FRANK O’BRIEN
Other
An early death to B.C.’s harmonized sales tax (HST) on recreational residences, much lower condo and cottage prices, a sharp upturn in the Alberta economy and a renewed search for retirement havens has spurred a spring surge in the vacation-home market.
But this upstroke is different from the cycle that ended four years ago; today, say those close to the action, vacation buyers are looking for solid, simple value, not innovations such as the hotel condos, leased land or fractionals that defined the last boom.
When the market sank in 2008 it exposed shared ownership concepts as a failure for most investors. At Sun Peaks ski resort near Kamloops, restricted-use hotel condos that once sold for $199,000 are now listed for about one-tenth of that price. At Whistler, hotel condos – known as Phase 2 units – are selling for less than they were in 1999. Recent listings show one-bedroom Phase 2 suites at Whistler priced as low as $61,000.
A Vancouver investor who bought a shared unit at the Penticton Lakeside Resort in the Okanagan for $140,000 three years ago estimates the unit has lost half its value. “We only used it for 12 days in the last two years,” said the buyer, who asked not to be named. “But the rentals have never covered our costs.”
Fractional units, where resort condos are usually sold in one-eighth to one-quarter shares, have also floundered. Among the high-profile collapses is the luxury Parkside Resort and Spa in Victoria, where one-eighth fractional shares were being sold from $115,000 to $121,000 last spring. Parkside is now under court protection from creditors, with more than $60 million in unsold inventory according to court filings by Victoria-based developer Aviawest Resort Group.
As real estate consultant Ozzie Jurock explains, the problem with fractionals is that, if the market turns down, up to eight owners will be all trying to sell the same unit at the same time.
“No one will build hotel condos or fractionals anymore,” predicted Zack Bhaista, vice-president of Mayfair Hotels and Resorts of Vancouver. “Anybody who bought a [shared ownership] hotel unit in the last 10 years has lost a tremendous amount of money.”
Developers who are offering full ownership, however, have found stability sells. At Sun Peaks and Whistler, demand for traditional condominiums and chalets is rising, despite relatively high values. Sun Peaks is also finding interest in its single-family building lots, after discounting prices 30 per cent from the peak to $195,000.
Search for value
Evidence of the search for value is perhaps best seen at Cultus Lake Cottages in Chilliwack, where 165 freehold cottages a block from Cultus Lake have sold at prices of around $300 per square foot. Developer Jon van Geel is quick to credit HST changes for an uptick in sales this spring, but Cultus Lake combines many of the features hard-nosed buyers are looking for:
• freehold land with detached cottages;
• close to the lake and next to a golf course; and
• a short (under two-hours) drive from the Lower Mainland.
After the HST came into effect in 2010 – slapping the full 12 per cent tax onto secondary residences – “we had more people looking but less people buying,” van Geel said. With the change this April, which allows vacation homes the same rebates as principal residences for the next year until the tax ends, “sales have shot up,” he said. He estimates the HST added up to $20,000 to $40,000 to the cost of a Cultus Lake Cottage.
Studies show how badly the HST hit B.C.’s recreational market. In the Okanagan, for example, sales of property to Alberta buyers fell by 40 per cent in the six months after the HST was introduced in July 2010, compared with the previous six months. In the Kootenays, the value of sales to Albertans was cut in half after the HST came in despite deeply discounted prices, according to a survey by Landcor Data of New Westminster.
A profile of today’s recreational buyer is also seen at Cultus: only about 4 per cent of the buyers are permanent residences and their average age is around 50. “People are buying a long-term vacation home for their families,” van Geel said. “People like to have their own dirt under their property, not someone else’s condo.”
Darkside
“Opportunities [in the recreational market] that haven’t been seen in years are now presenting themselves,” Elton Ash, regional executive vice-president, Re/Max of Western Canada, said last year – and the comments ring true today. But there is a darkside to why recreational prices are such a deal in B.C. this spring: a faltering economy in many small towns.
A prime example is Powell River on the upper Sunshine Coast. Blessed with sandy-beached islands, half-a-dozen lakes, excellent fishing and outstanding ocean cruising from modern marinas, Powell River is facing troubled waters. On April 23, the town’s largest employer, under court protection from creditors, sought court approval to sell the town’s pulp mill and biggest employer. As stores go dark, the downtown retail strip “looks like a hockey player’s teeth,” as one local put it. Further hampering the market is soaring BC Ferries fares. A family of four driving up from and back to Vancouver would have to pay $225, and another fee increase is expected this summer.
As a result, “There are real estate bargains here,” confirmed veteran Powell River realtor Warren Behan. Waterfront houses can be had for $500,000 or less and oceanview houses sell for half that price, he said. Two-bedroom view condos go for $125,000, some even lower. A classic old cottage a block from the water on Texada Island is listed at $94,000.
Vancouver Island
Across the Georgia Strait in the Comox Valley recreational property is selling now for at least 20 per cent lower than two years ago. Expect to spend upward of $300,000 for an oceanview house close to skiing at Mount Washington, sandy beaches and several fine golf courses.
Parksville, together with nearby Qualicum Beach, has among the highest percentage of seniors in B.C. – about half of Parksville residents are retirees. Many of the recent residential projects are aimed at this sector.
“Seniors represent 65 per cent of the [residential] real estate market here” and the preference is for detached ‘patio homes’,” said Rudi Widdershoven, a realtor and president of the local chamber of commerce. Three-quarters of new buyers are from outside the region, he said, and about 16 per cent come from Alberta. Prices have fallen. “You can buy waterfront houses starting at $600,000,” Widdershoven said, compared with a base of $900,000 at the peak.
There are aggressive resort-development plans for the Parksville waterfront working their way through the process.
Investors may also take advantage of incentives being offered in Nanaimo. Vancouver Island’s harbour city is offering a downtown building site for $1 for anyone qualified to build a hotel next to the Island Conference Centre. The city’s also offering a 10-year tax holiday for any new hotels built in the core. This on top of a current tax break for those building residential in the old heart of the city.
Generally, Nanaimo’s residential market is coming back to life, agents say. Buyers can find detached houses for under $300,000. Typical condo prices are around $214,000, down 7 per cent from a year ago. Nanaimo has a bustling downtown waterfront, including a new cruise ship terminal.
Lowest prices
In the Cariboo, a soft economy – hit by a downturn in forestry – has mde for some hard bargains for homes and recreational property.
You can buy lakefront lots at Burns Lake for less than $30,00; a private 4.5-acre island on Stuart Lake for $75,000; or, for the true getaway, 40 acres of lakefront for less than the cost of small condominium in Metro Vancouver.
Elaine Kienzle of Doucette Realty, who has listed 26 acres – with road access – on Clueulz Lake about 55 kilometres west of Prince George for $295,000, said there are at least 15 lakefront cottages for sale in the region, with prices around $215,000.
In the Kootenays, long a target for Alberta recreational buyers, lower sales and prices are common across the board. Housing sales fell 27 per cent to 159 in the first two months of this year, compared with the first two months of 2011. The average price dropped to $240,097 from $252,698, reports the BC Real Estate Association.
Canmore on sale
Vacation-condo buyers in Canmore, Alberta’s most prominent resort market, are also seeing much lower prices after a collapse in the overbuilt condo market.
Bellstar Hotels & Resorts bought up all of the unsold units in the luxury Solara Resort & Spa, where prices were $700 a square foot before the project sank into receivership. Now Bellstar is selling the condos for about half that price in a Rocky Mountain centre that’s close to both Calgary and Banff.
“If somebody’s looking to get something quite exclusive or higher end, this is when they can come in,” said Ed Romanowski, president of Bellstar. He added that most Canmore vacation condos can now be snapped up for between $250 and $400 per square foot.
“It’s certainly not a great time for developers. We’re making substantially less than we made a few years ago,” he said. “Even though we bought the [Solara] property out of receivership, it’s not as [profitable] as we intended it to be. What that spells is it’s just a good deal for the consumer right now.”
Romanowski expects values to rise as Edmonton and Calgary real estate prices recover, which could also help B.C. vacation properties.
The assessed value of the average hotel condo unit in Canmore is down about 16.5 per cent from a year ago according to Frank Watson, a property assessor with Bow Valley Property Valuators. Canmore’s experience is much like some areas of the Okanagan and the West Kootenays: a glut of property when the market nosedived in 2008, with aggressive marketing since then chopping prices down.
“Probably 250 units came on just at the wrong time,” noted Watson. “There was an oversupply.” Yet the upside in Canmore is in high-priced real estate, headded.
Wealthy lead
“Strangely enough, it’s the upper-end houses … the $2 million-plus houses in [the exclusive community of] SilverTip,” Watson said. “They seem to be holding their own.”
In contrast, properties valued at less than $900,000 have generally fallen in assessed value for 2012, he said.
This coincides with the experience of Sotheby’s International Canada, which notes that higher-priced recreational properties are apparently leading the spring sales curve.
“We are seeing stronger sales of luxury properties from Saltspring Island to Whistler,” said Ross McCredie, Sotheby’s president and CEO. McCredie notes the wealthiest buyers now lead the way, as in all real estate recoveries.
from Western Investor May 2012