Troy Alexander

After catching its breath over Christmas, the Vancouver Island real estate market is soaring again, especially south of the Malahat. New home construction is also climbing.

February data released by the Victoria and Vancouver Island Real Estate Boards show the number of units sold up substantially across virtually the whole island, while prices increased to a lesser degree.

In Victoria, the largest category of homes-single family homes-saw the number of units sold jump from 222 to 349, a hike of 57 percent; meanwhile the average price for single homes climbed from $511,192 to $534,101, a four-percent increase. Total sales in this category jumped from $113.5 million to $186.4 million, a sixty-four percent growth.

In the next most significant category, condominiums, there was an increase in units sold from 119 to 208 while prices fell off from $351,000 to $284,000.

VREB President Bev McIvor lauded the numbers as proof of continued confidence in the market and expressed confidence it would continue. She stressed that " over 25 percent of single family homes sold for less than $400,000 and over 44 percent of the condominiums sold for less than $250,000.

Up-island, the average single family home sold for $297,000, a six percent increase from January and 14 percent jump from February 2006. Condominium sales followed the Victoria pattern, with the average price falling off by three percent to $183,000, while the number of units sold increased from 60 in January to 79 last month.

VIREB reported a slight sales decline in terms of units sold only in Alberni. But average prices there climbed by 54 percent over February of last year. In Campbell River the average sales price climbed by six percent over February 2006. Nanaimo's average price was up 14 percent. Parksville and Qualicum beach's prices climbed by 25 percent while Duncan's was up 15 percent.

VIREB president Jennifer Lynch stressed the affordability of homes within VIREB's reach. "With the average sale price in Victoria over $500,000, and Vancouver over $640,000, our area looks pretty good at just under $300,000," she said.

Home starts across Vancouver Island were up 58 percent over February 2006, according to Peggy Prill of the Canada Mortgage and Housing Corporation: 354 homes were started last month. This was a slight increase from January.

Prill noted that more than 2,000 apartment units were under construction in Victoria last month-the biggest number in 30 years. She predicted that a strong economy, will sustain this "robust" pace.

The town of Ucluelet, on Vancouver Island's rugged west coast, will soon be attracting more than the storm watching crowd. The community will soon be able to host to elite golfers - and not just for a few rounds. Planned for the next recreation boom town is the Wyndansea Oceanfront Golf Resort at Long Beach, just north of town. Besides this $650-million project, the municipality is gearing up for a banner year in the construction sector.

"Ucluelet will have the biggest building year in history in 2007," says Felice Mazzoni, director of planning for the district. "Projects include the Black Rock hotel development, a single-family residential subdivision that will comprise medium to high-end properties; multi-family developments; many infill residential and industrial projects; a large residential subdivision to be constructed by Weyerhauser; and the golf course project. We're very busy."

And so is S&P Destination Properties of Vancouver, the international resort marketing company handling the sales and marketing duties for Wyndansea. No stranger to representing upscale properties, S&P has sold the Trump Tower Waikiki and the Trump Ocean Resort Baja, Mexico.

"The company recently set the world record for one day sales, when $700 million in sales were racked up for the Waikiki project," says Howard Kruschke, director of sales. "Since our principal markets are Hawaii, California, Mexico and Colorado, we weren't really looking to get back into the Canadian market. But when Elke Loof-Koehler, the CEO and president of Marine Drive Properties Ltd. and the developer of the project, suggested we look at it, we knew it would be a world-class offering."

Besides the Jack Nicklaus Signature Golf Course, the multi-phase project features home sites, town homes and condominium hotel suites for sale. A reservation program will be used to market the first offering of 29 home sites, says Kruschke.

"These will be offered at $1.5 million for a one-half to three-quarter acre site," he says. "We originally had 30 to sell, but Mr. Nicklaus bought the first one."

The hotel suites will come up for sale next, in late May 2007, says Kruschke. "For both the home sites and the suites, we will be contacting people from our database of those who would be interested in owning real estate of this type. We'll get the word out over the next two months to resort connoisseurs. It will be low key."

Golf aficionados will likely be intrigued by the course's location, adjacent to Pacific Rim National Park and the often-roiling waters of the ocean. "There are very few true waterfront golf courses on the Pacific side," he says. "Bandon Dunes in Oregon and Pebble Beach in California are the only others in North America. Golf courses on the Pacific side are anomalies, and Wyndansea will definitely put Long Beach on the map."

Stephen Duke, director of sales and marketing for Marine Drive Properties, agrees. "The golf course will be very unique and deliver a real golf experience. There are many moods to the property. For example, there's a gentle slope to the ocean on the peninsula side. Some holes will be on the inlet side, where the water is calm. Golfers will enjoy different weather and different winds, depending on where they are. It won't be like golfing in the desert or in the mountains and from a golfer's perspective, it will be interesting."

Currently, the golf course and road are under construction, and the course will be ready for play in 2009, he says. The hotel is expected to debut in 2010. "The condo hotel will bear a luxury brand," says Duke. "We're now in negotiations with three companies. Though we can't yet reveal a name, the brand will be a five-star landmark that is recognized internationally."

The global market will like view the region as a destination. The area that includes Ucluelet and Tofino will be a "future hot spot in the travel industry," says Kruschke. "And new development will be great for the community. The town council is very supportive of Wyndansea, and it's open to development."

The number of development projects in Ucluelet this year illustrates the point. So does the amount of perks received from developers. The community has received $11 million in amenities, land and cash courtesy of its density bonusing program, says Mazzoni. "We have a new skateboard park and we're building a community centre," he says. "It's a big thing for the city to get that kind of return from developers."

Land owners are also reaping the rewards of a vibrant building sector. "Five years ago, $150,000 to $200,000 would buy a half-acre lot," he says. "It goes for $900,000 now. And this year, that same lot will break $1 million."

High housing costs makes it hard to attract workers

First, the good news: We're all making more money.

The bad news, according to the Chartered Accountants of B.C., is that skyrocketing housing costs are pushing up personal debt levels.

However, further gains in disposable income are on the way, the bean counters say.

"The province's recent increase in personal disposable income, combined with robust job growth, suggests that further gains in disposable income are on the horizon," said Richard Rees, chief executive officer of the chartered accountants.

"If there is a concern, it is about the high cost of housing in the province and its impact on personal debt levels," he added.

"High housing costs make it more difficult to entice people to move to B.C., and this is a concern in today's competitive labour market, where skills shortages exist."

The accountants also point out that mortgage debt is not altogether bad, since mortgages for the most part substitute for rent and contribute to asset accumulation.

Nevertheless, Vancouver is the most expensive city in Canada for housing, and the 15th most expensive city in the world.

B.C.'s average real personal disposable income in 2005 was $913 higher than in 2000 -- an increase of 4.1 per cent above the 3.1-per-cent increase across Canada. That resulted in real disposable income in 2005 increasing to $23,339, close to the national average of $24,099.

According to the study, B.C.'s personal debt levels rose by six per cent last year, primarily due to rising mortgage debt. In fact, the study found that mortgages comprise 75 per cent of B.C.'s total personal debt, compared to between 55 to 68 per cent in the rest of the country.

The Bank of Canada is expected to slash interest rates by as much as one per cent over the next 12 months, according to a recently released report from one of Canada's leading financial industry experts.

And that spells good news for the Victoria real estate market.

In his September forecast, CIBC World Markets chief economist Jeff Rubin predicts the central bank will drop its overnight lending rate - the one-day lending rate between major participants in the money market - by 100 basis points to 3.25 per cent by December 2007. Rubin expects the rate change to occur over a series of four 25 basis point reductions.

He blames a "badly sagging central Canadian economy" as the main reason for the forecast. "Even with a 100-basis point interest rate cut, the Canadian gross domestic product will grow by a disappointing 2.5 per cent in 2007."

However, there remains a marked difference in economic performance between Central Canada and British Columbia. Recent provincial government forecasts call for a 3.6 per cent economic growth in 2006 and a 3.1 per cent improvement for 2007. Continuing strength in the housing market coupled with high employment and healthy retail sales will contribute to the growth, says the Ministry of Finance.

Rubin acknowledges the disparity between East and West. "Surging energy and resource prices have pushed the Canadian dollar well beyond the tolerance of much of the Canadian economy," he said. "While this has significantly benefited Alberta (and B.C.), it has hurt Central Canada."

Victoria Real Estate Board president Scott Kendrew says any interest rate reduction will benefit Victoria's housing market. "It will encourage buyers because it will make housing more affordable."

Kendrew points out that interest rate adjustments are often triggered by the economic woes or fortunes of central Canada and are not reflective of B.C.'s or Alberta's booming economies. "Any corrective measure for Eastern Canada frequently makes our situation even stronger," he says.

Current VREB statistics for 2006 show a seven per cent increase on the six-month average selling price. While Kendrew hopes that trend will continue, he would rather not see a major spike in house prices. "For every boom there is a bust, and I don't want to see that happen," he admits.

On the investment side, Kendrew is equally optimistic. "For money market investors, lower interest rates are not particularly desirable and that should encourage investors to turn to the real estate market."