BUilders, brokers busy liquidating existing inventory

It's hard to believe it was just a year ago when real estate developers on Vancouver Island were beating a hasty retreat, realtors were hunkering down for a dry spell and buyers and sellers were in a quandary: act now or wait and see if things would get better?

Turns out, things got better faster than expected.

"The situation has changed greatly, developers are returning to the Victoria market, and other urban B.C. communities," says David Europe-Finner, market analyst with the Canada Mortgage and Housing Corporation.

He points to the 634 residential units that were built in the first quarter of the year in Victoria, compared with just 117 units in the first quarter last year. The CMHC is forecasting a 51-per-cent increase in new housing in Victoria this year over last, with a total of 1,570 new housing units to be built. However, that's still below the 10-year average of 1,817 for the Capital Region.

New housing starts have already increased significantly up-island as well, with Nanaimo seeing 215 new units in the first quarter this year, compared with 170 in the first quarter of 2009.

In Courtenay, it's 82 compared with 27, Duncan 47 compared with 28, and Parksville 30 compared with eight.

However, pick up a local newspaper or turn on the TV or radio and you'll see ads for price-slashing that could make you think nothing has changed from six months or a year ago. At Bear Mountain, for instance, you can save 30 per cent on a new condo between the first and second fairways of a Nicklaus-designed golf course.

"We are cutting prices to reduce the last of our inventory before starting any new construction," is the explanation from Dale Sproule, the resort community's director of real estate.

On Victoria's Inner Harbour, there are even bigger savings to be had at Bayview Residences, where prices have been cut by 50 per cent on average for the 40 remaining suites in the first phase of the 20-acre development. That means you can pick up a one-bedroom suite from between $389,000 and $549,000. Perhaps more importantly, monthly maintenance fees have been slashed from $. 51 per square foot per month to $. 38 per square foot per month, which includes heat and air conditioning. "Without a doubt Bayview is the best value in Victoria," says Tracie McTavish, president of Rennie Marketing Systems.

Out in Sooke, the developer of Sun River Estates isn't cutting prices but is rolling back "the rates", according to its latest ad, referring to a limited-time offer to absorb the increase in mortgage rates.

In burgeoning Langford, developer Les Bjola hasn't had to offer financial incentives for homes at Kettle Creek Station. Priced from $339,000 including GST and HST, his 'small footprint' homes have been flying off the market since last spring. Instead, Bjola appeals to buyers' 'green' conscience. His latest inducement? Geothermal heating and cooling systems with each individual home, an amenity Bjola says will result in annual savings "of at least 60 per cent" for homeowners.

But even though the pricing of some new developments suggests the market is still recovering, prices of homes for resale in Victoria "are now cresting on record levels" according to Cameron Muir, chief economist with the B.C. Real Estate Association.

"It (Victoria) was the hottest market in the province in March," adds Muir. The average price of a home (single family and condominium combined) was $521,917 compared with $504, 194 in March of 2008, the previous peak.

"There is certainly much greater confidence seen in the market by developers and realtors," agrees Randi Masters, president of the Victoria Real Estate Board, pointing to the escalating number of sales with every month that's gone by this year. January began with just 418 sales, but that increased to 621 in February and jumped to 789 in March.

The median price of a single-family house in Greater Victoria in March of this year was $569,950 (up from $503,751 in March 2009) while the average price for a condominium was $336,779, up from $266,750 for the previous March.

Looking ahead, Muir says prices will moderate as interest rates climb, mortgage rules tighten and more homes come on the market.

Masters doesn't seem too worried about the threat of higher interest rates, saying any increases will be incremental, "and frankly, had really nowhere else to go but upwards."

Masters points out that Victoria remains a sought-after destination by many types of buyers, 'from newly weds to nearly deads' as the saying goes. And once here, "you do not tend to see buyers leave for other destinations."

In fact, the board's most recent analysis showed that over 79 per cent of buyers last year were from the Capital Region. Just under 12 per cent were from elsewhere in B.C. and just under five per cent were from Alberta.

If anyone still thinks Greater Victoria's market is soft, consider this: there were 33 sales of over $1 million in March, including one in Oak Bay for over $3 million.

Up-island, the resale market isn't as strong as in Victoria, "but we were very steady and we anticipate continuing along those same lines", says Cliff Moberg, president of the Vancouver Island Real Estate Board. He cites first quarter sales of single family homes outside of Victoria of 1,079 units, compared with just 636 units in 2009.

And average first-quarter prices for single-family homes on the island (outside of Victoria) were up nine per cent to $343,599.

Last year, 36 per cent of homes sold on the island (apart from Victoria) were to retirees. That group is "very significant part of our business," says Moberg. "I believe that Vancouver Island has been discovered as a retirement mecca much as the Okanagan was in the '90s."

In the Gulf Islands, changes in real estate reflect the slow pace of life in general. "We're just coming into our season," says Ian Watts, sales director for the Galiano Inn and Spa, adding that the owners have added a new dock, so buyers of the fractional property can arrive by boat and tie up.

At Mayne Island Resort -- another fractional resort property -- owner and developer Murray Rosengren is expecting a better sales season this year than last. "We've kind of moved along slowly and looked stalled for a while and now everything's finishing up. All the exterior finishes are on the central hotel, the spa is completing, the landscaping ... it looks so much better around here."

(prepared by Suzanne Morphet/Vancouver Sun)