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Be patient on sale of Olympic Village: Urban Development Institute

VANCOUVER -- The City of Vancouver and the owners of the Olympic Village should be patient and wait out the soft real estate market if they expect to recoup their costs, according to the Urban Development Institute.

Maureen Enser, the UDI's executive director, said Friday the Southeast False Creek project is one of the most desirable new neighbourhoods and people will buy there as the market improves. But she said the builders, Millennium Developments, and the city — as the financial backer — face an uphill battle over the short term because of the harmonized sales tax on new home construction.

"The city needs to be patient," Enser said. "It would probably be much more successful in terms of sales and recouping its money if it has a degree of patience and waits out this soft market [which] is beyond Millennium's control. It is beyond any developer's control."

Enser's advice comes as Millennium prepares to offer an incentive program next month to try to spur sales of the remaining 483 units in the former Olympic athletes' village. Those sales are necessary if the company is to raise the next $75 million instalment it must make on the remaining $700 million-plus loan from the city by Jan, 3, 2011.

Millennium's sales plan coincides with Wall Financial Corp's plans to begin selling the first 300 of 550 units directly across the street at its massive four-tower Wall False Creek project. That project won't be finished for another three years, but is expected to draw considerable interest because of its smaller units and lower prices.

The average Olympic unit is about 1,000 square feet and is priced at more than $800,000. In response to the softening market, Wall redrew its project last year to create units of about 600 square feet with an average price of $375,000.

Bruno Wall, the president of Wall Financial Corp., said he doesn't think his sales program will steal away potential buyers of Olympic units, since the two projects are vastly different in size and cost. Wall is after first-time homebuyers and investors with modest sums who may look for a return of three to four per cent. But the simultaneous sales programs should help attract attention to an area that is one of the most promising new neighbourhoods, he said.

"There is a lot of development going on the area. It is a great neighbourhood. Our market is different than theirs, but it should help drive sales," he said. "But the buyers they are looking for are in the $800,000 range while ours are half that."

Wall said the village faces only two possibilities: "Either it will get priced to a point where people will buy it, or it will get rented out. There really aren't any other options." On the bright side, the fact that major retailers such as food and pharmacy stores are committed to moving in will help encourage sales.

Both Wall and Enser said the HST is a problem for higher-end units because it amounts to tens of thousands of dollars. Units affected most are those priced higher than $550,000, Wall said. That's because under that price, there wasn't much difference under the old tax regime.

"What people are concerned about right now is the HST," Enser said. "Because there is confusion and debate about whether the referendum will continue or the HST will be here or not in a few months, I think it is stalling purchasing decisions throughout the market. But it is particularly hitting those higher-end units."

Enser said potential buyers face a double whammy of the HST and the provincial property purchase tax. The combination is enough to make many people shy away, and the UDI is trying to convince the province to drop the property purchase tax on new homes, which are already subject to the HST.

© Copyright (c) The Vancouver Sun

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