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City real estate market a study in contrasts – Lethbridge Herald

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By Lethbridge Herald on January 18, 2021.

Herald photo by Ian Martens
A construction crew works on the roof of a large home being built Monday afternoon in the RiverStone neighbourhood on the city’s westside. @IMartensHerald

Tim Kalinowski
Lethbridge Herald
tkalinowski@lethbridgeherald.com
Almost like a tale of two cities, LethbridgeÕs real estate sectors diverged from one another in remarkable ways in 2020.
On the commercial side of things, as might be expected with the severe economic impacts of COVID-19 and ongoing public health restrictions, last year was a fairly bleak year. New home starts were also sharply down in 2020 with 20 per cent fewer single family residential permits being issued by the City of Lethbridge compared to 2019. However, the resale residential real estate market was on a huge upward swing in 2020 with a nine per cent increase in sales over 2019, and ended the year red hot with 81 per cent more houses sold in December of last year compared to December of 2019.
Lethbridge and District Association of Realtors CEO Cathy Maxwell says the strong resale market was driven by historically low interest rates and a reassessment of housing needs with more people working at home during the pandemic.
ÒI think COVID has caused people to really consider what their home is offering them, and they are making changes,Ó she says. ÒPerhaps some employers are saying you can work from home, and they need to make changes to adapt to that. Perhaps they need more space.”
Compared to January last year, local housing inventories have also tightened up, says Maxwell, with a current supply of three and a half monthsÕ worth compared to about nine monthsÕ worth at this time last year. That lowering of inventory has also switched the market over from a buyerÕs market into a more balanced market which is favouring the sellers a bit more at the moment. The average home price increased by about four per cent in 2020, confirms Maxwell.
While a lot of uncertainty remains with COVID-19 still hanging around and a difficult economy at the moment, Maxwell is hoping that gangbuster December is a sign of things to come in 2021.
ÒOverall we had a good year as far as residential real estate is concerned,Ó she says. ÒWhere that goes in the new year Ñ who knows?”
Building Industry and Land Development Association (BILD) president Perry Neufeld says many developers and builders in the community also seem to be choosing to reset the clock based on the December outlook, and seem to be putting a difficult 2020 firmly in the rearview mirror. Taking advantage of low interest rates, a tight local inventory, and the desire of consumers to readjust their housing to a new stay-at-home pandemic reality, builders took out 19 permits for single family dwellings in December Ñ amazing for a normally slow slow month, says Neufeld.
ÒFrom the numbers standpoint, single family home building permits were slower than 2019,Ó confirms Neufeld. ÒThey were about 20 per cent down from the previous year. However, December, year-over-year, was fairly strong. So it was a fairly strong month moving into 2021.Ó
Neufeld confesses he is unable to fully account for the discrepancy between consumer demand for residential real estate in Lethbridge, which was quite strong in 2020, and fewer housing starts overall in the city. However, he says, when risks are higher in the marketplace, as we saw in 2020, home builders and developers tend to be more cautious about the new inventory they bring online.
ÒIn the land development and building companies there was also caution in how they were investing, and what their spec programs were going to look like,Ó he confirms. ÒWhereas three or four years ago, they would have had quite a few projects on the go when there was a little more certainty in the marketplace. As soon as that uncertainty became something they had to contend with then they had to be a little more creative and cautious in terms of how they presented that product, and brought it online.Ó
That being said, Neufeld sees the strong permit uptake in December and the fact that Lethbridge is one of the only real estate markets in Alberta that saw an increase in values and sales last year as grounds for increasing optimism in 2021.
ÒWe have the ability as an industry to create housing as required,Ó he states. ÒWe have (construction) in the community in all different regions depending on where a person wants to live. Coupled with the fact we have historically low interest rates, I think that bodes well in the cityÕs growth in all areas. I think we are well-positioned to grow the community as fast as it wants to grow.Ó
Unfortunately the commercial real estate outlook for Lethbridge is not as positive for 2021, particularly on the office side of things, says Lethbridge Avison Young associate Vinko Smiljanec.
According to the year-end report produced by Avison Young, overall vacancy rates in Lethbridge for retail in 2020 sat at about 5 per cent, and should remain consistent in 2021. Office spaces had an city-wide vacancy of 6 per cent in 2020, and this is projected to increase in 2021, the report confirms, with downtown commercial real estate vacancies increased most dramatically. It hovered at about 11 per cent in 2019 but increased to 15 per cent as businesses closed, downsized or simply moved to more suburban areas last year.
ÒThe retail and office sectors definitely got hit the hardest with the lockdowns and that,Ó Smiljanec confirms.
ÒOffices are interesting. With everyone working from home, I think the office sector will continue to decrease (in 2021) as companies realize they donÕt need to have their employees in office as much. And those office spaces will continue to decrease as those leases come due.Ó
On the retail side, Smiljanec says he is hopeful that sector has already reached bottom after the raft of closures in 2020, and may well see a rebound at the end of 2021 and at the beginning of 2022 as vaccinations become more widespread and public health restrictions ease.
ÒOn the retail side, I donÕt think we are going to see a whole lot more vacancies come up (this year),Ó he predicts. ÒI think if you have kind of been able to weather the storm this far, I donÕt think you are going to be closing your shop now. Outside of this pandemic, I think we will start to see some recovery later in the year, but it will stay pretty flat until then.Ó
Smiljanec also says there is grounds for potential optimism on the industrial side as vacancy rates actually decreased in 2020 over 2019, falling from 8.25 per cent vacancy in 2019 to 7.15 per cent vacancy last year.
ÒThe best news of the whole mix is probably the industrial side where most of the industrial users and tenants are essential workers,” he says. ÒThey have been able to keep their jobs and stay busy, and actually that side of the sector has actually expanded if anything. There are very few vacancies for small bays. It seems like everyone I speak to in the construction industry, and the industrial, are all busy.
Follow @TimKalHerald on Twitter

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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B.C. voters face atmospheric river with heavy rain, high winds on election day

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VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.

Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.

The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.

Wednesday was the last day for advance voting, which started on Oct. 10.

More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.

Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.

An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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No shortage when it comes to B.C. housing policies, as Eby, Rustad offer clear choice

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British Columbia voters face no shortage of policies when it comes to tackling the province’s housing woes in the run-up to Saturday’s election, with a clear choice for the next government’s approach.

David Eby’s New Democrats say the housing market on its own will not deliver the homes people need, while B.C. Conservative Leader John Rustad saysgovernment is part of the problem and B.C. needs to “unleash” the potential of the private sector.

But Andy Yan, director of the City Program at Simon Fraser University, said the “punchline” was that neither would have a hand in regulating interest rates, the “giant X-factor” in housing affordability.

“The one policy that controls it all just happens to be a policy that the province, whoever wins, has absolutely no control over,” said Yan, who made a name for himself scrutinizing B.C.’s chronic affordability problems.

Some metrics have shown those problems easing, with Eby pointing to what he said was a seven per cent drop in rent prices in Vancouver.

But Statistics Canada says 2021 census data shows that 25.5 per cent of B.C. households were paying at least 30 per cent of their income on shelter costs, the worst for any province or territory.

Yan said government had “access to a few levers” aimed at boosting housing affordability, and Eby has been pulling several.

Yet a host of other factors are at play, rates in particular, Yan said.

“This is what makes housing so frustrating, right? It takes time. It takes decades through which solutions and policies play out,” Yan said.

Rustad, meanwhile, is running on a “deregulation” platform.

He has pledged to scrap key NDP housing initiatives, including the speculation and vacancy tax, restrictions on short-term rentals,and legislation aimed at boosting small-scale density in single-family neighbourhoods.

Green Leader Sonia Furstenau, meanwhile, says “commodification” of housing by large investors is a major factor driving up costs, and her party would prioritize people most vulnerable in the housing market.

Yan said it was too soon to fully assess the impact of the NDP government’s housing measures, but there was a risk housing challenges could get worse if certain safeguards were removed, such as policies that preserve existing rental homes.

If interest rates were to drop, spurring a surge of redevelopment, Yan said the new homes with higher rents could wipe the older, cheaper units off the map.

“There is this element of change and redevelopment that needs to occur as a city grows, yet the loss of that stock is part of really, the ongoing challenges,” Yan said.

Given the external forces buffeting the housing market, Yan said the question before voters this month was more about “narrative” than numbers.

“Who do you believe will deliver a better tomorrow?”

Yan said the market has limits, and governments play an important role in providing safeguards for those most vulnerable.

The market “won’t by itself deal with their housing needs,” Yan said, especially given what he described as B.C.’s “30-year deficit of non-market housing.”

IS HOUSING THE ‘GOVERNMENT’S JOB’?

Craig Jones, associate director of the Housing Research Collaborative at the University of British Columbia, echoed Yan, saying people are in “housing distress” and in urgent need of help in the form of social or non-market housing.

“The amount of housing that it’s going to take through straight-up supply to arrive at affordability, it’s more than the system can actually produce,” he said.

Among the three leaders, Yan said it was Furstenau who had focused on the role of the “financialization” of housing, or large investors using housing for profit.

“It really squeezes renters,” he said of the trend. “It captures those units that would ordinarily become affordable and moves (them) into an investment product.”

The Greens’ platform includes a pledge to advocate for federal legislation banning the sale of residential units toreal estate investment trusts, known as REITs.

The party has also proposed a two per cent tax on homes valued at $3 million or higher, while committing $1.5 billion to build 26,000 non-market units each year.

Eby’s NDP government has enacted a suite of policies aimed at speeding up the development and availability of middle-income housing and affordable rentals.

They include the Rental Protection Fund, which Jones described as a “cutting-edge” policy. The $500-million fund enables non-profit organizations to purchase and manage existing rental buildings with the goal of preserving their affordability.

Another flagship NDP housing initiative, dubbed BC Builds, uses $2 billion in government financingto offer low-interest loans for the development of rental buildings on low-cost, underutilized land. Under the program, operators must offer at least 20 per cent of their units at 20 per cent below the market value.

Ravi Kahlon, the NDP candidate for Delta North who serves as Eby’s housing minister,said BC Builds was designed to navigate “huge headwinds” in housing development, including high interest rates, global inflation and the cost of land.

Boosting supply is one piece of the larger housing puzzle, Kahlon said in an interview before the start of the election campaign.

“We also need governments to invest and … come up with innovative programs to be able to get more affordability than the market can deliver,” he said.

The NDP is also pledging to help more middle-class, first-time buyers into the housing market with a plan to finance 40 per cent of the price on certain projects, with the money repayable as a loan and carrying an interest rate of 1.5 per cent. The government’s contribution would have to be repaid upon resale, plus 40 per cent of any increase in value.

The Canadian Press reached out several times requesting a housing-focused interview with Rustad or another Conservative representative, but received no followup.

At a press conference officially launching the Conservatives’ campaign, Rustad said Eby “seems to think that (housing) is government’s job.”

A key element of the Conservatives’ housing plans is a provincial tax exemption dubbed the “Rustad Rebate.” It would start in 2026 with residents able to deduct up to $1,500 per month for rent and mortgage costs, increasing to $3,000 in 2029.

Rustad also wants Ottawa to reintroduce a 1970s federal program that offered tax incentives to spur multi-unit residential building construction.

“It’s critical to bring that back and get the rental stock that we need built,” Rustad said of the so-called MURB program during the recent televised leaders’ debate.

Rustad also wants to axe B.C.’s speculation and vacancy tax, which Eby says has added 20,000 units to the long-term rental market, and repeal rules restricting short-term rentals on platforms such as Airbnb and Vrbo to an operator’s principal residence or one secondary suite.

“(First) of all it was foreigners, and then it was speculators, and then it was vacant properties, and then it was Airbnbs, instead of pointing at the real problem, which is government, and government is getting in the way,” Rustad said during the televised leaders’ debate.

Rustad has also promised to speed up approvals for rezoning and development applications, and to step in if a city fails to meet the six-month target.

Eby’s approach to clearing zoning and regulatory hurdles includes legislation passed last fall that requires municipalities with more than 5,000 residents to allow small-scale, multi-unit housing on lots previously zoned for single family homes.

The New Democrats have also recently announced a series of free, standardized building designs and a plan to fast-track prefabricated homes in the province.

A statement from B.C.’s Housing Ministry said more than 90 per cent of 188 local governments had adopted the New Democrats’ small-scale, multi-unit housing legislation as of last month, while 21 had received extensions allowing more time.

Rustad has pledged to repeal that law too, describing Eby’s approach as “authoritarian.”

The Greens are meanwhile pledging to spend $650 million in annual infrastructure funding for communities, increase subsidies for elderly renters, and bring in vacancy control measures to prevent landlords from drastically raising rents for new tenants.

Yan likened the Oct. 19 election to a “referendum about the course that David Eby has set” for housing, with Rustad “offering a completely different direction.”

Regardless of which party and leader emerges victorious, Yan said B.C.’s next government will be working against the clock, as well as cost pressures.

Yan said failing to deliver affordable homes for everyone, particularly people living on B.C. streets and young, working families, came at a cost to the whole province.

“It diminishes us as a society, but then also as an economy.”

This report by The Canadian Press was first published Oct. 17, 2024.

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