The real problem with Vancouver’s outrageous house prices

[Alex Mackinnon]

Well the options for Vancouver are:

a) make changes to bring housing prices back down to a sustainable rate
b) have a middle class which has a tiny retirement savings and no expendable income

A house isn't a retirement plan, and having a society with a smaller expendable income means we will be more prone to financial shocks and lower employment. While the housing industry does contribute a ton of money to our GDP it doesn't get us anywhere having all our income in only housing.

How many people in the middle class that can take a financial hit and still make mortgage payments? Who has savings anymore when it's all tied up in property?

[whatnext]

Look for things to get interesting. Two articles, perhaps unrelated perhaps not:

Anyone driving along Cambie Street between King Edward and West 57th, or reading the Real Estate Weekly, cannot help but notice that many of the single family properties along both sides of the street are for sale, or have been sold. According to newspapers, and recent CBC Early Edition reports, single family lots worth $1.2 million have sold for $3.4 million. This has included one ten lot assembly.

Experienced Vancouver developers have watched the situation with a mixture of amusement and surprise. They know that it is a mistake for anyone to buy a Vancouver property based on its potential rezoned value, since the City of Vancouver has a policy of charging a Community Amenity Contribution (CAC) whenever a property is rezoned. In other words, anyone paying $3.4 for a $1.2 million property may also have to pay another million to a million and a half dollars to the city as an amenity contribution...
http://gellersworldtravel.blogspot.c...community.html

Residential property prices are in freefall in China as developers race to meet revenue targets for the year in a quickly deteriorating market. The country’s largest builders began discounting homes in Shanghai, Beijing, and Shenzhen in recent weeks, and the trend has now spread to second- and third-tier cities such as Hangzhou, Hefei, and Chongqing. In Chongqing, for instance, Hong Kong-based Hutchison Whampoa cut asking prices 32% at its Cape Coral project. “The price war has begun,” said Alan Chiang Sheung-lai of property consultant DTZ to the South China Morning Post...
http://www.forbes.com/sites/gordonch...-this-a-crash/

It doesn't take much reading between the lines in Michael Geller's blog to connect the dots who the "inexperienced" developers are. A culture which hasn't experienced a massive bubble unwinding before no doubt thinks demand will keep rising forever.

How this all plays out in Vancouver will be very interesting. Those of us who bought over 10 years ago are probably OK, those who bought in the last 5 years are probably screwed for quite a while.

[trofirhen]

Originally Posted by Pinion

You say life isn't fair, I say "You're right, tough luck on not getting into the market on time." It is not me who life wasn't fair to on this issue.

I'm fairly confident I'm one of the most left-leaning members of this board, but having the government artificially lower housing prices somehow is beyond even my tolerance. That's why I was curious exactly how you envisioned this "levelling of the playing field" happening.

I was speaking too broadly without creating any specifics. The first thing that springs to mind is a residence requirement for foreign investors along the lines of what I believe they have in Australia.

[BCPhil]

Originally Posted by cc85

No, prices do not go up all the time. We have a bubble that will burst that will see prices go back down to a reasonable level. A level that roughly corresponds to 30% of one's income. Places that face a shortage of land are notoriously known for boom and bust cycles. Of course prices do go up if you have a long enough time to measure the range.

Let me know what our baby-boomers intend to do when they decide to sell to move into senior's homes. I guess there will be enough demand to purchase all of their single-family properties at their inflated prices.

It is quite sad that real estate runs on the backs of the ignorant segment of the population that have very limited knowledge on finance and real estate trends. It is even sadder to understand that those who seek a sustainable solution to cities realistically have no other solution to encourage densification aside from supporting this arrangement.

I never stop questioning why I'm left out of the conversation and those with less foresight are included.

You don't have to wait for the baby boomers. Over the next dozen years, about another $6 trillion in assets (in the US) will be released by the "greatest generation" as they die off.

They were the greatest generation, not just because they won WWII, but because they grew up in the depression and learned at a young age to save every single penny they could; and they did their entire lives. Imagine all the homes and houses that will fall into the hands of the spend happy, deeply in debt, baby boomers. What will they do? Sell! They need that money to buy a new car or 3D TV or pay off some debt. And they will sell at any price they can as it's free money. In Vancouver, the market will be flooded with properties from the very heart of the city that have been in the same hands since WWII.

[whatnext]

Peter Ladner writes on this issue in today's Province:

..But at some point we have to ask out loud: Is the harm from virtually unlimited offshore investment in real estate greater than its benefits? What is the price we pay for Vancouver being the thirdmost-unaffordable housing market in the world, where home ownership is out of reach for our next generation, skilled immigrants, teachers, nurses, police officers and health-care workers who are so vital for a livable city?

Vancouver's chief planner, Brent Toderian, says suck it up and learn to enjoy renting...

..In 2007, the Vancouver Economic Development Commission asked business and community leaders to name the biggest barriers to job creation in Vancouver.

At the top of the list were high commercial and industrial land prices, and unaffordable housing that makes the city unattractive to workers and managers alike.

That's job destruction, not job creation..

Read more: http://www.theprovince.com/business/...#ixzz1dbSPPX1f

[trofirhen]

Peter Ladner's article does indeed strike a raw nerve, and on both sides of the spectrum.

If people say, "yes, yes, come in and invest as much as you want," they'll be accused of a selling-their-own-mother mentality, and with what consequences?

If people say "No, No, stop the foreign (mostly Chinese) investors from pricing Vancouver off the map," people will scream "RACIST! RACIST!" ....... This is a real dilemma and requires some pragmatic, community-benefit-oriented thinking to find a solution.

The "laissez-fare" people who say there will be a real estate bubble that will burst may be right. Then again, they may be wrong .....

So, do we sit back and watch and wait, or do we start coming up with constructively proactive ideas now? ... or what?

[whatnext]

And four yeras after teh thread start today Angus Reid released a survey showing that "...About two in five respondents said they were "seriously thinking of leaving Metro Vancouver because of the cost of owning a home here." That is not a detached house with a yard in Vancouver either - that's any old condo, townhouse or detached home in Metro Vancouver, suburbs and all...

Read more: http://www.vancouversun.com/business...#ixzz3dTNfHX6N

I can't think of why anyone would consider starting up a business here, or why an existing firm would open an office here. Try Victoria, Kelowna, Vernon.

[WarrenC12]

Filling out a survey vs. actually uprooting your life are two different things.

As evidenced by something as silly as the Yoga event, people here loooooove to complain.

[dreambrother808]

Originally Posted by whatnext

I can't think of why anyone would consider starting up a business here, or why an existing firm would open an office here. Try Victoria, Kelowna, Vernon.

Because living in those places is boring to some people, such as myself, and a lot of talent wouldn't consider relocating there.

[Caliplanner1]

High house prices eventually spills over into higher rent prices which eventually hurts the increasing number of lower income folks (usually the younger or less professional workers) towards driving such workers (pun intended) either out of Vancouver (thus encouraging urban sprawl and longer environmentally damaging commutes) or out of the province. High housing costs/prices can also serve to deter certain industries from locating to B.C. as operational costs will be potentially higher. Unlike New York City or Toronto where higher house prices are linked more so with a robust economy that offers multiple opportunities to earn big salaries in a variety of interesting positions, Vancouver's local economy and attendant job market shows no such reality of vibrancy/diversity etc.!

[djmk]

Originally Posted by whatnext

I can't think of why anyone would consider starting up a business here, or why an existing firm would open an office here. Try Victoria, Kelowna, Vernon.

I'm starting to see clients move to Victoria and Kamloops to do business. But Kelowna and Vernon seem to be doing the opposite.

I think Victoria would absolutely boom if there was no issues with travelling there.

[Caliplanner1]

Originally Posted by djmk

I think Victoria would absolutely boom if there was no issues with travelling there.

What ever happened to the various plans to seek a road (via bridge/tunnel) link to Vancouver Island??

[Vin]

Originally Posted by BCPhil

You don't have to wait for the baby boomers. Over the next dozen years, about another $6 trillion in assets (in the US) will be released by the "greatest generation" as they die off.

They were the greatest generation, not just because they won WWII, but because they grew up in the depression and learned at a young age to save every single penny they could; and they did their entire lives. Imagine all the homes and houses that will fall into the hands of the spend happy, deeply in debt, baby boomers. What will they do? Sell! They need that money to buy a new car or 3D TV or pay off some debt. And they will sell at any price they can as it's free money. In Vancouver, the market will be flooded with properties from the very heart of the city that have been in the same hands since WWII.

I think what you've just said has already been happening since the 60s. Spending on the luxuries, going for less working hours with higher pay and full benefits, and not saving for more important purchases like property assets are not anything new in the western world. Otherwise, low-paying labour-intensive factories and other production facilities wouldn't have relocated to other less developed parts of the world, essentially giving them a very competitive edge over the developed world. Now the tide has turned, and the ones that used to be frugal, worked hard and saved even harder are the ones buying into properties here. Locally, inheriting a fortune would still not make this place any more competitive if people still think it's ok to max out on their credit limits, and not resort to belt-tightening measures in order to save.

[WarrenC12]

Originally Posted by Caliplanner1

What ever happened to the various plans to seek a road (via bridge/tunnel) link to Vancouver Island??

Impossibly complex and expensive.

I think rough estimates are in the $25B range. If financing could be figured out, it would still mean tolls of $300 or something each way.

[city-dweller]

As long as income has no connection to housing in geographically constrained area, housing prices will always move independently of what is locally needed to support the range of workers.
The crazy situation in the City of Vancouver is a combination of:

1. Vancouver's amenity paradox (the nicer you make the place, the more people want to live there.)
2. Socio-economic filtering (keeping up with the Joneses, i.e. neighbourhoods homogenizes as prices go up pushing prices nearby up from the spill over. The idea that the 'west side' starts at Boundary)
3. Speculation of property to park or flip as a commodity. (Nationality is irrelevant)
4. City planning that protects property value over diversity of uses. (and Public interest?)

First, I would benchmark the land-values as community assets and tax the crap out of anything that goes beyond inflation based indices. People should be able to build equity in their home, but housing is not a typical commodity and should not be treated as such.

Secondly, I would create rental housing tied to 30% income and create categories for different rent-based incomes. This way you would be able target the developments to the need available. For example, if 10% of the rental stock is class C rents, then drop taxes on buildings the accommodate more class C. Targeting income is more effective in maintaining the right balance of housing. People of similar incomes should be competing for housing. The current model is the top earners push out everyone. This should also be applied to small business. A notary has a different financial reality than an artist. (Check out the 401 Building in Toronto that mixes artists and commerce providing a diversity of tenants with different financial realities - and daycare)

Thirdly, I would pre-zone all arterials and collectors to multi-unit, but change the code to make them based on form not use. This would allow for better flexibility of developers to meet community preferences while allowing better flexibility in demand changes over time. Three square blocks of mid-size can provide the density of a few towers near a station. (I still like the towers near the station. )

Finally, I would drop parking requirements. If that is not tenable then drop the requirements for any building within 500m of a bus stop and 750m of a rapid transit stop. The developers have a strong incentive to build what they think the market will bear. The cost of surplus parking feeds into the cost of units. With all the current and planned mobility options, it is silly to building too much parking while housing is so unaffordable.

[Alex Mackinnon]

Originally Posted by Caliplanner1

What ever happened to the various plans to seek a road (via bridge/tunnel) link to Vancouver Island??

Actually it was $200B-300B dollars as a spitball, with no known technology that could cross the Salish Sea in a remotely useful place.

The Straight is 1000' deep in places. It would have to been a floating bridge and tunnel combo.

A bored tunnel would almost certainly never get deep enough. A non floating bridge would never work in the deep water.

Connecting via Campbell River would be 5 or 6 long spans with a 3-4 hr travel time.

All the options suck.

[EastVanMark]

Originally Posted by whatnext

And four yeras after teh thread start today Angus Reid released a survey showing that "...About two in five respondents said they were "seriously thinking of leaving Metro Vancouver because of the cost of owning a home here." That is not a detached house with a yard in Vancouver either - that's any old condo, townhouse or detached home in Metro Vancouver, suburbs and all...

Read more: http://www.vancouversun.com/business...#ixzz3dTNfHX6N

I can't think of why anyone would consider starting up a business here, or why an existing firm would open an office here. Try Victoria, Kelowna, Vernon.

Can't wait till the city of Vancouver comes out with a "study" of its own that finds the exact opposite and that people have "adapted" or "gotten used to it" like they do every other time. Or my personal favorite post a "myths" section regarding issues with some highly suspect "evidence".

[casper]

Originally Posted by Alex Mackinnon

Actually it was $200B-300B dollars as a spitball, with no known technology that could cross the Salish Sea in a remotely useful place.

The Straight is 1000' deep in places. It would have to been a floating bridge and tunnel combo.

A bored tunnel would almost certainly never get deep enough. A non floating bridge would never work in the deep water.

Connecting via Campbell River would be 5 or 6 long spans with a 3-4 hr travel time.

All the options suck.

Best option, reduce BC Ferries rates by 50%. That places it at a break-even point. Currently the Vancouver to Vancouver Island runs are very profitable for BC Ferries. They use the money they make on those routes to subsidize the less profitable routes.

[ssiguy]

My sister and brother-in-law moved back to Ontario years ago.

They prefer Ontario but also were tired of working hard for the privilege of owning a shoe box. The funny thing is that he still works primarily in BC in construction but it's worth his while to fly back and forth and stay with my brother or friends.

Ontario gets it's property and income taxes from him and BC misses out.

A lot of people may not love the idea of moving to a smaller, quiet city but you are assuming those people will stay in BC which is a very bad assumption. Every province in the country is vastly cheaper than BC most with higher wages and Vancouver has the longest commute times of any city in the country including big, bad Toronto.

[red-paladin]

We need to keep this thread on topic.