Q|As we all know the boyancy of the real estate market is subject to the ability and willingness of buyers to keep purchasing. In all previous real estate market cycles, there has been, without exception, an end and prices have retreated to varying degrees.

All the signs are now pointing in the direction of an overpriced marketplace, affordability is a serious question for entry level purchasers. Builders are now in the classic terminal phase of this cycle, building condos because of the prohibitively high price of single family homes, so, when in your estimation are we going to see the inevitable slowdown and a market correction?

A|Yours is a question I have asked myself many times and the bottom line is, of course, no one can predict when or if there will be a correction. You are right, the past has shown us that the market has gone through cycles, up and down. Prices HAVE retreated at times but, over the long term, they have always gone up.

Are we headed for a slowdown? Market watchers such as CMHC predict prices will continue their upward trend this year and beyond, although not at the rates we have seen. The market fundamentals are still sound: low unemployment, a strong economy and more people are moving here. That being said the U.S. economy is worrisome and the Bank of Canada just lowered its interest rate by 0.5% because of its fears of an American recession and its impact on Canada.

If there is a severe downturn in the economy, the fundamentals change and that could have a bearing on the market here. Would I advise someone to wait for a market correction? That depends. People who have been waiting for the last several years have lost out on dramatic equity increases. All indicators are that price increases will slow down, largely because of the affordability issue you raise. But will prices actually go down? Who knows?

There is always a risk with real estate. Purchasers should buy what they can afford over the long term. That way they can ignore the ups and downs.

Posted March 4, 2008 05:41 PM

Q| I noticed that farm land in the Fraser Valley is selling at approx $100,000 per acre. What can you possibly grow on this land at this price? Prices for farm land is much cheaper in more exclusive areas such as the South of France. Are these farm prices sustainable or is this pure speculation?

A| I am not sure is the price you are quoting is unusual or not as I am not familiar with the average price of farmland in the Fraser Valley. I can only guess this land falls outside the Agricultural Land Reserve or someone has got a permit to develop it. Is that the case? You should check with the Commission at http://www.alc.gov.bc.ca/ or your local government. Contact the realtor listing the property to get more information.

Posted March 4, 2008 03:33 PM

Q| There are a number of high end recreational properties and resorts springing up in Osoyoos right now. A friend suggested I buy into one of these as a recreational property which would be rented out as a hotel room when I'm not using it. The one I'm looking at is just nearing completion and is called Walnut Beach resort. It has 800 feet of private beach and bills itself as a 5 star hotel. Prices range from $279,000 for a suite to $849,000 for the two bedroom "penthouse". Do you think this is a good investment as far as resale maybe a few years from now? Are these kinds of properties easy to resell? Or should I avoid these kind of mixed use hotel strata unit deals?

Thanks,

Aaron

A| The property you are talking about has some advantages. A property management company looks after everything: the maintenance, the cleaning, and the scheduling of renters. The downside is that you will pay for it. Some facilities charge 49% or more so you really have to weigh the costs against any potential income you earn.

Is the rental pot shared among owners on a per square footage basis or do you actually get the rental income from your individual suite? What percentage does the management get? Are you allowed to decorate the suite yourself or are you forced to maintain a consistent "hotel" look? Will you have to pay to replace the furniture or mattresses periodically or will that come out of a contingency fund? How do other similar properties in the region measure up? Have they gone up in value? What do the owners say about their arrangements--are the better or worse than what is proposed? Where does it get its "Five Star" rating from?

There are two kinds of buyers: those that buy for the long term and plan to use it a lot. The other is an investor. You sound like the later. Specifically ask how much income you can realistically earn from the property after fees. Most likely they won't be able to tell you because they don't want to be held accountable. Can you afford to buy the property and NOT count on any revenue, just relying on property values to go up? Ask the developer--and yourself---some tough questions.

Posted March 4, 2008 02:15 PM

Q| I own a home in higher end sub division in Burnaby. We just completed construction on the home this year, and homes in the are which are compriable to mine are selling at close to 1.8 million. How do you see the high end housing market in the next year reacting to the economic pressure that the real estate market will face.

A| A quick search on MLS for Burnaby shows 99 homes listed for a million dollars or more. There are more than 500 in Vancouver. That's a lot of competition and you have to wonder just how many people can afford to buy. And the busier spring market will bring even more properties online.

I am assuming you have a single family home and are thinking of selling. There are all types of high end markets (rural, downtown, suburban, condos, recreational) , so it is hard to say how they would do collectively. So much depends on view, lot size, room to add on, exclusiveness of neighbourhood, and so on.

I would suggest you call an agent, or several, for a free property evaluation. Get them to give you a list of comparable homes in the area and what they have sold for. Make sure you get agents who specialize in your neighbourhood and homes such as yours.

A high end Coal Harbour or Yaletown specialist, for example, wouldn't be as useful since the downtown condo market has a combination of foreign buyers and investors which your neighbourhold might not have.

A local specialist would have a better idea of what you can expect in the months ahead. My guess is you would market to buyers who are "trading up" and have built up some equity on previous purchases and an awful lot of people have made an awful amount of money in the last five years.

If your home is finished well and appeals to a broad range of buyers you have an advantage. Some high end homes have bizarre custom finishes (they are often described as "unique" in their listing descriptions) and buyers get cold feet if they have to factor in renovations on top of paying a high price.

Posted March 4, 2008 01:17 PM