Business in Vancouver Magazine is out today with a shocking series of slides taking a closer loop at Olympic Village property values.
In the first one, the average change from assessed values in 2011 to 2014 is down almost a stunning 20%:
Breaking down the properties, the average price drop per unit is a whopping $221,546. The largest price drop is $627,000 for one unit:
Based on floors, from units on the 10th floor and up, prices are down -33%. Mid floors (5th - 9th floor) are down 22% and Lower floors (4th and below) are also down 22%.
BIV also gives a breakdown of the smaller to bigger units:
It's a stunning look at property values in the former Olympic Village.
We've posted an example of a Richmond home selling for 33% below assessed value and now are we seeing similar 30%+ plunges in Vancouver?
According to this Craigslist ad (click on above image to enlarge) from Rennie Associates, an Olympic Village penthouse now has an asking price 34% below the original asking price.
Not as spectacular, but now less significant, the add notes that the asking price is 25% below original purchase price:
Penthouse suite, 2 bedroom and den, over 1,000sf in Olympic Village. Priced reduced by $370,000 for immediate sale!! Huge deck with a nice view of the water. Perfect for entertaining. Make an offer now and get a nearly new Penthouse condo at a 25% discount from the original purchase price!! Call today for a private showing.
Will the final sale come in at 30%+ below the original sale price?
Tuning into Global TV the past few days might convince you it would. First the most bullish of TV stations talks about the 'Death of the Condo Presale in Vancouver':
And then a story on 'Vancouver's Deflating Real Estate Bubble' (hat tip to GreenhornRET for posting the clips):
I wonder if IAMWILL is going to question Global's agenda?
We last heard from Capital Economics (CE) back in June 2011.
They arean economic think tank founded in 1999 to provide "independent macro economic research in the US, Canada, Europe, Asia, Latin America, the Middle East and the UK, on the property sector", had concluded that Canada's housing market was in a bubble that's set to burst.
They say housing prices could plunge by as much as 25%.
“Housing valuations have lost all touch with fundamentals and household debt is at a recordhigh. Canadian house prices are overvalued at close to the excessive levels seen in the frothy U.S. market at its 2006 peak.”
Two months later the group continues to pump the same message. The Globe and Mail put out an interesting chart on Monday by the group which shows 'house price to income per capita'. As you can see we are nearing the same levels the Americans had just before their crash took hold (click to enlarge):
CE notes that our current boom has produced the largest increase ever seen in Canadian housing prices and has wrenched real estate out of its usual alignment to people’s income and concludes that all signs increasingly point to a housing bubble.
“The stories we hear about people buying homes to rent out as investment properties, and others buying homes fearing that if they wait they will be priced out of the market, only convince us even more,” CE's David Madani (pictured above) writes in a research note.
Madani restates the same concerns as those articulated in June. Mass psychology – “animal spirits” – have driven housing prices to unsustainable levels and that it can only lead to a collapse of at least 25% over the next few years.
In the short term, Mr. Madani sees any further gains as modest. “Housing affordability is already stretched, with costs accounting for a very large share of household income, over 40 per cent according to some estimates.”
Olympic Village - Millennium Water
Speaking of bubbles and a declining market, have you seen the latest bit of promotional desperation over at the former Olympic Village (now Millennium Water)?
The website hails: "We’re kicking off a brand new promotion tomorrow—an amazing move-in package of essentials for every buyer—it’s everything you’ll need for life at The Village!"
And almost as if you are watching a Ron Popeil commerical, the list of goodies carries on missing only Popeil's trademark "but that's not all... you will also receive..."
The package includes:
A hybrid bicycle – for your 5KM ride along the seawall to Stanley Park
A portable BBQ – for Saturday’s BBQ with the in-law’s, on your balcony or at Hinge Park
A one-year Aquabus ferry pass – for a last minute trip to Granville Island or Yaletown
A single person kayak – get to know the neighbourhood sea life
A year’s worth of one-zone Translink FareCards – the skytrain is only 5 minutes away
A coffee per day for a year at Terra Breads Café – just downstairs
A pair of running shoes – run the seawall in style
A year’s worth of groceries from Urban Fare – an elevator ride away
A year’s membership to Modo Car Co-op – for your day trip to Seattle
A set of All-Clad cookware – for your Miele kitchen
I wonder if Rennie could get Weird Al to redo his Popeil song for him? "Now how much would you pay?"
CBC news has quite the story tonight with stunning visuals of Olympic Village condo owners who have leaks and shoddy construction throughout their units. CBC online covered it this way.
A total of 62 condominium owners at five different buildings in the former Vancouver Olympic Village are suing the City of Vancouver, claiming their units are poorly built and badly designed.
According to CBC-TV, "Lawyers say so many people wanting out of so many buildings all at the same time is a first for Vancouver Real Estate."
Lawyer George MacIntosh, representing Village on False Creek (new name for the Olympic Village) marketer Bob Rennie, countered by sayinig he just received the legal documents Wednesday and has yet to study the case. But MacIntosh said he suspects the recent price reductions on unsold condos may have something to do with the civil suit.
On average, 30% discounts were offered in a new marketing campaign that was launched last month and the assertion is that the wave of complaints are simply disgruntled owners who bought earlier and who want the discounts too.
However if you saw the visuals on the news tonight... we'll... let's just say no prospective buyer would be interested based on what they saw tonight.
Leaking ceilings with water pouring from light fixtures into toilets, leaking windows absolutely hemorrhaging water, kitchen ceilings ripped apart from water damage, tiny bedrooms unable to accomodate Queen size beds, closet doors unable to open because of the cramped conditions... the list goes on.
If ever there were a marketing nightmare... this was it.
Hopefully we can get a link to the CBC-TV story for you shortly.
One of the Vancouver City Councillors talks about a looming 20% price reduction in the Olympic Village condos dying on the vine in False Creek (hat tip to L.M.).
It's a far cry from the days of this October, 2007 Vancouver Courier article, isn't it? Check out some of the priceless Bob Rennie quotes as he gushes about the ease with which the Olympic Village is selling out.
Olympic village condos selling like hotcakes Prices range from $450,000 to $3.4 million
More than 80 per cent of the first wave of Olympic athlete's village market condos sold over two days last week, and almost all the buyers were local.
More than 80 per cent of the first wave of Olympic athlete's village market condos sold over two days last week, and almost all the buyers were local.
The condos, part of the Millennium Water development along False Creek, will become market housing the summer following the 2010 winter Games.
About 255 of the 302 units available in the first phase were sold, according to Bob Rennie of Rennie Marketing Systems. A second phase of 400 is expected to go on sale in February.
Some buyers and realtors stood in line for five days before sales started last Thursday.
Most units were priced at between $600,000 - for a 725 to 759-square-foot suite with marginal view - and $3.4 million, although a few were available in the $450,000 to $600,000 range.
There are still about 10 available on either side of $500,000.
The cheapest still on the market is $489,000, which gets the owner 574 square feet overlooking the plaza and Salt heritage building. The $3.4 million unit was purchased, but some $3-million suites are available.
Rennie estimated there were only about five out-of-town buyers.
"There's a lot of interest from West Side addresses--from buyers who live on the West Side that don't necessarily want to be downtown," Rennie said. "And there's a huge amount of interest from buyers who see it as one of the last new communities -it's on the water and there's the legacy project [aspect], that it will be the home of the 2010 [Games]."
He's never seen prospective buyers line up for five days before and was taken aback by how much interest was shown in the project. The marketing company anticipated it would sell about half the units during the opening days.
"A lot of people that came in, they wanted a certain view or a certain size and said, 'You know what, for the big ones we want to wait until the next phases,'" Rennie said. "For the next phase all bets are off for how much activity there's going to be there and how we're going to handle it. Maybe we should do similar to Woodward's where everybody phoned in for a wrist band. But there's no one system you can put in place that doesn't offend somebody."
Rennie suspects the buying frenzy was sparked by three factors: the "green" aspect of the project as a sustainable community, the Olympic connection and the views of False Creek, the city and the mountains.
"We keep switching around over which one we think is the driving force in buying," he said.
Speaking of vultures, we've all heard about how the City of Vancouver has forced Millennium Development into receivership in order to recoup its $740 million loan to the developers for the Olympic Village in False Creek.
As part of that deal, Millennium’s owners agreed to hand over other assets to the city to sell if the City can’t cover the loan through sales of the high-end condo' in the Olympic Village.
Last week represetatives insisted Evelyn was on track.
But now a lawsuithas been filed against Millennium saying they haven’t been making payments on their loans of more than $75 million.
Backers of the project, Peoples Trust Company, bcIMC Construction Fund Corporation and bcIMC Specialty Fund Corporation, filed petitions in B.C. Supreme Court Wednesday against Millennium Evelyn Properties Ltd., Millennium Development Corporation and Shahram Malekyazadi — one of the brothers who own Millennium — seeking a declaration that the developers have defaulted on their mortgage.
There is more than $71 million owed to two of the backers, with interest adding up at a rate of $12,000 a day.
More than $4 million is owed to another mortgage holder.
In the lawsuit, the backers ask the court to appoint a receiver and grant an order giving the backers power to sell the property to recoup their loans.
The City of Vancouver has also registered a charge against the Evelyn properties as part of the Olympic Village process.
Looks like wealthy Asians have a lot of buying to do.
Given the U.S. government’s $13 trillion accumulated debt, its continuing $1 trillion annual deficits, its failure to deal with a rapidly approaching explosion of entitlement spending, increased healthcare costs, State and city obligations to retirees which are in many cases too sizable for many localities, the near-total state of political gridlock, and now a looming massive funding issue of unknown proportions with this foreclosure crisis, and what do you have?
I suspect the full range and scope of what is going on still has not been realized. We are entering the second act of the 2008 crisis and I sincerely believe it will eclipse anything we have seen yet because of the shear size of this OTC derivative disaster.
The reaction from the US Federal Reserve is not hard to predict. Last Monday (before the fervor of the Foreclosure Crisis) we saw this commentary from New York Fed President William Dudley:
"Fed action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long... The outlook for US job growth and inflation is unacceptable. We have tools that can provide additional stimulus at costs that do not appear to be prohibitive."
When you have the New York Fed President openly stating that subdued inflation is unacceptable, it doesn't take a PhD in economics to decipher what is coming.
What we are waiting for now is a tipping point, an incident that will trigger a flood of actions. The stage is set for panic and when it is triggered, I suspect you will see Gold move a couple of hundred dollars in a manner of days and Silver move $5- $10 in the same time frame.
Olympic Village
Meanwhile on the real estate front, the Olympic Village story is another unfolding disaster.
If it interests you, this link will take you to a media briefing on the Olympic Village by City Manager Penny Ballem on September 30, 2010.
As noted in the comments section of VCI, there are some interesting facts in this report.
Number of market units put up for sale: 737 Number of presales: 264 Number of presales closed: 223 Number of presales that have not closed: 264-223 = 41 Number of post-Olympic sales closed: 36 Number of units with closed sales: 259 Number of units remaining unsold: 454 Number of units with pending sales: 737-259-454 = 24
Breakdown of the 259 closed sales by price: under $1 million: 202 (78%) $1 to 2 million: 54 (21%) over $2 million: 3 (1%)
Breakdown of the 454 unsold units by price: (Prices as of May 15, 2010) under $1 million: 48% $1 to 2 million: 24% over $2 million: 28%
Interesting question raised by SethM on a real estate chatboard: what's wrong with this picture?
On the shores of False Creek, located directly across from the downtown core of the City of Vancouver is the luxury real estate development of Millennium Water aka the Olympic Village. Sales of units are stalled at 36 with none having sold after the first 2 days (it's been on the market now for 5 weeks). Worse, 11 pre-sale purchasures are trying to let out of their legal obligation to proceed with their purchase.
Meanwhile, about 15km south is a proposed real estate development known as River Green. Located in the Vancouver suburb of Richmond, the development is across the Fraser River from the Vancouver Airport (with the accompanying views of the airport and the airport noise). The development is touted as the biggest ever single development in the City of Richmond and is the start of what the City hopes will be a reorientation of its downtown out to the Fraser River waterfront.
The first phase of that development, 458 luxury-oriented units in six buildings with completion expected some time in 2012, set condo sales records as 'HAM' money flowed in.
So what gives?
The consensus is that the River Green development pre-sales are driven by Chinese buyers whose intention is to sell when it's complete. In this development a 2 bedroom typically sold for $900,000 + HST. The Olympic Village is already complete... so no speculative potential there.
Thus we have a current, completed set of luxury condos on the highly desirable False Creek perimeter located directly across from downtown and Yaletown... and those condos go wanting for buyers.
But condos which won't be ready for 2 years in a highly speculative venture across from a busy international airport are snapped up instantly by speculators!
Naw... this doesn't scream 'housing bubble' at all.
“The Federal Reserve is now a government within a government. It is totally out of control. Congress doesn't control it. It's funded by the banks and we either have constitutional government or we don't."
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