Vancouver & the 8th Annual Demographia International Housing Affordability Survey

[ozonemania]

Came across this Bloomberg Businessweek article about Demographia's latest survey:

Vancouver Displaces Sydney as Second-Costliest Housing Market

Jan. 23 (Bloomberg) -- Vancouver displaced Sydney as the least-affordable housing market after Hong Kong among large English-speaking cities, as home prices rose faster than incomes, a study of 325 metropolitan areas worldwide showed.

Vancouver’s median home price of C$678,000 ($686,400) in the third quarter was 10.6 times its median pretax household income of C$63,800, making the city “severely unaffordable,” Demographia said in a report today. A ratio of 3 or less is considered “affordable,” according to the public-policy firm’s survey of markets in Australia, New Zealand, Ireland, the U.K., the U.S., Canada and Hong Kong.

Sydney’s ratio of median home price to income was 9.2, while Hong Kong’s was 12.6, a record for the eight-year-old survey, surpassing the previous high of 11.5 for Los Angeles in 2007. Home prices in Hong Kong, Vancouver and Sydney haven’t plunged as they have elsewhere, such as in Ireland, now the second most-affordable country, after the U.S., the study said.

.....

I'm not sure the exact profile of Demographia, but the tone of the article and the citations/interviews seem to be real estate developer biased. Basically, the answer to housing costs and affordability is to build more starter homes (presumably by expanding suburbia) and to get rid of regulation that prevents more homes being built.

“The causes of massively deteriorating housing affordability are not a mystery,” Cox and Pavletich said. “They inevitably result from more restrictive land-use regulations adopted by governments with insufficient attention to economic fundamentals.”

The study focuses on the home-affordability ratio, not absolute prices. It doesn’t take into account such influences as falling interest rates, an influx of foreign buyers or the attractions of climate and coastal location.

“There’s no question if you want to live in Manhattan or in a nice, close-in suburb, it’s going to cost you more,” Cox said in a telephone interview. “Demand doesn’t drive up prices. Demand drives up prices if there are constraints in supply, and the cause here is regulation.”

Bubble Bursting

Home prices in the eight capitals of Australia’s states and territories fell 3.7 percent in 2011 through November and were on pace for the biggest annual decline in at least 12 years on concerns that Europe’s debt crisis may damp the nation’s economic growth, according to figures released Dec. 30 by RP Data, a real estate researcher.

“The bubble is bursting in Australia,” said Pavletich, who operates PerformanceUrbanPlanning.org, a website on urban public-policy issues.

In New Zealand, Christchurch is “severely unaffordable,” with a ratio of 6.3, according to the study. The city is rebuilding after a series of earthquakes that started in 2010.

“There’s huge pressure on the government to open up land supply and get affordable new lots,” said Pavletich, who is an advocate for the effort.

........

[racc]

Demographia is the latest vehicle of Wendall Cox, a long-time anti transit and pro-sprawl activist. This is not unbiased or really even research. The data is cherry picked and massaged in such a way to support his arguments.

For example, why arbitrarily chose English speaking cities? Well he knows that this will be lost in much of the reporting and the cities will be reported as the most expensive in the world.

It is of markets of 1,500,000 except in Australia and New Zealand. Why, I expect again it so they can get the result they want.

http://www.demographia.com/dhi.pdf page 11.

All the "affordable" markets are American cities which don't really have reputations as being great places to live. Several, like Detroit, are suffering badly from the recession and housing prices and the economy have collapsed. Hardly a great result. No coast cities either.

Factor these American cities out and all of the other cities are more "restrictive" making the entire "study" totally useless.

It is pretty apparent the the most expensive cities are expensive because people actually want to live there. Now it could be that these are nice places to live because of more restrictive land use. I don't think we want to make Vancouver a worse place to live just to drive down housing prices. There are better ways I hope.

[Metro-One]

Yeah, i also noticed how it dod not mention that all of the speculation / buying many units simply for flipping have artificially driven up the prices.

[Hed Kandi]

The truth of the matter is that owning a property in Vancouver is expensive. However, this city is still extremely affordable in comparison to other world cities with regards to food, services, and consumer goods. Any who has traveled outside of North America will quickly realize this.

http://en.wikipedia.org/wiki/List_of...iate_employees

Owning a house may not be an option for many of us but one can still have a relatively good life in Vancouver filled with all the material luxuries that we have come to love. Having just spent some time in Aus and Japan, I soon realized just how good we have it when it comes to affordability.

[whatnext]

The Province has a whole series on people being driven out of Vancouver by high housing prices.
http://www.theprovince.com/news/pricedout/index.html

Bad news for any city masquerading as "liveable". The most striking thing is that compared to all the other high priced real estate around the world, there is absolutely no economic activity underpinning these insane prices.

[racc]

Originally Posted by whatnext

The Province has a whole series on people being driven out of Vancouver by high housing prices.
http://www.theprovince.com/news/pricedout/index.html

Bad news for any city masquerading as "liveable". The most striking thing is that compared to all the other high priced real estate around the world, there is absolutely no economic activity underpinning these insane prices.

Yeah, that pesky free market. People want to live here because it is a liveable city. It is far worse news to be a city that is not liveable where no one wants to live. Detroit, for example.

Still, it is important to find ways to make it so people can afford to live here. Making it less liveable not the best option. Maybe we should help other cities become more liveable.

[quobobo]

Originally Posted by racc

Yeah, that pesky free market. People want to live here because it is a liveable city. It is far worse news to be a city that is not liveable where no one wants to live. Detroit, for example.

Still, it is important to find ways to make it so people can afford to live here. Making it less liveable not the best option. Maybe we should help other cities become more liveable.

Free market? I wouldn't call it that - it's still illegal to build housing of any meaningful density in most of Vancouver, even in a lot of areas well-served by transit. When a developer can build as many units as they like near a Skytrain station or bus line, I'll be happy to call it a free market.

It bugs me that Cox focuses on the availability of land for single-family housing, when IMO the availability of land on which it's legal to build dense housing is much more important wrt affordability.

[whatnext]

Originally Posted by racc

Yeah, that pesky free market. People want to live here because it is a liveable city. It is far worse news to be a city that is not liveable where no one wants to live. Detroit, for example.

Still, it is important to find ways to make it so people can afford to live here. Making it less liveable not the best option. Maybe we should help other cities become more liveable.

You're really just repeating your previous post, perhaps in an attempt to deflect what you perceive to be criticism of Vision Vancouver (which it wasn't, though you might want to lecture Gregor about the free market-judging by the STIR program he doesn't undestand what it is).

[racc]

Originally Posted by whatnext

You're really just repeating your previous post, perhaps in an attempt to deflect what you perceive to be criticism of Vision Vancouver (which it wasn't, though you might want to lecture Gregor about the free market-judging by the STIR program he doesn't undestand what it is).

What? Huh? Really? Serious? Might want to lay off BC's best, you are really being "creative" on this one. How about just not assuming why people are saying what they are saying. My comments were just a reaction to yet not very thought out comment. Might want to get your ideals from other places than the Province and City Caucus.

[whatnext]

Originally Posted by racc

What? Huh? Really? Serious? Might want to lay off BC's best, you are really being "creative" on this one. How about just not assuming why people are saying what they are saying. My comments were just a reaction to yet not very thought out comment. Might want to get your ideals from other places than the Province and City Caucus.

Well given that you only post: a) to bash cars; b) to defend Gregor, it's an understandable assumption.

And while no doubt The Province is too plebian for someone as elevated as yourself, it does have a higher weekly readership that the Sun. And the Priced Out seriers offers a very good snapshot of what is becoming a serious issue in Vancouver.

[trofirhen]

Originally Posted by whatnext

The Province has a whole series on people being driven out of Vancouver by high housing prices.
http://www.theprovince.com/news/pricedout/index.html

Bad news for any city masquerading as "liveable". The most striking thing is that compared to all the other high priced real estate around the world, there is absolutely no economic activity underpinning these insane prices.

That's exactly it. There is no strong underpinning economy. Vancouver has become an investment haven for very rich pêople, and that's what is driving up the prices, along with the speculation and flipping.

Originally Posted by racc

Yeah, that pesky free market. People want to live here because it is a liveable city. It is far worse news to be a city that is not liveable where no one wants to live. Detroit, for example.

Still, it is important to find ways to make it so people can afford to live here. Making it less liveable not the best option. Maybe we should help other cities become more liveable.

I think the free market is great, hey. But this is a skewed situation. A weak economic base, as Whatnext pointed out, plus thousands of very rich people investing here and driving up prices.

From the tone of your response, it would seem either you already own a home here, or don't care if you do or not. Besides, IMO, the very fact of people being forced out (and in particular families) to live miles away is getting a bit too much, however you wish to argue

[Hed Kandi]

Trofirhen, I'm curious as to how Vancouver compares to Paris in terms of pricing and affordability?

Can you provide us with a quick comparison of consumer items, services, and real estate between the two cities?

[WarrenC12]

It's that simple. The cost of renting in Vancouver is right in line with median wages. Why people feel the need to "own" a home at 2-3 times the price of renting, is beyond me.

[trofirhen]

Originally Posted by Hed Kandi

Trofirhen, I'm curious as to how Vancouver compares to Paris in terms of pricing and affordability?

Can you provide us with a quick comparison of consumer items, services, and real estate between the two cities?

Well, everything is in € of course, so that is relative to the exchange rate at any given time.

However, in the decade or more that I've been here, real estate prices have really shot up. When I arrived, you could buy a small studio apartment here and there for (hmmmmm) about $125,000 CAD, starting price.

Now prices are at least triple that. And if you're thinking of a large, 3 bed apartment with all the mod-cons and hardwood floors, for example, that would be over $ 1 million CAD easily

The price of groceries and consumer goods here is generally more expensive, too. Just by what % is difficult to say right now. I'd need to do some research.

Public transportation: bus, Métro, and RER, is better, more comprehensive, and cheaper overall (much better than London) and France still seems cheaper than England, when I visit there.

However and perhaps more to the point, the syndrome of flight to the suburbs by the middle class exists here, too, while the City of Paris inexorably undergoes the process of gentrification in all the arrondissements.

Ménilmontant, my neighbourhood, was rather mournful and drab when I arrived. Now it's becoming chic, artistic, AND, yes much more expensive. Sorry I can't give you more precise details at the moment.

[trofirhen]

Originally Posted by WarrenC12

It's that simple. The cost of renting in Vancouver is right in line with median wages. Why people feel the need to "own" a home at 2-3 times the price of renting, is beyond me.

I think that they often have the idea of "cashing out" when they retire.

[go_leafs_go02]

The problem with renting is that you'll never recoup the money you pay in rent. You own, while you lose out on interest, all the principle you pay down you get back down the road to put towards a new house.

[racc]

Originally Posted by whatnext

Well given that you only post: a) to bash cars; b) to defend Gregor, it's an understandable assumption.

And while no doubt The Province is too plebian for someone as elevated as yourself, it does have a higher weekly readership that the Sun. And the Priced Out seriers offers a very good snapshot of what is becoming a serious issue in Vancouver.

whatever whatnext. You can have the last word in this pissing match. People are here to discuss issues, not read post bashing others. Please stick to the topic. I will.

[red-paladin]

Sticking to the topic is advisable yes

[whatnext]

Originally Posted by WarrenC12

It's that simple. The cost of renting in Vancouver is right in line with median wages. Why people feel the need to "own" a home at 2-3 times the price of renting, is beyond me.

A couple reasons.

Some might be too young to remember why there has been essentially no redevelopment in the West End or rental areas of Kerrisdale for years. In the late Eighties, early Nineties, the media was full of "granny being tossed out of her rental into the street due to new construction" stories. The council of the day basically slapped a moratorium on tearing down rentals but when you're a renter, your home is at the mercy of someone else.

Second, there is absolutely no legitimate economic reason that owning a home should cost 2-3 times the price of renting. Nothing in the Vancouver economy justifies the run-up in prices. It is only by importing a new foreign landowning class that this run-up has taken place:

..Lau's clients are wealthy Chinese business-men who set their families up in tony areas of Vancouver and West Vancouver that offer multimillion-dollar homes with top schools. These investors like to buy Vancouver property while visiting the wife and kids at this time of year, Lau said....While local buyers might worry that home values could be dampened if Canada's historically low interest rates eventually rise, that's not a concern for Lau's clients.

"In Chinese culture we buy one home for living in and a few for investments," Lau said. "Most of my clients buy in cash, so they don't need the bank. They would not be forced to sell [due to changing financing conditions.].."

Read more: http://www.theprovince.com/business/...#ixzz1kuSxeJQE

As to Paris, trofirhen knows better than I, but consider this. Paris is by far the First City of France, it is the nation's capital and the centre of finance. Vancouver is none of those things to Canada, not even the capital city of BC. All of the other high-priced cities largely fill Paris' place in their respective countries (London, Sydney, NY etc). So there's essentially one unique condition that fuels Vancouver's price run-up, but don't look to any politician to address it.