BC Business
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For many residents of Invermere, last year’s slowdown in the real estate market couldn’t come soon enough. Their town has become the A-list destination for Alberta vacationers, driving prices for housing, food and clothing to lofty heights. As things settle – for now – the question remains: how big can things get??
On Oct. 3, 2009, a crowd buzzing in anticipation packed the large ballroom at the Calgary Westin hotel. The auction attracted so many people – more than 400 were pre-qualified to bid – that, despite chairs being brought in from other rooms, it was standing room only. With the ingredients of a traditional auction, motor-mouthed auctioneer included, the scene could have been mistaken for an estate sale or police auction, except that the products up for sale weren’t stolen bicycles or Grandma’s china but 40 recreational condos in Invermere, a small town in the East Kootenays. To some back in Invermere, the real estate auction – a first in Canada, according to organizer Kennedy Wilson – seemed like a desperate attempt to move inventory after months of virtually no sales at Lake Windermere Pointe. The three four-storey buildings, which sit at the end of Lake Windermere on Invermere’s eastern edge, contain 224 mid-range recreational units that went to market in 2006, a significant housing boost for a town of only 3,200 permanent residents. But by early 2009, only 97 had been sold, so Douglas McIntosh – who, in partnership with Calgary developer Pointe of View, built the project – was on the search for a new approach. He settled on the auction and selected a mixed bag of 40 condos, a number he determined acceptable to sell at what he calls “wholesale prices.”
Media reports of the auction portrayed Alberta buyers as “scooping up” units at deeply discounted prices, like vultures feasting on the remains of what was once a red-hot recreational real estate market. McIntosh, in contrast, characterizes the event as a creative and successful marketing move. “In times like this, you have to think outside of the box,” he says, noting that 38 of the 40 units were bid on and that 32 sales closed within a month of the auction.
The difficult market McIntosh is now dealing with is very different from what he first envisioned for Lake Windermere Pointe. Invermere has long been a summer playground for wealthy Albertans (70 per cent of all residential properties in the area are owned by Albertans), and with Alberta’s economy booming in the decade before the recession hit, new families and young professionals could afford to get in on the action. McIntosh saw great potential for lower-priced recreational property aimed at this group. When his sales office opened in 2006, one- to three-bedroom condos were going for between $267,000 and $590,000, a score for recreational buyers in a market typified by lakefront luxury cabins worth $2 million plus. But McIntosh and Pointe of View held off on aggressively pushing the units, since prices and demand were still on the rise. “In hindsight, we’ve learned a lesson,” McIntosh says now. By October 2009, prices had plummeted, and the 32 units sold at auction went for an average of $242,000. As of December 2009, 89 condos remained up for sale.
Discounted prices and stale inventory represent a dramatic turnaround for Invermere. In the decade preceding the recession, the local real estate market had reached prices common in Kelowna or Banff; a modest single-family residential home that sold for $100,000 in 1990 was going for $450,000 in late 2007. It was, according to almost everyone interviewed for this article, a market that was greatly overvalued. Contractor Rick Luyendyk, who specializes in custom-made and timber-frame homes, says things had reached the point where homes he had built in 2007 were being flipped six months later for $40,000 or $50,000 above the original selling price. The labour market was so tight that some employees were able to dictate the terms of their employment. Have a dispute with your boss? You could walk away and have another job by that afternoon. “Everyone needed to feel and taste a recession,” he says.
But the market correction turned out to be much more significant than even Luyendyk had hoped for. In 2006 his company built 53 homes; in 2008 he completed only three, using employees to do some work previously subcontracted and having to lay off six. By November 2009, the unemployment rate in the East Kootenays region was 8.4 per cent, a point above the provincial average and 2.5 per cent higher than a year before. All across the area, construction on new developments had ground to a halt, leaving the small town dotted with half-finished recreational properties. And nowhere is the economic slowdown more apparent than at Lake Windermere Pointe, where Invermere’s tallest buildings still sit half empty, three years after being built.
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INVERMERE MAYOR GARY TAFT knows first-hand the trickiness of balancing development and local interests. Born and raised in Invermere, the 27-year-old has long taken an interest in how his town is run. Even after moving to Kamloops in 2000 for a two-year college program in business, he found himself reading council minutes online and having the local newspaper mailed to him by his mother. Taft returned to Invermere in 2002 and ran for town council, serving two terms before being elected mayor in November 2008.
After making a latte in Gerry’s Gelati, the popular downtown café and ice cream parlour that he’s owned and operated since 2004, Taft sits down and explains the difficulty local businesses face. During the high season, businesses can’t keep up with demand. But if they build up their business and hire enough staff for the busy period, they go broke in the winter. “You’re stuck in these peaks and valleys in terms of business,” he says. “It’s very difficult to find a size that somehow works for both seasons.”
Taft says that as Alberta vacationers started snapping up single-family homes in traditionally residential neighbourhoods, many homes would be left dark for much of the year. The pressure on those neighbourhoods – and the perception of an eroded sense of community – was the primary reason why Taft, then a town councillor, supported the 2004 development proposal for Lake Windermere Pointe.
“If people want a place to come on the weekends and in the summer, then a condo unit in a dense development with underground parking walking distance from the beach makes more sense than buying up all these houses in residential areas,” he says. “To be a true community and to maintain our residential feel, there should be a mix of very different product.”
It’s easy to understand why Alberta vacationers are attracted to Invermere. Perched on a plateau surrounded by the dramatic peaks of the Purcell Mountain range, the town looks down onto Lake Windermere and the golden reeds of the Columbia Wetlands, one of the last largely intact wetlands in North America and home to 250 species of birds, according to the environmental group Wildsight. Half a dozen golf courses and the Panorama ski resort are within short distance, and downtown Calgary is only a three-hour drive away. During July and August, when the population of Invermere and the surrounding lake country swells from about 5,500 to 45,000, the lake is busy with people swimming, kayaking and water-skiing. SUVs with red-and-white Alberta plates fight for parking spots at Sobey’s.
A limited number of Albertans have owned cottages in Invermere since the 1950s, but it wasn’t until the 1980s that the area became widely popular. That’s when the municipal and provincial governments of the day seized on opportunities to develop and diversify the local economy, with the B.C. government putting a small portion of the wetlands at the north end of Lake Windermere up for sale for recreational development. Douglas McIntosh bought eight hectares of it in 1990, but years of legal wrangling with environmentalists opposed to filling in the flood plain and negotiations with town council delayed development. By the early 2000s, the finally filled-in land featured an A&W drive-through and a failed mini-golf course, but otherwise sat vacant.
Around that time, demand for property in Invermere started to spike upward. Modest lakeside cottages were being bought for up to $2 million and replaced by 5,000-square-foot mansions designed to appear rustic but with the added flourishes of elaborate boathouses, copper roofing and, in one case, a turret. In 2005 former Calgary Flames goaltender Mike Vernon sold his lakefront retreat for $2.9 million and built a place farther south. Between 2005 and 2008, property values more than doubled to an average of $1.3 million near Vernon’s former abode and $1.7 million on the more exclusive west shore. The result: per capita property taxes in Invermere went up more than 60 per cent between 2003 and 2009.
[pagebreak] At the crossroads: Many residents of the sleepy East Kootenay town of Invermere fear recreational development is threatening their community’s character
With demand for lakefront property increasing and supply tightening, many prospective buyers, mostly out-of-towners looking for second homes, were priced out of the market. That led to a development called Lakeview Meadows, the town’s first high-end subdivision of recreational properties, which Mayor Taft describes as “starter castles.” Launched in 1998, Lakeview offered parcels of land above the lake and shared lake access for a fraction of the price of the coveted lakeside hideaways. Over the past decade, 280 homes have been built on the land, with the final phase, 26 high-end condos, completed in 2009. “Those people would have all liked to have bought on the lakefront, but the prices got so high that they couldn’t,” says Gordon Bagan, a longtime Invermere-based real estate agent and market observer. “Instead, they compensated and built really beautiful mountain homes.” Competing developers took notice of Lakeview’s success, and a flurry of construction ensued in the mid-2000s, culminating with Lake Windermere Pointe’s launch in 2006.
All this development has led to some strife. Permanent residents of Invermere, who have long grumbled about rich Albertans taking over their town (especially during the six weeks following the Calgary Stampede), blame the growing influx of vacationers for making housing, food, clothing and other living expenses unaffordable. There’s also a growing concern about public access to the prized Lake Windermere. “There is a mentality from some, not all, lakefront property owners that the best way to limit the number of boats used is to make everything exclusive, so that the only way to get a boat on the water is if you own lakefront property or you have a private marina or a lake-access community,” says Taft. “In the future, will the ability to have use of the lake be limited to those who can afford it?”
And then there’s the environmental impact of mushrooming subdivisions, golf courses and lakefront developments. Sixty-two per cent of Lake Windermere’s foreshore has now been developed, disrupting breeding grounds of birds and affecting the health of the lake. According to Heather Leschied, program manager of an environmental partnership called the Lake Windermere Project, a comprehensive water quality analysis conducted in 2005 indicated the lake is eutrophicating: a high level of nutrients in the lake is causing an increase in plant matter, which can cause animal life to die for lack of oxygen.
When new lakefront holiday mansions are put up where modest cabins once stood, septic tanks are commonly not upgraded, and many people suspect the overused old septic tanks often leak. Current research hasn’t conclusively pointed a finger at the septic tanks, but for Brian Colgan, a lakeside property owner from Edmonton, the effects are clear: “I know what my septic system was doing to my beach, and I believe my neighbours’ are having the same effect.”
Perhaps because of its highly visible location at the end of the lake or because of the controversy sparked by the filling of the wetlands, Lake Windermere Pointe has borne the brunt of residents’ frustration about what’s happening in Invermere. Realtor Gordon Bagan believes the public’s displeasure with the development is because it doesn’t suit Invermere’s character: the buildings, he says, are oriented in such a way that people passing them on the main drag can no longer see the lake. “They’ve ruined the public’s view,” he says, speaking from his office that now looks out onto the beige wooden walls of the condos. “Then they put up a chain-link fence. In Invermere, we don’t even have fences.”
But the project’s most serious sin, Bagan and others argue, is its scale. “There’s nothing else like it in this town. If it was a two-storey structure, it would probably be a lot different.”
As for McIntosh, he’s aware that Lake Windermere Pointe has its detractors but argues that the project fills an existing demand. “Any time there is something new in a community, it scares people,” he says. “You’re never going to satisfy everyone.” And even though almost 40 per cent of his units remain unsold, he sees growth in Lake Windermere Pointe’s future. The current development’s 224 units are only Phase 1; up next – as soon as the market allows, he says – construction will commence on a 140-unit resort and hotel complex, building permits pending. “This is not the first time the economy has slowed down,” he notes. “While we are suffering right now, it is nothing like during the national energy policy in the early ’80s.”
Still, with Invermere’s businesses, services and lakefront already at capacity – not to mention the excess of inventory on the market – it’s difficult to imagine how these future plans will fit into the picture. While McIntosh is confident that town council will support the next stage of his development, Mayor Taft now acknowledges that Lake Windermere Pointe may not have been an appropriate fit for Invermere and is hesitant to endorse any new development: “We got a pretty loud and clear message from people that the Lake Windermere Pointe project was too dense and that a repeat of that in a larger scale to the east is not something that is desirable.”
Instead, Taft believes Invermere will continue to grow by attracting visitors outside the already saturated July-August time frame. He points to an unfinished conference centre, part of the Resort at Copper Point. After months of construction delays, the development went into receivership in March 2009, but Taft is hopeful it will eventually move forward. He also sees new opportunities as baby boomers retire. “The next big push is away from recreational condos and more into 55-plus retirement units,” he says. “Instead of only a weekend destination, [retirement properties] will be a May-to-October summer residence.”
Gordon Bagan, on the other hand, believes the economic crisis slowed growth just in the nick of time, providing Invermere with time to pause and reflect. “What is Invermere going to be in the future?” he wonders, adding that he thinks the town lacks adequate transportation and the sort of health-care facilities needed to become a large-scale retirement destination. “People need to realize that this town is not going to be huge.” In Bagan’s view, Invermere is as big as it ever should be; it’s no longer able to absorb more people, so developers and town council should pat themselves on the back and declare Invermere complete, he says, their work finished.