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Economy has builders eyeing a return to rental apartments

Fri Dec 26, 2008 10:39 am

FRANCES BULA
Globe and Mail

December 24, 2008

VANCOUVER -- With the British Columbia condo market in a deep freeze, developers are looking at constructing a form of housing that hasn't attracted their interest for 35 years - rental apartment buildings.

Major developers say they are looking at ways to make rental work, in order to keep their companies in gear at a time when it appears that no one is willing to buy.

The province's development association, the Urban Development Institute, is even putting on a workshop in January to help builders understand the ins and outs of building rental apartments. With construction costs coming down and rents going up, they say the concept of rental is starting to look good.

"The public is just scared to death," said Ward McAllister of Ledingham McAllister, which has 22 condo projects under construction. "And right now the rental market is tight, so the income is good and the construction-cost side is coming down."

Some developers are looking to cities or the province for help.

Shayne Ramsay, chief executive officer of BC Housing, said the organization is getting dozens of calls from developers wanting to know if the province is interested in their sites for rental projects.

Mr. Ramsay said it's not something the province has done in the past, but Housing Minister Rich Coleman has made rental-housing development a priority.

"I think it's one of the big untapped markets," Mr. Ramsay said.

Cities, which have been struggling for decades to hang on to or create affordable housing for residents, also seem willing to listen.

Mr. McAllister said he is talking with three Lower Mainland municipalities willing to consider the possibility of temporarily forgoing property taxes or development charges in return for buildings that developers promise to keep as rental for 10 years or more.

Purpose-built rental buildings have become a precious commodity throughout Canada after the postwar apartment-building boom came to a halt in the early 1970s when the federal government cancelled tax incentives that had been aimed at encouraging apartment construction.

Since then, cities have lobbied intensively for a return of the tax incentives, to no avail.

Both Vancouver and Richmond have put moratoriums on the demolition of rental apartments in the past two years, and Vancouver has recently taken the unusual step of building its own rental apartments above a community centre in central-city Mount Pleasant.

The most recent figures from the Canadian Mortgage and Housing Corp. showed a 0.5-per-cent vacancy rate for the Vancouver region, with rents having gone up about 7 per cent in the past year.

But there are also some developers who think they can potentially build apartments even without outside assistance.

David Negrin, head of the development arm at Aquilini Investment Group, said the company is considering converting its Richards project to a rental building, providing the numbers work out.

Aquilini started marketing the 238-unit downtown project in October, just as condo sales ground to a halt. The company sold 33 units in the initial phase and, since then "nobody's buying," Mr. Negrin said.

He said for rental to work out, a company has to have paid a reasonable price for the land, construction costs have to keep coming down, rents have to be reasonable, and currently skittish banks have to agree to finance them. He said that all four are coming into line for Aquilini.

"We're out tendering and prices have dropped about 30 per cent. What we're seeing now is 1997, '98 pricing," he said. He is looking for prices to come down a little more in order to go ahead with plans to build rental.

Former Vancouver planning director Larry Beasley, a University of British Columbia professor and a strong advocate for city-aided projects to create low-cost housing, said it's a good time for cities to jump at offers from developers to build rental housing.

Even if municipalities can only get buildings that are guaranteed to remain as rentals for 10 years, that will give them time to come up with more types of what he calls "third sector" housing. Such projects are not strictly private and not social housing, but a mix of the two where governments help reduce the cost of specific projects in return for guarantees that they will be available at low cost to lower-income renters or buyers.

http://www.theglobeandmail.com/servlet/ ... hColumbia/
 
yogurt
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Re: Economy has builders eyeing a return to rental apartments

Fri Dec 26, 2008 11:12 am

Some developers are looking to cities or the province for help.

Shayne Ramsay, chief executive officer of BC Housing, said the organization is getting dozens of calls from developers wanting to know if the province is interested in their sites for rental projects.

Mr. Ramsay said it's not something the province has done in the past, but Housing Minister Rich Coleman has made rental-housing development a priority.

"I think it's one of the big untapped markets," Mr. Ramsay said.
So much for free enterprise. Funny how everyone becomes a socialist when times get tough.

There is no way any rental housing project will pencil out, or get financing, without government help until condos get a lot cheaper. They are still priced far above the value the same properties would fetch on the rental market.
 
thirdlittlepig
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Re: Economy has builders eyeing a return to rental apartments

Fri Dec 26, 2008 12:48 pm

One question I have, if you'll pardon my ignorance, but what incentive is there for private developers or even small operators to jump into providing rental housing at low or moderate levels,even if housing prices come down, if the government will be subsidizing competitors who build other larger low income rental housing?
 
ianmills
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Re: Economy has builders eyeing a return to rental apartments

Fri Dec 26, 2008 5:00 pm

Sounds like the builders are getting desperate.

They know that building condos is useless in a market such as this, but if they can get somebody to buy an entire building before it is built, it takes out most of the risk for the builder.
 
pramodchuphal
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Re: Economy has builders eyeing a return to rental apartments

Thu May 14, 2009 9:44 pm

Hi nice information but I want to provide you some information about Alabama Condos.Alabama is often called the heart of Southern United State. A large number of cultural venues make it a preferred destination for many. Though most of the people come here for vacation, some invest in a condo as a second home. Huntsville is the capital city of Alabama, which has Space and Rocket Centre as main attractions. The city is full of enigmatic aura and charm and there are a lot of lakes, gardens and parks. The city offers various exciting adventures like rock climbing, hunting, fishing and many more. This makes Alabama a hot destination for real estate investments.
Last edited by pramodchuphal on Mon Jun 14, 2010 3:50 am, edited 1 time in total.
 
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specuskeptic
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Re: Economy has builders eyeing a return to rental apartments

Thu May 14, 2009 10:14 pm

Sounds like the builders are getting desperate.
I want to provide you some information about Alabama Condos.Alabama is often called the heart of Southern United State. A large number of cultural venues make it a preferred destination for many. Though most of the people come here for vacation, some invest in a condo as a second home. Huntsville is the capital city of Alabama, which has Space and Rocket Centre as main attractions. The city is full of enigmatic aura and charm and there are a lot of lakes, gardens and parks. The city offers various exciting adventures like rock climbing, hunting, fishing and many more. This makes Alabama a hot destination for real estate investments.
Not just the builders. I'm wondering if we're going to be seeing more spam like this in the coming months.... :roll:
 
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rentah
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Re: Economy has builders eyeing a return to rental apartments

Fri May 15, 2009 6:23 am

VANCOUVER...
Major developers say they are looking at ways to make rental work, in order to keep their companies in gear at a time when it appears that no one is willing to buy...
"The public is just scared to death," said Ward McAllister of Ledingham McAllister, which has 22 condo projects under construction.
Must be a different 'Vancouver' from that being discussed on other threads.
 
markx
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Re: Economy has builders eyeing a return to rental apartments

Fri May 15, 2009 6:34 am

One question I have, if you'll pardon my ignorance, but what incentive is there for private developers or even small operators to jump into providing rental housing at low or moderate levels,even if housing prices come down, if the government will be subsidizing competitors who build other larger low income rental housing?
If market rent can justify the cost of building rental apartments, private developers will build them. The government subsidies only apply to low income renters, and not everyone wants to live in a social housing complex. Just like price of condos can go way above the price of rental apartments, it can potentially go way below the price of rental units as well. In the long run, they should converge, but short term disparities do happen, and developers are behaving as expected to help the convergence happen.

For now, rental apartments will only get built with government subsidy, as rental yield doesn't justify any new construction on its own.
 
douglas
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Re: Economy has builders eyeing a return to rental apartments

Fri May 15, 2009 2:20 pm

For some of the larger developers, who have land tied up, it may make sense to to build out the project as strata apartments, rent them out for the near future and sell them as individual condos when the market is stronger. It works as long as the rental income offsets the cost of the building( as opposed to building and land), or at least most of it. The cost of the land can be recouped when the units are sold. Either way, build or not, the developer is going to pay holding costs on the land.

Also some of the larger developers even if they are working at low, or no, profit, it is important to keep their machine up and running, albeit at a slower pace. They have an interest in keeping good development teams and construction crews employed.
 
luke8000road
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Re: Economy has builders eyeing a return to rental apartments

Fri May 15, 2009 10:03 pm

The public is just scared to death
 
agraham
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Re: Economy has builders eyeing a return to rental apartments

Mon May 18, 2009 6:43 pm

Somebody is obviously trying to do some Search Engine Optimization by making a whole lot of pointless posts - but he has misspelled his own URL in his sig.
Hilarious.
 
drewkramer
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Re: Economy has builders eyeing a return to rental apartment

Sun Mar 18, 2012 7:50 pm

Rental properties most especially apartment rentals are undoubtedly one of the popular housing option of people even in different parts of the globe. This is mainly because of the benefits and advantages it gives. One is affordability and convenience. This project developments should be taken seriously and possibly help people give a safe place that's not hard on their budget.
Thanks for posting up this news update!

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