Home buyers undeterred by B.C.’s high prices

Tuesday, March 16th, 2004

35 per cent of residents plan purchase in next 2 years

Wyng Chow

Despite British Columbia having the most expensive housing prices in Canada, 35 per cent of residents in this province say they plan to purchase a home within the next two years — nine percentage points higher than the national average.

The RBC Royal Bank’s latest annual home-ownership survey, released Monday, shows the number of would-be purchasers in B.C. climbed a full 11 points from 24 per cent in 2003, when a record $24.2 billion worth of residential real estate was snapped up.

“The market in B.C. is definitely unique to the rest of the country, and RBC’s survey indicates that 2004 could be a year like no other,” said Kevin Lutz, Royal Bank’s mortgage manager for Vancouver.

“The low cost of borrowing, flexible payment plans, and current economic market conditions make this an opportune time for purchasing homes. What we are seeing is an overwhelming belief in the long-term value of a home.

“The housing industry is a key economic driver in Canada, with home-building, buying and renovation expenditures representing an estimated record $154 billion in 2003.

“The sale of homes is an important economic indicator and consumer confidence barometer, and the RBC survey indicates that 2004 won’t be far off last year’s record pace.”

Vancouver residents, Giuliana Bertuzzi and her husband, George Samilski, who are typical first-time purchasers, are among those who decided to quit renting largely because of record-low mortgage rates.

On Monday, Macklem Mortgage Services, a Delta-based mortgage broker, was offering fixed five-year terms as low as 4.35 per cent, compared to the posted rate of 6.2 per cent.

“We’ve been renting for quite some time,” said Bertuzzi, 35. “We felt that with the low interest rates, you can’t beat buying.”

After months of scouring the Lower Mainland, the couple, who work in the film production industry and have a 10-year-old daughter, settled on a three-bedroom, 1,600-square-foot ground-floor condominium on West 10th, in Vancouver’s Fairview area, paying “under $400,000.”

They took out a two-year open variable-rate mortgage, which floats with the prime interest rate, at 3.75 per cent.

On Monday, with prime at four per cent, Invus Financial, a national mortgage brokerage firm, was offering five-year variable loans at rates as low as 3.32 per cent.

According to the RBC survey, British Columbians are the most likely in the country to have a mortgage on their home, at 64 per cent of respondents, compared to the national average of 54 per cent.

B.C. homeowners also have the highest amount left to pay at an average of $111,280, compared to the national figure of $86,175.

(RBC has the largest residential mortgage portfolio in Canada, with more than $73 billion in loans outstanding in 2003).

Of the 35 per cent of B.C. respondents who said they plan to buy within the next two years, seven per cent of them intend to purchase within the next six months.

Among the Royal Bank’s other major findings:

– Twenty-six per cent of national respondents plan to purchase a home within the next two years, up from 25 per cent in 2003.

– Albertans lead the country as the most likely to buy, at 36 per cent — edging B.C. by one percentage point. Last year, 34 per cent of Albertans planned to buy.

– Canadians aged 25 to 44 are the most likely to buy, topped by those aged 25 to 34, at 42 per cent, up three points over last year. This is followed by 33 per cent of those aged 35 to 44, up seven points from 2003. Those aged 45 to 54 held steady from last year at 22 per cent.

– Young Canadians between 18 and 24 dropped in terms of buying intention from 40 per cent in 2003, down to 27 per cent this year.

– B.C. residents are the least likely to be doing home renovations in 2004 (24 per cent of respondents), compared to the national average of 28 per cent.

– Of potential B.C. home buyers, 69 per cent prefer resale homes, while 30 per cent favour newly-built ones. Sixty-two per cent are most likely to purchase a detached home, 13 per cent a townhouse, 11 per cent an apartment or loft, seven per cent a condo, and five per cent a semi-detached home.

– Nationally, 34 per cent of renters and 21 per cent of owners say they are planning to buy in the next two years.

“Perhaps the reason for this is that 89 per cent of them expect house prices to be the same or higher next year,” noted Royal Bank national mortgage manager, Nancy Mitchell.

“We believe that for a significant majority of Canadians, their home is as much an investment as it is a place to live.”

The B.C. Real Estate Association reported Monday that a toal of 7,566 homes worth $2.14 billion sold in February on the Multiple Listing Service, representing a 30-per-cent increase in dollar volume and a 16-per-cent rise in unit sales compared to the same month last year.

The record $24.2 billion in B.C. residential sales for all of 2003 shattered the previous high of $19.7 billion set in 2002 by $4.5 billion, about 23 per cent more.

In January, the average MLS price of a home in Greater Vancouver was $348,100, the highest in Canada, followed by Toronto at $296,000.

In February, the Lower Mainland’s average price climbed 1.7 per cent to $354,100. Canada Mortgage and Housing Corp. predicts the region’s average MLS price to rise a further eight to 12 per cent this year.

The RBC’s 2004 survey, conducted by Ipsos-Reid between Feb. 3 and Feb. 15, was based on random telephone interviews with 2,000 Canadian adults. A sampling this size has a margin of error of plus or minus 2.2 per cent, with the results considered accurate 19 times out of 20.

© The Vancouver Sun 2004

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