would guess to be roughly in the age demographic of buyers of these types of units. It was insightful to say the least. 2 of them were from TO and simply said, you sell your North Toronto home for $550K-$650K once your kids are gone, then 'downsize' out West to one of these units. You get luxury, a beautiful city, fresh air, rare snow (and all the other things we know about the west coast lifestyle) all for roughly the same equity you had in your TO house that was paid for a decade ago. Your retirement income doesn't change no matter where you live, and in effect your purchasing power goes up a bit out here because generally speaking the cost of living is cheaper here than in TO.

That part of the conversation made perfect sense. And maybe that's the answer to this question?

Those of us from out here already didn't quite see it that way. We just see condos costing more than the homes we grew-up or still live in and can't fathom the idea of selling a perfectly good house at $600K to carry a mortgage on a relatively good-sized condo that, while may be a luxury-upgrade, comes at a cost of high monthly assessments and a new round of keeping up with the Jones' in the parkade where our Toyota Corolla's don't fit in with the sea of BMWs and Mercedes. So we sell our house, buy a $450K, 800 SF unit, not quite on the water, invest the $150K difference elsewhere and there you may have the buyers of the lower priced units.

So next question? Whose buying those $950K houses in Oak Bay? I could chase my tail around these questions all day. So I will stop and let you try to make some sense of it for me.

38 comments:

Roger said...

hhv,

Thanks for opening this discussion.
BTW, your mortgage numbers are off a bit. A 720K purchase with 25% down is a 540K mortgage. At 5% with a 25 year amortization and 5 year term you pay $3140 per month.
Add in $300 month for taxes and $250 for condo fees for a total of $3690 per month. A conventional lender wants a family income of $134K for this purchase. A nice mortgage calculator can be found @
http://tinyurl.com/3cs9gk

hhv said...

It's a sad state of the market when I automatically use 35 years for amortization and skip calculating the assessment into the factor.

But you are right, my numbers are off.

Cheers

Roger said...

hhv said: It's a sad state of the market when I automatically use 35 years for amortization

Imagine that you buy your house on your 30th birthday and you finally pay it off when you get your first pension cheque at 65. That is a sobering thought.

BTW - HHV - did you get those graphs I sent you?

hhv said...

Yes, thank you. Very informative.

CMHC has already introduced limited interest-only mortgages and a 40 year amortization. The big banks haven't picked up the 40 year option as far as I am aware.

We've been using the 35 year to calculate payments just as a way of getting in. The plan was always first 5 years at 35 paid weekly fast-track (which is actually 28 years) then when renewing we'd drop it down to 25 paid weekly fast tracked or better depending on the state of our income at that time.

Roger said...

hhv said
We've been using the 35 year to calculate payments just as a way of getting in.

If you choose this option and interest rates go up you no longer have a way of lowering the payments while you ride out the storm. You may not want to sell in a rising interest rate (i.e. buyers market).

Prairieboy said...

I know someone who bought a condo at Shutters. She's retired and a recent widow. Her house was Central Saanich area, and is looking forward to moving into the city. I think, no problem for her paying for a place at Shutters after selling her home. And being single, she won't require much space. I'm happy for her, and her story is very understandable. But how many widows are moving into those places??

Vicguy said...

I can't see too many widows moving into downtown from areas like Central Saanich. If it was my mother I would be highly concerned for her safety with the scuzz walking around downtown these days.

Vicguy said...

Just watching the business news and they stated it well : the RE bizz took marginal renters and turned them into marginal home owners and now they are back to being marginal renters.

As well in a few weeks expect to see some hedge funds come out stating they are going under or close to it cause they bet too much on mortgage backed securities.

How the Canadian banks with all their US inroads/exposure the last 10 years can not come out of this unscathed has me baffled.
Maybe they are waiting til the very bitter end before breaking the news to us,by then all the sheep will be herded and fully mortgaged and they won't be able to afford to sell ? Hmmmm.... ya just never know do ya ?

Call me a pessimist but I have lost faith in believing all the MSM talking heads trying to say it won't happen here.


roger,
thanks for the hot list link and the Oak Bay condo story, will be a good one to follow.

Vicguy said...

A couple of good articles in the NY times this weekend.

http://www.nytimes.com/2007/03/17/business/17dream.html?_r=1&th&emc=th&oref=slogin


Buying with the help of mom and dad

http://www.nytimes.com/2007/03/18/realestate/18cov.html?em&ex=1174449600&en=5bb8eafb9770f6f8&ei=5087%0A

Roger said...

vicguy,

Those were great articles. I think there is a lot more Bank of Mom & Dad going on in Victoria than we might expect. This Bank might stop issuing loans once the TC publishes one or two negative articles. That may be a while though - they don't want to offend the real estate advertisers.

Roger said...

Hot off the press from RBC:

www.rbc.com/economics/market/pdf/house.pdf

Check out the affordability graphs and charts for Victoria at the end of the report. How many new buyers at these levels? Can existing buyers hang on?

Vicguy said...

roger,

Thanks for the RBC report link, more signs that the banks are now totally out to lunch or desperate as ever or both. They are screaming relief is finally here ? they should grab a brain, where's the relief ? just because prices have stopped going up once they doubled while wages went up 6 % at the same time ?

And their affordability chart is out of whack with the others out there that were saying Victoria was at 60% and Vancouver 70% just a month or so ago and now it is magically 50% ? They must be sweating it out in their mortgage department to put out this pump job. Don't worry kids,everyone in the pool,the sharks won't bite, you got 35 years to pay but don't mind the 10% correction it's temporary. The MSM are out to keep this bubble going at all costs.


And get this,I even read on Friday that market analyst Micheal Levy has jumped ship too. 2 months ago he says in quotes that a serious correction is imminent. Now last Friday he says there is no bubble ! Can you believe these pimps for the RE bizz ? I couldn't believe it,talk about a credibility issue. I will never respect his opinion again on anything,and I thought he was one of the credible guys,NOT !

talus said...

You know I really question the theory of the rich Toronto buyers selling their homes and moving west when I see this graph...

http://www.canadian-housing-price-charts.235.ca/canadian_housing_price_chart.htm

talus said...

Try this link instead...

http://tinyurl.com/ytmhvk

hhv said...

Talus,

"You know I really question the theory of the rich Toronto buyers selling their homes and moving west when I see this graph..."

I agree. I provide anecdotal evidence at best, the result of one conversation with in-laws. The area of TO they are familiar with is Toronto proper, not GTA, which I'm guessing is the basis for 'Toronto' in the graph.

In-town TO is much closer to in-town Vancouver or Victoria I believe.

bauhaus said...

Just wanted to say great blog, great topic. Just moved back to Canada and was wondering these same things. You've gotta think at some point we'll run out of buyers for these properties, at these prices, whoever they are. It just doesn't make a lot of economic sense right now.

talus said...

"In-town TO is much closer to in-town Vancouver or Victoria I believe."

Ya your right.... I did a quick check on North York (TO Central) and they are as high or higher. We have relatives that live there and it's quite a nice area.

I did note that some of those TO houses look to be in better shape than our 1920's Vic homes that haven't seen a reno since being built!

After recently moving back to BC from Ontario my home equity is currently liquid and won't become a new residence until this madness ends. I love renting - it's so much cheaper than being a home owner at this point!!

Vicguy said...

Just counted 14 new houses listed since late afternoon and almost the same amount since this morning making it about 30 listings. Any of you know if these are normal numbers for one day or a Monday for that matter ?

JMK said...

Just counted 14 new houses listed since late afternoon and almost the same amount since this morning making it about 30 listings.

Sounds like a lot to me. There have been no new condo listings 250,000 or greater in the last four days in Vic/Fernwood/Vic West, unless the MLS is broken.

hhv said...

MLS is slowest way to get listings. Its usually a week behind and many properties that sell in days don't show up on it.

I have noticed its very slow on the listings that we've been getting over the weekend and to today.

Vicguy said...

Another 13 this morning.

Roger said...

vicguy said
Just counted 14 new houses listed since late afternoon and almost the same amount since this morning making it about 30 listings. Any of you know if these are normal numbers for one day or a Monday for that matter ?

Where are you geeting these updates? Do you have a URL to share?

Vicguy said...

roger,

Got them from your link to scott piercy hot list that you posted the other day.

Vicguy said...

Just heard about a friend of a friend whose parents just bought them a condo,must be nice,the insanity continues.

JMK said...

MLS is slowest way to get listings. Its usually a week behind and many properties that sell in days don't show up on it.

Hmmm, that would be a bummer. I was getting notices from my realtor as well, and MLS only seemed a day behind. Do you know how many downtown condos have been listed >900 sq ft in the last 2 days? Where do you get your listings from?

hhv said...

jmk,

We get email updates throughout the day whenever there are any price changes or new listings. We only see the properties that fit our criteria, so if the units under 900SF are 1-beds we wouldn't see them.

The link to the hotlist: http://scottpiercy.ca/hotsheet.html
will have almost-instantaneous listings... try there.

Our realtor, part of one of the bigger Victoria firms has an internal MLS system. We get phone calls for properties that never make MLS because they sell day-of-list. That hasn't happened in the last few weeks though.

Vicguy said...

"We get phone calls for properties that never make MLS because they sell day-of-list. That hasn't happened in the last few weeks though. "


Got this hunch we are on the verge of a shift in the tides.

hhv said...

That hunch hit me in the gut a couple of weeks ago like a ton of bricks.

JMK said...

We were looking for a condo, 2-bed, 250-550k, leaning towards the mid to high end. Nothing we were looking at sold quickly, and we were pretty leisurely about it. That being said, most things we were interetsed in have recently sold, and nothing new seems to have come on lately. We've already bought, so we aren't actively looking, but I've gotten in the habit of watching the MLS.

Vicguy said...

Just learned of yet another young couple buying,sounds like a 25% down with the help of the parents,the problem is they make a combined income average of $13 an hour. Talk about how desperate they are to lend out cash.
With all the taxes and strata fee they are now paying double their rent.Another one bites the dust.

hhv said...

and they say we don't have any sub-prime issues in canada, eh?

Roger said...

jmk said

That being said, most things we were interetsed in have recently sold, and nothing new seems to have come on lately.

Lots of condos have come on the market in this price range during the last two weeks. If you watch this site: scottpiercy.ca/hotsheet.html you will see more every day.

I also subscribe to an update service and I have had price reductions on all kinds of properties, including condos in this range, over the last week. Most drops are 10K but I had one in Oak Bay drop from 539K to 489K after 15 days on the market.

Vicguy said...

"and they say we don't have any sub-prime issues in canada, eh?"


yep,it was a sub primer.

JMK said...

Lots of condos have come on the market in this price range during the last two weeks.

Sorry, my criteria got spread over two posts:

$250-550k, >=900sq ft. Downtown, Fernwood, Rocklands, Central Park, Vic West.

There is one new property on Piercy's site today that matches this. Nothing yesterday that I noticed. Maybe things are being snapped up pre-MLS, but that goes against my experience of the last two months of looking pretty hard for properties in this criteria. Days-on-market was usually greater than 30. Those were the traditionally slow months, though. Cheers

Vicguy said...

Did you all see this one ? A sure sign we are at the top as they keep the pump alive no matter what it takes.


http://www.canada.com/vancouversun/news/story.html?id=81641424-91be-421d-ad43-0e438a88adb5&k=24036

Anonymous said...

There is one house I have been watching (not scientific at all I know) for a while. It had a price drop of $10,000 after being listed for one month. It has now been pulled. I wonder if they didn't want to do another price drop or are going to go with another realtor or are will list again when it is more into the spring market. This is someone who has to sell by the way as they are moving so it will be going back up eventually. I will watch to see what the new list price will be. I wonder if they will go back to the original list price?

Roger said...

News report from today's TC newspaper business section:

Today is the grand opening of the VREB Barber Shop in Victoria BC. Will Shaveit, owner and hairstylist, welcomes all home sellers in the region to his new enterprise. A few customers arrived on opening day and were given a light trim haircut. Customers do not need an appointment but business is expected to pickup shortly.

Will gave the following statement to the press: "We saw an excellent opportunity in the Victoria region and look forward to serving many of you in the near future. Several new barbers will be joining us over the next few months and a brushcut specialist will be joining us later this summer."


On behalf of all lowballers, I wish Will continued success in his new endeavour.

Roger

HouseHuntVictoria said...

Finally, Roger, Finally. Halleluyah their picking up the story...