Condo's, Coffee... and an ode from Ms. Hopkin

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A chilling turn of events for condo developers and a ray of hope for pre-sale buyers sewered by the market crash of 2008.

As reported in the Vancouver Sun, the B.C. Supreme Court has ruled that the pre-sale buyer of a UBC condo development is entitled to rescind the contract under the Real Estate Development Marketing Act because the developer failed to properly inform him of changes to the development. The section of law in question is one which requires that purchasers receive all amendments to the disclosure statement.

There are dozens of other cases currently before the courts from people who put deposits on condominium units when the market was red hot, and now, for various reasons, are trying to walk away from them.

I suspect that never in the history of real estate have so many disclosure statements been raked over with such a fine tooth comb nor developments so finitely inspected, as is now being done in British Columbia.

We will watch developments unfold with keen interest.

Meanwhile over on Real Estate Talks, one of the best R/E discussion boards around town, there has been an interesting banter about the spring bounce in the real estate market.

Sales volume is clearly up, driven by the government's desperate attempt to halt falling property values by slashing interest rates to historic lows.

Anecdotal evidence posted on the board suggests that many sellers are tapped out of equity in their properties that they are selling. Once sold, the outstanding mortgages held by the sellers are very close to the selling prices, ie…..no equity left. So, although there are a lot of first time buyers purchasing these properties, the Seller’s don’t have the equity to buy “up” or even buy “down” afterward.

In addition, it is being suggested that some investors who would love to sell, won’t sell because there is no profit on the table. They are underwater on the deals and are left bleeding money every month because they are paying a tenant to live in their investment for rents far below their own mortgage payments. One poster suggested that this negative cash flow each month is like a Chinese water torture for the property owners.

Despite such evidence, one RETalks contibutor (messageboard posting handle 'eyesthebye') is so convinced that the selling frenzy means Vancouver home prices will rise in 2009 that he is betting the naysayers on the board a beverage at Starbucks if he is wrong.

The measurement standard will be the MLS HPI, a concept modeled after the Consumer Price Index. The HPI is touted by MLS as an alternative measure of real estate prices that provides a clearer picture of market trends over traditional tools such as mean or median average prices.

The specific bet will use the January, 2009 HPI numbers for Greater Vancouver Detached Homes (194.8) and for East Vancouver Detached Homes (200.6). 'eyesthebye' states these numbers will be higher at the end of the year.

Clearly 'eyesthebye' is one of those who thinks that the notion that Vancouver is in a housing bubble is pure nonsense. He has even posted that Vancouver 'is different' from other cities and suggests that we are immune here.

I'll keep you posted on the results.

That anyone refutes the fact we are in a bubble that is bursting continues to amaze me. Yet 'eyesthebye' is clearly one who thinks it can go on and on and on.

Reminds me of the lyrics from the song,

Through the door there came familiar laugher,
I saw your face and heard you call my name.
Oh my friend we're older but no wiser,
for in our hearts our dreams are still the same...



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More Condo Developers Filing for Bankruptcy

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Real estate sales may be up from the number of sales in February but they're still well below last year's levels which has caused a spike in the number of condominium developers seeking creditor protection and/or going into receivership.

One of the appointed receivers for these failed developers, Bowra Group, has been involved in 12 seperate developments that are either in receivership or are struggling and have sought creditor protection.

“I think it’s just a sign of the economy. The forest industry has been in trouble for some time and has its casualties, and the real estate industry has been challenged for a while now,” Bowra group president David Bowra said in an interview with the Vancouver Sun today.

Across the Lower Mainland more and more developments are running out of money and being forced to have a receiver appointed. The receiver finishes the building and gets the best price it can for the units.

Others seek creditor protection, asking the court for time to get their financial houses in order before the lender comes knocking.

As we noted last week, there are currently 2,391 unabsorbed housing units on the market in the Lower Mainland with another 25,907 under construction.

Look for more and more developers to go under as the year moves along.