International report — Boom and bust: A Canadian-built suburb wilts in a hot housing market

A Canadian-built suburb wilts in a hot housing market

An eight-hour drive south of Santiago lies Temuco, the largest city in southern Chile. In the near distance, two of the world’s most active volcanoes spew smoke. Long-beaked ibises fly across blue skies–and it never snows. Not the kind of place you’d confuse with Canada–unless you happen to be strolling along the streets of Primavera, a meticulously planned suburb plunked down on the outskirts of this rapidly growing city of 300,000. Especially for a northern gringo, encountering this subdivision 38 degrees south of the equator can be a surreal experience. In a country of gated brick and concrete fortresses, Primavera looks so, well, Canadian.

That’s not surprising, given that the houses are based on Canadian designs, many built of Canadian spruce and fitted with Canadian-made vinyl double-glazed windows and doors, roofed with Canadian asphalt shingles and erected (under the supervision of Canadian construction workers) on lawns that flow out to a streetscape designed by a Toronto planner. To drive the connection home, the streets in the 173-acre suburb are named after Canadian provinces and cities.

The Primavera subdivision is the offspring of a joint venture between Newfoundland lumber merchant Rex Philpott and farmer Robert Stanton, a third-generation Anglo-Chilean educated at Cambridge. In 1997, Stanton, whose family owns and manages a 2,000-acre dairy farm outside Temuco, was looking for a way to bring some profit into his highly indebted operation. To Stanton, it seemed a no-brainer to use some of his main asset–farmland–to get into the real estate business. But he wanted to “do it better” than other developments in Chile. “I thought Canadian at that point,” says Stanton. “That’s my vision of Canadian homes: wooden and well-insulated.”

His Internet research coincided with Philpott’s newly launched website for a subsidiary called Highland Homes, which builds wood-frame and log houses. In a case of further good timing, Philpott was on his way down to Chile: Canada had just signed a free trade agreement with the South American country, and Philpott, whose Cottles Island Lumber Co. is one of the largest lumber producers in Newfoundland, had been invited to join then-Prime Minister Jean Chrétien’s Team Canada mission. Stanton and Philpott met and quickly drew up a memorandum of understanding to jointly invest in an $82-million housing development. “On paper it was one of the biggest Team Canada missions,” says Stanton. “There was lots of excitement. We sat up at the VIP table, met both countries’ leaders. It was all quite fun.” The operative word being “was.”

Chile is booming, and the country’s housing sector is one area that clearly reflects 15 years of economic growth. This past November alone (springtime in the southern hemisphere), housing sales increased 33%. In Santiago, the capital, with a population of nearly six million, sales have hit historic highs. Billboards advertising inexpensive homes line the highways, and construction cranes litter the suburban landscape. To make room for more residential building, Cousiño-Macul, the well-known wine company, is converting more than 200 acres of its vineyards located on the fringes of the city into real estate. And this kind of growth is taking place in Chile’s smaller cities, too. A massive migration is taking place as mechanization puts rural Chileans out of work. That, combined with a per capita income recently breaking the US$10,000-a-year mark, “is pushing tens of thousands every year into the threshold of being able to buy a house,” says Stanton.

Stanton and Philpott hoped to grab a piece of this booming market by offering a self-sufficient satellite town based on the principles of New Urbanism. The Primavera project would emphasize integrated pedestrian-friendly communities as a solution to sprawl. They called it Primavera (“spring” in Spanish) because, according to the business plan, it’s “a name that speaks of nature, new beginnings and change.” They hoped the change–Primavera breaks dramatically with traditional Chilean urban design–would open up a niche, one that enables them to expand not just throughout Chile, but into the much more lucrative market of Brazil. “Those satellite cities have huge potential in South America,” says Philpott.

Maybe. Eight years after its inception, Primavera has become a reality. Stanton provided the low-cost land and project management while Philpott contributed $2 million through Canex Development Corp., set up specifically to build the suburb. The funds covered design costs, the construction of the access road, seed money to start a local school, the sewage treatment plant and the materials for the first 32 houses. Sales and bank loans have funded the rest of the development. Philpott also contributed three Canadian building technicians to train local teams. (Chilean builders are not familiar with asphalt roof shingles, for example.)

True to the principles of New Urbanism, the houses are not surrounded by walls or gates, and the front doors open onto the street. The sidewalk that winds throughout the development is wide enough to accommodate two people strolling abreast. Underground, fibre-optic cabling means that telephone poles and power lines don’t obstruct the view, which on a clear day reveals the outlines of five volcanoes. All in all, a dream suburb with several home styles to choose from at a budget price: between US$60,000 and US$100,000.

And yet, Primavera remains largely uninhabited. Eight years into the project, only 76 homes have been purchased. “We had hoped to sell three times as many by now,” admits Stanton. The partners’ final goal of 850 houses seems a long way away.

What went wrong? Philpott cites everything from the unfamiliarity of a new country and language to insufficient funds as contributing factors. “Always the biggest reason with these things is cash flow, how much you can pop into it and how far you can extend yourself,” he says. As well, in 2000, just as the houses were ready for sale, the market suddenly went flat, not picking up again for three years.

But Stanton and his wife, Killy, wonder if it’s related to the break Primavera makes with traditional Chilean expectations of a house. The success of a nearby housing development, built by the Chilean company Socovesa, suggests they might be right. The Socovesa units, which sell in the same price range as Primavera houses, are densely crowded together, less attractive and surrounded by sprawl. But they are what Chileans typically expect: constructed of brick and concrete, sequestered behind large iron gates and offering little yard space. The development, a bit closer to Temuco than Primavera is, has now sold more than 700 units.

On the other hand, Primavera’s houses are made out of wood, a material Chileans regard negatively despite being better suited to the climate. Stanton says that zoning large and small houses together in Primavera is also new for Chileans. “People in Chile are very [class conscious],” he says. In a country with a rising crime rate, the fact the community is open-concept rather than gated may also be viewed as a drawback. But the biggest strike against Primavera may be the 23-kilometre commute to Temuco, which deters residents who work in the city from going home for lunch. “They needed a new mindset,” says Stanton. But this new attitude has been slow to appear.

The future of the development seems to be partly dependent on getting a commercial area established. It is difficult to sell houses when there are no nearby shops that offer the fresh daily bread that Chileans expect on the breakfast table. That needs a large injection of cash, but the man with the money, Philpott, is holding back. “I would say we’re not going to put any more into it; I gotta get some first,” he says. Most of Philpott’s energy and available money is currently focused on a Newfoundland luxury vacation development, Humber Valley Resort, which is selling quickly. But he says he’s not giving up on Primavera. “It’s not building at any great speed, but it’s still alive,” says Philpott. “And, hopefully, it stays so I can get back to it. I definitely want to get back to it.”

Meanwhile, Stanton and his wife “are just breaking even,” using proceeds from house sales and new financing to stay afloat, and banking on their belief that the Chilean mindset is changing. “They’ve changed so much over the past 15 years,” says Killy, wistfully. “Now they’ve got pet dogs–it used to be dogs on chains.”