The market for high-end real estate on Vancouver Island continues to sizzle, with no fizzle in sight, thanks largely to Baby Boomers intent on investing in the island’s two most lasting commodities – scenery and weather.

The latest evidence of strength in the high-end market is the 85-per-cent sell-out of posh luxury condominiums in Bear Mountain in August, culminating in more than $30 million in sales in just four hours.

The one- and two-bedroom luxury condos ranged in price up to $365,000, and won’t be ready for occupancy for more than a year.

In just 3 1/2 hours in mid-July, 87 per cent of the 80 luxury suites in the Oswego boutique hotel sold, priced at up to $450,000 for 800-sq.-ft. units.

File photo by Don Denton, Business Edge
Bear Mountain developer Len Barrie has reason to smile after recent sale.

The resale market is strong, too: In July, 20 resale homes valued at more than $800,000 were sold in Greater Victoria, driving the average price of single-family homes to a new record – $397,503 – despite the fact one-third of the 739 monthly sales were for less than $300,000.

Current low interest rates and retirement of Baby Boomers are cited as fundamental factors fanning flames under high-end buyers.

“Many buyers are selling in other markets,” says Carol Geurts, president of the Victoria Real Estate Board. “And before they can buy here, they have to sell elsewhere.”

Low interest rates are important to the younger families buying their first homes, and freeing up Baby Boomers’ home equity to buy retirement or recreational homes.

Today’s Baby Boomers are the richest group of retirees in Canada’s history. Many have pension income from government pensions, employer pensions and their own retirement savings plans. They’ve earned higher wages during their working lives – at livelihoods not interrupted by war or economic depressions. Many have had two-income families.

Their peak earning years occurred when they had paid off their big consumer debts (mortgages, car loans) and they had smaller families, meaning they are entering their twilight years with fewer child-related expenses. Many have also inherited the accumulated wealth from the previous generation.

They are also ripe for an active retirement, says Bear Mountain developer Len Barrie. “They want to be healthy and fit and live longer, healthier, more active lives.”

Bear Mountain’s lifestyle community, with golf courses, skating rink and hiking trails, was designed with them in mind, adds Barrie.

But interest rates are low and Baby Boomers are retiring all across the country – yet B.C. is benefiting from a larger real estate boom. It all comes down, say experts, to location, location, location. “These people could afford to buy anywhere,” says Geurts. “They could buy anywhere in Canada, but this is one of the best places in Canada to be.”

Three B.C. communities lead the nation in housing starts this year, according to the Canada Mortgage and Housing Corp. (CMHC). Vancouver is expected to post a 25-per-cent increase over last year, while Victoria’s starts are projected to increase by 14 per cent and Abbotsford’s by 16 per cent.

Demand is high for existing housing, too. “Real estate prices increased an average of 5.8 per cent across the country between 2003 and 2004,” says Oswego marketing consultant James Askew, “but prices in Greater Victoria have increased 10.8 per cent” overall.

While Geurts says this is an indication property on the Island has been “undervalued for many years,” Dale Sproule, Bear Mountain’s director of residential sales and marketing, believes it’s also a sign there has been pent-up demand.

“There hasn’t been a major development for 12 years,” he says, “and until Bear Mountain, no upscale development in proximity to a major city” – and amenities attractive to former yuppies.

After the stock market dips of the past decade, many Boomers also believe real estate is a safer investment than the stock market and more lucrative in the long term, says CMHC analyst Peggy Prill.

“The growing popularity of real estate as an investment is due to strong performance over the past several months,” she says, “especially when compared with interest rates available for GICs, bonds, etc. and with recent returns on the stock market.” CMHC research shows high-end buyers are looking not only for second homes, but capital investment opportunities – 47 per cent of all new condominiums built in Vancouver’s downtown peninsula during the 1990s were bought as investments, not primary households.

Prill adds average house prices in metro Victoria rose 21 per cent between January and July this year over the same period in 2003. Both Bear Mountain and Oswego are in metro Victoria.

“I see a lot of people buying with inherited money,” says Geurts. “And people want to get in now, before it’s out of reach.”

And it’s not only Canadian Baby Boomers who are buying, adds Geurts. More buyers are coming from the Pacific Rim and Europe, where real estate prices are higher, and from the U.S. “Since 9/11 we’re perceived as a safe place, close to home, and the value of their dollar doesn’t hurt,” she says.

Whatever the reasons for the boom, Bear Mountain has been able to ride the phenomenon since breaking ground in January of 2002. Developers Barrie and Mike Vernon, both former National Hockey League players, initially had a 20-year development plan for the 455-hectare (1,100-acre) site perched on the side of a picturesque mountain about 20 minutes from downtown Victoria and created around two Jack and Steve Nicklaus-designed golf courses.

The first three offerings of single-family lots, condos and townhouses sold out within hours. The 25 highest-end lots, ranging up to 15,000 sq.ft. (about a third of an acre or 1,393 square metres) and priced at $610,000, sold out in an hour. One five-hour sale garnered $37.5 million and the quarter-ownership villas were 91-per-cent sold before ground-breaking last December.

Due to continuing high demand and lightning-fast sales, remaining development of more than 2,000 residences – single-family homes, townhouses, condominiums and hotel rooms – is expected to be finished in 12 years, rather than 20.

And demand isn’t likely to diminish.

Next spring, 14 high-end one-half- to one-acre Bear Mountain properties, ranging from $1 million to $1.7 million, are slated for sale. “We have 60 people on the waiting list,” says Sproule.

(Sharon Adams can be reached at sharon@businessedge.ca)