Saturday, January 5, 2008

It is seen as our "Yaletown"

Get ready to reach for a tums.

I swim fairly regularly at the Crystal Pool. I like the facility, the staff are really friendly and they try very hard to keep the facility secure. They even let me take my stuff onto the pool deck in the early am during club swim times. That said, there are signs everywhere warning you not to leave valuables in your car or in their lockers. They have a theft problem.

When I drive north on Quadra Street, right at the corner of Bay and Quadra, there used to be an obvious crack house that sat empty and un-rented for at least a year. I guess the owner got tired of dealing with problem tenants. The neighbourhood has a high ratio of rental properties to owner occupiers and the condo building on the north side of the Bay/Quadra intersection is strictly a rental only building. Family and owner occupiers are not allowed.

Back to the house. A while ago, maybe a year and a half ago, Large and Co bought the place, raised it up and set about "revitalizing" it. Good on them. It's now on the market. I figured, with the neighbourhood, location and all, that they would be listed around $250-$300K depending on square footage. The last 3-4 weekends they've been having open houses, despite not listing the places on the MLS. Curious, we went by today.

Let me say I was disappointed on two fronts. First, the place, while nice looking, smelled terrible. And not the new paint and carpet glue headache-inducing smell, but the "there must be something rotting in the walls, or some serious mildew somewhere smell."

And the second was their prices: starting at $344,900 for a rather large by one bedroom standards 825 SF unit. And moving up to $370K for the 2-bed main suite at 944SF. You'd think for those prices the developer would have at least stained or otherwise weatherproofed the extensive exterior stair sets. Just to put s further into perspective, you can get a brand new one-bed place in Tuscany Village for under $300K, roughly the same SF and a much nicer neighbourhood.

There was actually three really disappointing things; I forgot the most disappointing aspect to this place, (taken directly from the marketing materials):
With the excitement surrounding The Hudson, The Radius and other projects in the arena area, this neighbourhood is poised to become Victoria's urban place to live and work. It is seen as our "Yaletown." The revitalization is well on its way. Bay Street to Fisgard and Quadra to Douglas Street is set to explode for the discriminating metro living lifestyle.

The Phoenix is the latest addition with three affordable apartment homes. Two two-bedroom homes and one one-bedroom loft style.

The Phoenix starts at an unheard of $344,900. Being first in to this "up and coming area" will reap the greatest rewards. Don't miss out.
Wow. I'd heard of the "Victoria's Yaletown" nonsense before. But never in my wildest imagination would I expect condo marketing to suggest it so far north and east of the two block radius that is Fisgard, Chatham, Douglas and Blanshard. I guess this is what happens in a world class city; pretty soon the VicWest revitalization is going to be referred to as "Victoria's Manhattan," the Humboldt Valley will be known as "Victoria's Park Place" and the new conversions going into lower Yates and Johnson will be known as "Victoria's Soho."

"Victoria's Yaletown" at the corner of Quadra and Bay is, was, and always likely will be, the closest thing to "Victoria's Hells Kitchen" (of The Bronx). Except Hell's Kitchen has more culture, more excitement and very likely lower RE prices.

This bubble is going to get ugly. I feel bad for people buying right now. Tune in soon to the next post where we almost buy a property but get talked out of it by... wait for it... a banker manager who hasn't got a single new mortgage on the books in a branch that has been open for almost a year. Yes, that's in the CRD too. And says he: "The Bear Mountain condos are in trouble, they have "investors" walking away from their contracts because they can't assign them." In plain language that means those that bought pre-sales hoping to "flip" their units before they're completed have now realized that they can't cover the mortgages with the low rents in the neighbourhood and would rather just lose their deposit than their shirts as completion looms.

That is the disaster in the making that will blow the roof off this market. Sounds like we may not have to wait that long.

28 comments:

Anonymous said...

I was up looking at the Bear Mountain condos last week and you are spot on about this.

There have only been 6 ml re-sales in all of 2007! There are about 170 condos built and more under construction. If you had bought a pre-sale - a year or more ago -you would be lucky to get that price today. The units that pre-sold are mostly listed for rent, by the same company that are selling the suites, on craiglist and they start at $950 a month for a 500 sft studio which are listed for sale at $300,000. Yikes! This is gotta be the WORST investment you can make.

roger said...

This is one of the Bear Mountain Condos that HHV was referring to. Completion date is Jan. 18 and buyer wants out. Any lowballers out there?

olives said...

Didn't that house at Quadra and Bay have an extensive fire in it? Maybe that is part of the reason for the bad smell.

I worked in that area years ago - well actually a wee bit farther north in "Quadra Village" (although it wasn't called that at the time), and I can attest that it is a really really crappy neighbourhood in my opinion.

Anonymous said...

I was driving my 10 year old and a gaggle of girls to the Oak Bay Rec Centre last night for skating. We were at the corner of Foul Bay and Oak Bay Avenue.

There was an underage prostitute (about 15 years old) meth head and her pimp fighting on the street. The kid was white as a sheet and covered in sores. The pimp was yelling at her. She was shaking from drugs.

We have decided to leave this city and hopefully go back to Toronto. This is too much.

Anonymous said...

You can put lipstick on a pig but it is still a pig.

I suspect this is all going to end very ugly.

S2

Anonymous said...

I drove by the house on the corner of Bay and Quadra yesterday. I'd seen them working on it and then poof there it was, lights all beaming, people walking around inside, leaning against the windows to watch the view of delivery trucks and impatient drivers below them. Fantastic, non? The urge to blow my horn as I went through the intersection was strong. What a joke. Then I read they are selling them as suites? I too wondered what the whole house was going for and thought if it was anything over 399K it was too much.

On a different note does anyone know anything about the Lakeside Village condos, my sis just bought in there. I hope they will be ok in that one. Work forced the move down to Victoria. They were a bit panicky I think and I couldnt talk them out of it - none of my family are bearish on the market. They got a 2 bed, 2 ba, I think in the 389K range. They are selling their Parksville home, should have some cash to invest. I'm concerned about the ole bait and switch with tiles and finishing near the end of completion. Due to be finished in August. They had to fight to get two parking spots.

Confession time. We bought a place, it was life over smarts kind of thing. I think we will be ok but still I know we bought at the top of the market. We plan to be in it for a long time so we may be able to ride out the bad years. I dont suppose anyone has leads on great mortgage rates. I will continue to read HHV and VT, I'm still a bear, just a little poorer for needing a cave.

Any info to both queries greatly appreciated.

notso-farfromhome.

Anonymous said...

I've also been watching that house in the corner of Quadra and Bay for the past year or so being built. If I recall correctly, from the TC's front page article many months ago, Large & Co, is a father & son venture - made for a very nice feeling cozy story for the TC. You know, father & son are working hard to make Victoria look better by dealing with houses in tear down situations.

Well good for father & son if they manage to sell it; however, 344K+ x2 for that location is a complete and utter joke!

About 15 years ago, I used to live in an appartment complex just 1/2 a block down the road. I remember the constant street noise of Quadra and the ambulances, police cars and fire trucks that used to pass by day and night. In the building I was in there was a prostitute living 3 doors down, although she didn't bring 'clients' home. And upstairs from us there was some weirdo that was seen and heard having a fight with somebody in the hallway and pulling out a hand gun, not to mention the various tenants that smoked enough pot to impregnante the hallway carpet with the smell.

... And that was 15 years ago, back when this house the Large & Co just fixed was still livable and not boarded up as it was only a couple of years ago.

Then about 2 blocks away, there's the Douglas & Bay townhouse complexes which are quite possibly one of the worst parts of town to live in.

In the wise words of Mr T. "I pitty the fool..." ... who pays $344K x2 to live in this "Yaletown"! I don't know whether to laugh, cry or shake my head.

PS. There's a reason they placed a police station 2 blocks down the street! Think about it.

vg said...

Wow, now I have seen it all. Funny you should mention that HHV as I drove by that place last week and was looking at it and had to be impressed by the way they fixed the dump up but my problem is I was stupidly under the assumption it was a non-profit group who fixed it up to help out low income people find a place to live for short term while they get their life together. Don't ask me where I got that from,maybe it was those who got hired on the cheap to fix it up.

Fool me for thinking that the greed has not gotten so bad that one of the crappiest neighborhoods next to Vic West could be labeled as the new Yaletown, now that is THE most pathetic attempt to scam people that I have ever seen in this city.

I used to know someone who rented a place two doors down 20 years or more ago and it was a shithole neighborhood back then even and the traffic is horrendous not to mention the vehicle exhaust that builds up in the tight little area,in the summer it's even more brutal.

vg said...

Did you see the Kelowna condo developer in that huge development who went tits up yesterday ?
I saw it on Global last night as all the trades guys pulled out their tools,pay day got missed by the sounds of it.

I thought everyone was moving to Kelowna and those places would be all sold out by now ? GONG !!

hhv said...

Not so far from home,

Mortgage rates will be coming down over the next year, I wouldn't be locking in this year unless that is too much risk for you to stomach.

I've always maintained that if you can afford to buy a place that is going to make you happy and you want to stay there long term, then you should buy regardless of the market. So congratulations.

To the anon whose sister bought in Thetis condos. Why would they be any different than any other condo that has trouble selling out, or whose value declines in a declining market. But again, see above for my standard disclaimer.

I should state that you should never take what I say as advice. Always see a professional financial advisor, preferably a fee-for-service one.

Anonymous said...

VG,

do your remember the name of the project for that Kelowna Developer?

Anonymous said...

HHV thank you for your congrats, I appreciate it. Will keep an eye on BOC announcements and rates. Does anyone know of a good link for comparing bank rates and products?

Yes, I wish my sister luck with the completion dates etc on the Lakeside Condo development. Word is that they are bringing in the same guy who developed Matticks Farm shopping area to do the same over there. Make a village and they will come...my question is where they will put it, I dont remember there being a lot of spare land unless they are going to use the underpass to Thetis?

notso-farfromhome

Anonymous said...

anon at 9am jan 6th: Not sure if it's been said but get a mortgage broker. Saves you a half percent or so and costs you nothing.

Anonymous said...

LMAO.

I grew up on Empress Avenue, which is right around the corner from the refurbished crack house. This was my "hood" from the late seventies to the mid-nineties.

It's still a rough area, and the location for that particular house is certainly TERRIBLE, but the neighborhood as a whole has actually improved since I was a kid in the eighties. The neighborhood has more yuppies living in it now, and more gentrification with more owner-occupiers. When I was growing up, it was 99% renters, and a lot of the old-school hippies and drunks. It was funkier than it is now (drunk and stoned hippies rather than zombie meth-heads) but there was a lot of violence and prostitution, which has since been moved around (e.g. I understand the prostitutes have moved East to the Fernwood proper area).

One thing about the neighborhood is it has a lot of micro-environments. Sometimes one side of the street can be dodgy and the other not, or individual houses. Aside from that intersection being busy and noisy, the apartment buildings across the street from it have always been a bit dodgy.

There are IV drug users around, as my mom still lives in the hood and she finds needles. This is something at least that we didn't have back in the day. It's certainly not Yaletown in any case - who are they fooling? Yaletown as we all know was an industrial warehousing district. Central Park, as I know it, is just a residential area that has had its ups and downs, just like every other part of Victoria proper outside of Oak Bay and Fairfield. It's like a little piece of Esquimalt in Victoria.

Oh, and the earlier poster was right about Blanshard Courts being dodgy. It's gotten better as well though - in the eighties we wouldn't even walk through there. Of course, you're more of a target as a kid. Wark Street, north of Bay and just down the hill from the refurbished crack house, has a few apartment buildings that are filled with prostitutes and drug types. So does the street, name escapes me, one street further down the hill and bordering Blanshard Courts (Norm's grocery on the corner). I should know, I bought drugs in a lot of these buildings - LOL (only pot, mind you).

Billy TwoBaulz

Aleks said...

I'm looking for a place to rent, and it's amusing to see the condo ads mixed in with the houses on Craigslist. $1800 can either get you a whole house with a yard in a nice neighbourhood or a 750sqft condo downtown. Spot the one that is trying to cover the mortgage payments rather than pricing to the market!

hhv said...

Yes, but, Aleks, that 1800 still doesn't cover the mortgage on those $450K condos!

hhv said...

Yes, but, Aleks, that 1800 still doesn't cover the mortgage on those $450K condos!

Roger said...

HHV said

Yes, but, Aleks, that 1800 still doesn't cover the mortgage on those $450K condos!

There are some high end 800K+ condos on Sayward Hill near Matticks Farm in Saanich. One phase is completed, one is ready for occupancy this month and the third completed this fall. There are still lots of units available. I have seen two rental ads recently (one on Craigslist) for lease at $2600 to $2680 per month.

Some renter will be laughing at this deal. The investor is paying 4K a month in interest (actual or lost) and has condo fees and maintenance of around $1000 per month. The renter lives there with no worries for 1/2 the carrying cost. However the owner can look forward to all the capital gains!!

roger said...

Here is a short article I wrote for submission to Real Estate Weekly:

Investors can help make Victoria more affordable.

Many investors are looking at Victoria as the ideal place to purchase real estate. Many reports by VREB, CMHC, Realtors®, and the news media have stated that real estate has nowhere to go but up. Annual gains of at least 8 to 10% for single family homes will be the norm for the next couple of years. However, most investors are left wondering what is the best way to make these easy profits.

Well, there is an easy way to purchase property, help the less fortunate and make money at the same time. One simply needs to buy a new condo and lease it to a renter that is either unable or afraid to make a real estate purchase commitment. The following example uses leveraging and the investor does not need to tie up much capital which makes it all the more attractive. A 2 bedroom 800 sq. foot condo is purchased for 400K in one of the many developments available In Victoria. With a 40 year mortgage at 6% and 10% down the payments are only $1960 per month ($1780 is interest). The condo fees and taxes will be around $640 per month for a total monthly outlay of $2600.

Now an unsophisticated investor would try and rent the property for this amount and would not be able to find a tenant. This is where the investor needs vision. You rent the condo for $1600 per month and pick the best tenant from the dozens that jump at the opportunity. Now there will be a loss of $12K per year ($9840 is tax deductible) but this just makes Revenue Canada your partner in this scheme. Your annual after tax loss will only be around $8000 if you are in a high tax bracket. After five years you sell the property as the condo is probably looking a bit tired and requires maintenance . The total loss to date is 65K (initial property transfer tax of 6K, 40K of annual losses and real estate fees of around 19K). The investor only has to sell the unit for 65K more than the purchase price to break even . However that condo should be worth at least 525K in five years!! So the savvy investor has just made 60K on a 40K investment and helped out the less fortunate in Victoria.!!

You need to consult your financial advisor before making any decision. Beware of real estate bears that will tell you that your shoebox condo will not be worth even 465K (breakeven point) in five years and that there is a glut of condos coming on to the market. Those with a vested interest in real estate such as Realtors®, local newspapers, mortgage brokers and bank economists will be more than happy to satisfy any doubts you may have about the booming real estate market in Victoria. Remember, everyone wants to move here, the boomers are downsizing, BC has a great economy and the Olympics are only two years away.

greg said...

That's priceless Roger, if I had somewhere to publish the piece for you, to get it to the prospective investor, as opposed to jbrs* and unrepentant RE Bears, I would...

*jealous bitter renters

hhv said...

Roger,

Tell me again why you are not writing your own blog? That stuff is priceless. Brilliant man, brilliant. I be buying you a nice expensive beer when we hit the 10%!

Roger said...

HHV said

Roger,

Tell me again why you are not writing your own blog?


Because I have too much fun writing posts on your blog and on the Victoria Housing Market blog

Roger said...

I got the following email from a reader of my article:

Roger- I read your article and see that after I purchase the condo I only have to sell for 15% more than I paid, 5 years later, before I start making the easy money. What happens if something unforeseen happens and the condo market drops by 15% over 5 years?

Dear reader - First of all the pundits will tell you that this will never happen. But if it did occur and you sold for 340K then you would have a total loss of 125K on your 10K investment. However your partner Revenue Canada would allow you to declare a capital loss of (400+6-340+19)= 85K on your taxes. Plus you would have had all those tax loss writeoffs for five years. You see every cloud has a silver lining.

Roger

Anonymous said...

So does the street, name escapes me, one street further down the hill and bordering Blanshard Courts (Norm's grocery on the corner).

That's Dowler. I walk this road, through Blanshard Courts, on my way home. I haven't had any problems although you're right, it's less than desirable. I believe every house on Dowler between Princess and Bay is suited and rented. At least that's what the indicators tell me. One of them went up for sale this past summer and sold fairly quick.

Anonymous said...

"You can write off the taxable loss of 85K."


mmmmmmmmm, should this not read you can write off this taxable loss only against a Capital Gain?
Not against your personal taxes?

Please correct me if I am wrong.

mold city said...

If you don't have your own yaletown you can have ours. Its a soul-less vapid area that is increasingly over-run by junkies and the homeless.
Best place on earth!

roger said...

anon 8:17 wrote

mmmmmmmmm, should this not read you can write off this taxable loss only against a Capital Gain?
Not against your personal taxes?

Please correct me if I am wrong.


You are indeed correct that a capital losss can only offset a capital gain. However you can carry it forward and hopefully the investor was making or will make some successful investments. If not their "partner" just left the building and they lost even more money.

B Courts Home Girl said...

Hey this is really interesting stuff, I lived in Blanshard Courts for 10 years, moved out in 1977. Lots of rumbles, drugs and crime. It was the land of the down and out, even the cops would not always come when you called them, only if they could spare a second car to watch the first one so it didn't get vandalized. There was effort made to try and help the kids there though, someone turned the church at Dowler and Kings into a Drop in Center for them. Well good luck to who ever buys into it, but that kind of stigma is hard to get rid of.