Why the real estate market won't be the same

Vancouver's real-estate market is coming back to life.

But it's not the one that existed before the crash, because the investments and property values of boomers were severely hit by the recession, and they will end up with different buying habits as a result.

That's the big-picture message expected today when Vancouver's prime condo marketer, Bob Rennie, gives his annual state-of-the-city address to developers and builders.

Mr. Rennie said that sales are starting to increase, but the new buyers are predominantly young people who had nothing to lose in mutual funds or property. Now, encouraged by lower prices and low interest rates, they are coming back.

He said that in the past four months, 444 downtown condos less than 10 years old were sold. Of those, almost two-thirds went for less than $350,000.

With only 741 more condos currently listed for sale downtown, Mr. Rennie's statistics indicate there's more demand than supply. Those kinds of numbers were echoed in other
municipalities.

"I believe the tide's turned in the last 60 days," he said, echoing others in the development industry over the last couple of weeks.

But Mr. Rennie will be warning that developers can't just go back to old models from last year, when the boom was still on. Instead, they need to focus on that lower-income group in a way they haven't before.

"If you want yesterday back, kill yourself. We have to pay attention to local incomes and we have to re-invent the starter condo," Mr. Rennie said. "We were loading it up with too much luxury."

As for the older customers who used to be more affluent, "we have to re-evaluate the boomers." They are still buying, but are hunting much harder for a bargain.

Mr. Rennie's speech last year, which was a sell-out for the Urban Development Institute, was filled with optimistic-sounding numbers that appeared to run counter to the growing uncertainty about the housing market.

But, although he delivered his traditional upbeat message, Mr. Rennie also noted that the demand for housing in the Lower Mainland was estimated to be 7,000 units, according to statistics on migration into the area, but that builders completed 8,400 units. Few people listened.

This year, his 2008 numbers show an estimated demand for 7,200 units while developers built 13,400. When he gave his talk last May, the signs of oversupply were there – 58 per cent of the available units were unsold.

Now, Mr. Rennie will be talking about the dangers of undersupply.

"Watch the construction starts," he said. "They are scarily low."

(prepared by Frances Bula/Globe and Mail)