What is the relationship between new construction and urban housing prices?

[jpdivola]

Some argue that high urban housing costs are driven by a lack of supply. NIMBYs and zoning laws restrict supply and drive up prices. Allow more development and affordability will improve.
Opponents argue that new development won’t do anything about prices and will just line developer’s pockets and contribute to gentrification.

I take the first position. But, imo the answer is a little more nuanced.


Here are my somewhat disorganized thoughts:
1) The main driver of prices is supply relative to demand. Increasing supply, will ALL other factors being equal put downward pressure on prices. Denying this is economic illiteracy, even if you don’t agree that more supply will necessarily drive down prices.
2) The relationship of new supply to prices is like debates on the federal budget. It is all relative to hypothetical baselines. If prices would rise at 8% with no new construction, they may only rise by 6% with new construction units.
3) New construction will be more expensive than older units. But, new construction helps keeps older units more affordable AND today’s new luxury units become tomorrow’s older cheaper apartments. If avg rent is $2,000/mo and new units rent for $2,500 units a month that will mathematically raise prices on average, even if prices on existing units don't rise. Plus,if there is demand for $2,500 units, landlords can renovate existing housing to charge $2,500/mo. New units make "luxury renovations" less attractive and keep older units more affordable.
4) Urban multifamily housing is more expensive to build per sf than lower density housing. High density housing only pushes down prices when land costs are high enough to offset the higher construction costs.
5) Urban construction/land costs are so expensive that no amount market rate housing will ever be affordable for “lower income” residents.
6) New supply can gentrify a localized area (i.e. make it more expensive) by making a run down area more desirable. However, this is a classic “smart for one, dumb for all” problem. If every neighborhood resists development, then prices will raise for everybody.
7) Furthermore, this is moving people around. If neighborhood A gentrifies (by adding supply), it takes price pressure off of neighborhoods B-Z.
8) Developing areas where nobody lives or in already expensive areas avoids displacement/gentrification elsewhere.
9) For new development to push existing unit prices up on a city wide basis, new development would have to induce demand more than supply (adding 1,000 units create demand for 1,200 units?) This would happen if the city becomes more desirable, so that affluent suburbanites decide to trade the suburbs for the city. This seems possible, but not likely and even so, it would make housing more affordable in the suburbs.
10) “Global investors” may or may not drive up housing prices in trophy locations, but adding more supply won’t feed this. They can simply buy up existing homes.
11) The relationship between new development and lower prices is difficult to see in practice. People point to new luxury towers in Brooklyn as driving up prices. But, if the city shut down the towers and the tenants had to move out, would prices in NYC fall?

All in all, I agree more supply (i.e. development) is needed in our “prime urban cities”. But, urban development has innately high costs. Even if developer’s margins were pushed down to zero under a completely free market, prices would still be higher than suburbs/smaller cities

Just curious on other people's thoughts? I was hoping to have a thoughtful informed discussion on the topic.

***This is aimed at high priced urban markets (NYC, SF, BOS, DC, LA etc), most other US cities aren't under the same capacity issues.

[mhays]

This is one of the best summaries I've seen, and every point looks right at first read.

[pdxtex]

i understand the math but i think good old speculation drives alot of pricing too and it looks like were heading towards bubble land again!! take portland for instance. the economy is doing better but were not jamming on the gdp gains at the moment yet housing prices rose on average 13% over the last year. i dunno, to the layman (me!) that sounds like alot, and mostly based on bubble like economics of trendy markets, which defy any forumula.

[WilliamTheArtist]

I don't know. Seems like here the demand is higher than the amount of new construction. What's frustrating is how slooooow new stuff is coming online. One would think that after seeing every new development sell out well before it's finished more developers would get on the bandwagon and build more? I have been looking for something to live in downtown and there just isn't anything available that I want. The new stuff or the occasional old stuff that is pedestrian friendly is sold out and has long waiting lists. There is some old high-rise and apartment living in downtown that is affordable but but I and others don't want to live in it because it's often not pedestrian friendly having parking podiums and or parking garages near it, being set back and not connected to any street/sidewalk life, etc. so no matter how cheap it is, I don't want to live in something that is essentially a suburban high-rise or apartment plopped into a non-pedestrian friendly area of downtown, and not an urban/pedestrian friendly apartment or high-rise in pedestrian friendly area. The whole point of wanting to live in an urban/pedestrian friendly area is being able to live an urban/pedestrian friendly lifestyle.

So, even though we are seeing new development, the demand is higher than the supply so the prices are not coming down. And the older stuff that is affordable is not desirable and there is not enough "fixing up" that can be done to make them desirable because they are essentially 70's-80's stuff that is "designed" and sighted poorly.

[jpdivola]

Originally Posted by pdxtex

i understand the math but i think good old speculation drives alot of pricing too and it looks like were heading towards bubble land again!! take portland for instance. the economy is doing better but were not jamming on the gdp gains at the moment yet housing prices rose on average 13% over the last year. i dunno, to the layman (me!) that sounds like alot, and mostly based on bubble like economics of trendy markets, which defy any forumula.

Thanks for the feedback. Yeah, that is a fair point. There could be a bubble element to some of these markets for ownership.

But, I guess I think of housing markets are being driven by
1) long term "fundamentals" which I discussed up top.
2) short term "bubble" which are temporary.

I guess maybe I would add 2 points to bubbles:
1) Housing purchase markets can clearly experience bubbles in housing purchase prices. This can since homes are purchased through debt. People believe housing is an "investment" and are willing to go deeper into debt on the promise of a big payoff down the road. But, IMO the fundamental idea that more supply would lower prices still hold. A "price" bubble is more likely to occur if supply is fixed, whereas an "overbuilding" bubble will take some of the price pressure off the existing stock. And when the "overbuilding" bubble busts, the area will be left with an abundance of cheap excess housing.

2) However, it isn't clear you can have a rental bubble. Rents are paid out of current income and nobody views a rental payment as an investment in the futures. As a result, it doesn't seem rents can get out of whack in the same way. There maybe demand shocks if say the local economy were to crash and unemployment soared, but that isn't a bubble in the traditional sense.

IMO, the 30-year trend across several housing cycles ('bubbles") has been increasing rent and housing prices in the key urban markets driven by the fundamentals (demand creation has exceeded supply creation) with several bubbles along the way.

[jpdivola]

Originally Posted by WilliamTheArtist

So, even though we are seeing new development, the demand is higher than the supply so the prices are not coming down.

Interesting to hear about the market in Tulsa. I'm curious if "urban living" in Tulsa would follow kind of a "localized gentrification" model. This could happen if: if you have a suburban city where the middle class lives on the outskirts and the downtown is still a little quiet. Unlike the big urban cities, prices in the core will be lower (on total price, not PSF basis) and often times housing prices will be below replacement costs, since it is old and not renovated.

But, say you start revitalizing the downtown, bring middle class residents and amenities, that could create a "positive feedback loop/ gentrification cycle". Amenities attract the middle class which attract more amenities, which attract more middle class and so on. Owners will renovate older units and start new construction which will cost more than older units. As with all gentrification trends, this is just localized. New supply in the core will leave behind cheaper housing in other neighborhoods. (Again this is all other factors being equal, of course other factors will affect supply and demand).

I went to college in the interior North Eeast and many of the cities there follow this model.

[mhays]

Bubbles can point downward too. The low prices of 2010 were temporary, based on fear and lack of financing. We know those prices were out of whack (and still are in some places and for some project types) because prices were below replacement cost.

Rents and condo prices can rise much more quickly than wages without a bubble existing. Some of this is the downward bubble popping. Some is people's willingness to pay a larger percentage of their income for housing. San Francisco will never "pop" and revert to housing prices being 30% of income.

[Wizened Variations]

The continuing artificially low interest rate is permitting contractors to build 4 and 5 story stick wall midrise buildings and afford the material expense (lumber, sheetrock, concrete, etc.) while at the same time, keeping interest payments within (reasonable) reach.

The ripple effect of this low interest rate has permitted millions of single family houses to not go upside down (money owed is greater than worth), as well as permitted old housing prices in many markets to rebound.

The kicker is that this cannot continue too much longer. When the interest rates rise, as they must, the cost of materials will not fall as fast as the prices will due to reduced demand. The Chinese, Indian, Indonesian, Korean, Brazil, Russian, Saudi Arabian, Japanese, and, Turkish, interest rates do NOT have to track the US interest rate, so world wide demand could well keep the cost of materials high worldwide, regardless of what the US housing market does nor does not do.

We remain in a variation of the Greenspan Era created dilemma, where we are subsidizing the housing market, and, have no idea what the eventual mark to market adjustment will be.

High inflation rates with high interest rates?

EDIT: Construction of rentals makes the most sense, as rent can increase to cover inflation, and, renters are the easiest to evict.

[WilliamTheArtist]

Originally Posted by jpdivola

Interesting to hear about the market in Tulsa. I'm curious if "urban living" in Tulsa would follow kind of a "localized gentrification" model. This could happen if: if you have a suburban city where the middle class lives on the outskirts and the downtown is still a little quiet. Unlike the big urban cities, prices in the core will be lower (on total price, not PSF basis) and often times housing prices will be below replacement costs, since it is old and not renovated.

But, say you start revitalizing the downtown, bring middle class residents and amenities, that could create a "positive feedback loop/ gentrification cycle". Amenities attract the middle class which attract more amenities, which attract more middle class and so on. Owners will renovate older units and start new construction which will cost more than older units. As with all gentrification trends, this is just localized. New supply in the core will leave behind cheaper housing in other neighborhoods. (Again this is all other factors being equal, of course other factors will affect supply and demand).

I went to college in the interior North Eeast and many of the cities there follow this model.

Our core is a mixed bag. There are some neighborhoods where homes are still dirt cheap and others where homes are sky high. Within a mile or two of downtown you can still find homes that range from run down little places starting at 30-40 thousand to beautiful 10 million and up mansions. The "nice" areas in the core have been expanding for decades now and show no sign of stopping and many of those areas where the homes are super cheap are in the "transitional" areas that you know will in time be redeveloped. It's so hard to buy a place in those run down areas the way they look now, but then you know in about 15 years you will be kicking yourself for not lol. (Remember in particular a home in a neighborhood near downtown I looked at with huge white columns on the front porch that was going for about $35,000 and needed a lot of work and was in a sketchy area. Now the yards in the area are flawless and you probably couldn't touch that house for under $400,000.)

I don't see homes in other poorer parts of the city declining in prices with people moving to new developments in the suburbs or core because immigrant/hispanic population growth is currently enough to offset that.

I think what's stifling urban development in our core is that it's still seen as a bit of a "risky unknown" for our developers and banks. And it seems as if there are only a few developers currently building in downtown and they can only take on so much. Even though there is demand, the "suburban type developers" have no clue as to anything other than your typical suburban style development, and there is still demand for that as our commute times are very minimal so why bother with something different and unknown. Meanwhile there are waiting lists for the desirable downtown developments that do exist and people are snapping up the few new things before they even finish.

[Wizened Variations]

Originally Posted by WilliamTheArtist

Our core is a mixed bag. There are some neighborhoods where homes are still dirt cheap and others where homes are sky high. Within a mile or two of downtown you can still find homes that range from run down little places starting at 30-40 thousand to beautiful 10 million and up mansions. The "nice" areas in the core have been expanding for decades now and show no sign of stopping and many of those areas where the homes are super cheap are in the "transitional" areas that you know will in time be redeveloped. It's so hard to buy a place in those run down areas the way they look now, but then you know in about 15 years you will be kicking yourself for not lol. (Remember in particular a home in a neighborhood near downtown I looked at with huge white columns on the front porch that was going for about $35,000 and needed a lot of work and was in a sketchy area. Now the yards in the area are flawless and you probably couldn't touch that house for under $400,000.)

I don't see homes in other poorer parts of the city declining in prices with people moving to new developments in the suburbs or core because immigrant/hispanic population growth is currently enough to offset that.

I think what's stifling urban development in our core is that it's still seen as a bit of a "risky unknown" for our developers and banks. And it seems as if there are only a few developers currently building in downtown and they can only take on so much. Even though there is demand, the "suburban type developers" have no clue as to anything other than your typical suburban style development, and there is still demand for that as our commute times are very minimal so why bother with something different and unknown. Meanwhile there are waiting lists for the desirable downtown developments that do exist and people are snapping up the few new things before they even finish.

As a business owner, you are all too aware how difficult establishing name recognition is. Place recognition is no different, and, elevating location to where outside money is attracted takes a lot of sweat and more than a little money. In addition, once one has some place recognition, one needs to solicit interest in proposals, which involves more money, well placed, well designed, and, visually pleasing advertising, synchronously released with published company releases, which means one has to have the local newspaper's ear.

IMO, what one hopes for is that the "herd" takes the bait, at which point an area starts to sell itself through word of mouth, public interest stories, art colonies, etc.

Of course, the pioneers do the hard work, but, if successful get the best return on their investments.

[jpdivola]

Sorry, just picking up on this topic again.. i don't really have a question more just some general thoughts on the economics of urban housing markets.

I guess I basically see expensive coastal housing markets as basically driven by supply and demand. If this is the case, the obvious solution is supply and demand. However, I hear a lot of arguments against traditional supply/demand explications.

I'm generally unpersuaded by them. But, I do agree to much of the debate seems to polarize between overly simplified Econ 101 supply/demand arguments (zoning good, rent controls bad) and developers are evil type rhetoric, which seems to mistake correlation for causation when it comes to development and rising prices.

I can't find any literature that deals with the nuances of the issue. (E.x. more supply can possibly lead to a positive feedback as dense areas a generally more desirable. Demand can be distorted by sharp inequality, etc.)

Here are a few of the "anti-supply and demand" arguments.

1) New units simply raise the market ceiling allowing other properties to raise rent. I think the basic idea is that everyone wants to raise prices, but no one wants to charge the most. New luxury building provide a higer relative price. Say a land lord is charging $2,000 a month. If a new building opens charging $2,500, then suddenly charging $2,200 in the older building doesn't look like such a bad deal. People basically become conditioned to pay higher rents. Under traditional economics, this is nonsense. Profit seeking landlords would already have been charging the most they possibly could. However, there is some evidence from behavioral economics that landlords and renters aren't always rational. People will spend more on goods if they seem cheaper in a relative sense.

I understand this argument. But, not sure that this would hold for an entire rental market. Particularly given that rents account for such a large share of income. Ultimately, it seems like supply and demand rules. If landlords raise rents too much, people could move to cheaper apartments. However, in most cities there aren't excess of vacant apartments sitting around (hence the argument that ultimately rents are high due to limited supply relative to demand).

2) Coastal housing markets are being distorted by "the mega rich"
Traditional supply and demand arguments don't account for the wide variation in ability to pay. Inequality is skewing demand toward luxury housing, which pushed up land prices and crowds out middle class housing.
In coastal cities, it is more profitable to build 1 new housing for a family who can pay $5 million than it is to build 5 units for median income families (say 400k*5 = $2 million).

I agree this is an issue that makes middle class housing harder to build. But, I think this is largely an issue of demand distortion and blaming developers/new construction is like shooting the messenger. Without developers building new luxury units, the mega wealthy could simply buy up older existing buildings and renovate them or combine units to form larger living spaces. Brooklyn has seen Browstones revert from multi-family residences back to single family luxury homes. Ultimately, building new luxury housing supply helps everyone. Better to have the mega rich living in luxury towers than combining old units. Yeah, this is suboptimal and is a very indirect way to help middle class residents. But, building lux housing will not raise prices on existing units and probably puts very modest downward pressure on existing prices (relative to what they would be without super-lux construction) as the older units are less viable as super lux conversions. For super lux construction to raise prices, the new luxury developments would have to increase luxury demand more than luxury supply. This seems highly implausible.

I do agree cities could impose a tax on combining apartments or reducing density. If they distort the market toward increasing supply mind as well distort it toward reducing supply as well.

Developers are only catering to wealthy out of towners
Closely related to the mega rich argument and the global investor argument, is that wealthy non-residents are buying pied a terres and second homes. Realistically, I only see this applying to NYC and SF. Conceivably with the rise of the Emerging Markets there are tons of mega wealthy who are looking to park money in US real estate and keep a prestige home for occasional usage.

Like the wealthy argument, this is a problem of demand, not supply. Rising demand for 2nd homes from the global elites does push up prices and crowds out scare land for middle class housing. Again, its unlikely the wealthy foreigners would just stop buying in SF and NYC if those cities banned luxury condos. The global wealthy buy old townhomes in London and flats in Paris. Yeah, the new condo towers may induce some demand that otherwise wouldn't exist. But, for the most part these foreigners would still be buying in these cities. It is unlikely that adding 100 new luxury condos creates demand for more than 100 luxury units.

Additionally, Miami has wealthy foreigners buying property and it doesn't crowd out the middle class as it has a fairly healthy supply/demand balance relative to NYC and SF.

Seems a better way to deal with the pied a terre issue is create a 2nd home tax and funnel the revenues toward building affordable and middle class housing. That tax reduces demand for 2nd homes (or ay least compensates some for the crowding out effect) without reducing incentives to build more housing.



The luxury market is a separate housing market and does nothing to lower prices in the normal market

The theory is that urban real estate markets are bifurcated into 4 separate markets:
1) non-market affordable housing- which is subsidized by governments or non-profits.
2) a market rate housing market. Basically a private sector market affordable to those marking between say 50% ans 99% of the median income.
3) a super luxury housing market
4) non-residential (office, retail, everything else)

The idea is that the super lux market is completely separate from regular workforce housing. Adding luxury supply won't do anything to overall prices or may make them worse by eating up scarce land.

Again, I think this is more of a demand issue. Say a city has 20 million sq feet of demand for luxury at $1000 sq feet and 80 million sq feet of middle class demand at $300 sq feet. If the city only has zoning to allow 15 million sq feet of development then only the luxury stuff will be built (and 5 million existing middle class housing would be upgraded to luxury product). If the city upzones and there were now 50 million sq feet of development, then all the luxury housing and some of the middle class housing would be built (assuming it covered the cost of capital). Additionally, there would be no incentive to convert middle class stuff to luxury.

[mhays]

On #1, some landlords might try that, but they'll generally be undercut by other landlords, and they'll learn their lesson.

[dave8721]

New construction can also raise housing prices through gentrification of course. Shiny new highrises go up in an area that had been less desirable, making the area more desirable and increasing the cost of the pre-existing buildings. In Miami's Edgewater area, rent in the old pre-existing low/mid-rises has doubled since a ton of new supply came on line in the area due to a gazillion luxury highrises increasing the desirability of the neighborhood.

[jpdivola]

Originally Posted by dave8721

New construction can also raise housing prices through gentrification of course. Shiny new highrises go up in an area that had been less desirable, making the area more desirable and increasing the cost of the pre-existing buildings. In Miami's Edgewater area, rent in the old pre-existing low/mid-rises has doubled since a ton of new supply came on line in the area due to a gazillion luxury highrises increasing the desirability of the neighborhood.

Yeah, I agree this can happen in a localized area. New development can raise the desirability of a particular neighborhood. But, do you think this can raise prices across the board for an entire city?

My guess is 2 posibble options happen:

1) new development pushes up prices on the existing housing stock in a "gentrifying neighborhood" as it becomes more attractive. However, if city wide demand is fixed, then prices will fall in other areas of the city (or rise less if demand is rising).
Although, it pushed up prices in a particular area. If every neighborhood banned construction, then no neighborhood would see this "supply led gentrification effect", but prices would rise across the board for everyone as rising demand outpaced fixed supply.

2) the development induce demand from the affluent suburbs. If that is the case, it's likely that prices in the city will rise (hip neighborhood rise, non-hip stay the same) and demand falls in the suburbs. This is good for regional housing prices and/or limits sprawl. But, does on average make the central city more affluent/less affordable (but helps with inner-city social services/financing for affordable housing). As long as you are adding supply on net, prices in other areas should fall in relative terms. (Again this is all relative to what is happening to demand).


I lean more towards the first option.
My guess is yes, adding supply makes cities more attractive and does induce more people into the city. But, it is not a 1:1 or 1:greater than 1 ratio. Adding 100 units may bring 20 or 30 new households into the city that otherwise wouldn't be there. But, that still lessen price pressure on the existing housing stock as net new supply exceeds net induced demand, and hence takes price pressure off the old stuff. (Again all relative to hypothetical price baselines where demand is exogenous).

Of course in reality, we will never see scenario 1 in a city with flat demand. Developers need ROI to get financing. The practical effect is that developers will build when either 1) demand for city living is rising across the board or 2) they think they can attract suburbanites into the city with a unique product that doesn't currently exist. The 2nd scenario probably applies to development in most of the country, where the affluent live in the suburbs. But, it is unlikely developers are creating demand in already expensive/desirable coastal cities. The demand already exists from the regions affluent to be in the core.

Of course, for affluent costal cities it means it is not possible to build your way to cheaper housing, only to build your way to keep prices from rising less than they otherwise would. Not exactly a winning slogan for developing a political coalition in favor of more housing development.

[mhays]

Originally Posted by dave8721

New construction can also raise housing prices through gentrification of course. Shiny new highrises go up in an area that had been less desirable, making the area more desirable and increasing the cost of the pre-existing buildings. In Miami's Edgewater area, rent in the old pre-existing low/mid-rises has doubled since a ton of new supply came on line in the area due to a gazillion luxury highrises increasing the desirability of the neighborhood.

Yes, on a localized basis. But unless its majesty kicks off a wave of in-migration, it'll simply shift the locations of some local money. Other places will move down a notch.

[jpdivola]

Originally Posted by mhays

Yes, on a localized basis. But unless its majesty kicks off a wave of in-migration, it'll simply shift the locations of some local money. Other places will move down a notch.

Thanks for taking the point of my rambling/semi-incoherent post and boiling it down to the actual point.

As a side note, it seems better to refer to new supply as putting upward or downward pressure on prices, since we are really only talking about one part of the supply/demand balance.

1) If demand is rising faster than new supply, prices will still rise but at a stable rate.
2) If demand and supply are rising together, prices will stay constant.
3) If demand is fixed and new supply is growing prices will fall.

In reality, we only see new construction in 1 and 2.

[pdxtex]

have americans warmed up to condo living yet? it seems like thats a big issue also. the idea that the pinnacle of ownership is a stand alone home and banks prefer to loan money for that kind of construction, at least at the moment. if new home owners were being funneled into high rise towers instead of all these 3 story, 6 units town houses that seem to be the only thing that can get built (in portlant at the moment) then that would help alot. prices in the inner neighborhoods and downtown have gone nutty in the last 5 years. there has to be a costco effect at some point, build enough units of multifamily and the sq. footage cost will be lower then single family. maybe????

[mhays]

The first step for condos is to be worth enough to make development feasible. Condo values haven't kept up as much as rental prices. But in some places they're worth plenty to justify construction.

The next step is for the development-financing model to function. For developers that don't bring a ton of equity, it's usually necessary to use presales to "prove" the market, reduce uncertainties, and get financing. But right now, buyers and lenders both mistrust the presale concept. That won't change until the benefits of the concept outweigh the mistrust. Buyers need a sense of urgency about prices rising (if they don't buy now) and availability being limited. Developers and financiers need to trust that buyers will hold their commitments.

Until then, a small amount of construction will occur among developers who bring their own equity, or have partners who do. They have a big advantage...building while it's cheap (actually costs are moving up again quickly), but selling a year or two later when prices are much higher.

(I'm omitting NY and other special cases.)

[ssiguy]

Writing from North America's most expensive housing market, I have insight into what has happened here.

Vancouver which is growing by a decent but not fast rate of 1.3% a year is EXTREMELY expensive, most of you couldn't even imagine the prices. The average cost of a SFH in this city of 630,000 is a whopping $1.3 million but it gets worse. The lowest price home currently on the market is $675 which is a dump in an ugly, crime infested, very low income area. You would never get anything regarded as decent for less than $800k and that would still mean a low income area.

This is made worse by the fact that Vancouver is one of Canada's poorest major cities and has the second lowest income level of Canada's 15 largest metropolitan area second only to Montreal where a SFH is, quite literally, one quarter the price. Vancouver has the nation's highest overall poverty rate, highest child poverty rate, smallest middle class, and largest gap between the rich and the poor. It is also the only city of Canada's top ten metros that has seen it's average family income DECLINE over the last 30 years after inflation.

So how has this happened................speculation and huge Chinese money. Canada allowed people to "invest" in the country and get a passport but of course their "investing" meant they didn't nothing more than bought a house and then went straight back to China to make their living and avoid their taxes but keeping their kids here for free schooling, medical care, and far higher quality of life.

The politicians are so corrupt and financially backed by the real estate companies and developers that they have encouraged this forcing the younger people to leave the city and hence usually the province. The city also has no patience for anyone trying to discourage the razing of heritage properties. Vancouver hasn't updated it's heritage building codes and status since the early 80s which already had very few.

This has resulted in a massive destruction of older family homes on the city's tony Westside and new ugly monster houses being built in their place that have nothing to do with the local community and they always tear down the trees when doing it. In Vancouver if you buy a house for less than a $1,000,000 it means the house is just a teardown. This is made worse by the fact that literally thousands of these sit empty as the occupants are in China.

Vancouver like to talk about it's Waterfront development but Coal Harbour is a line of 10 condo towers but recent stats state that one-third of the owners have NEVER lived in them yet they seel for between $600 and $2,000,000...........not your average Vancouverite. You don't see this in the postcards or the ranking files when comparing quality of life indexes.

The problem now is that it has forced many of the young and brightest, head offices {it never had many to begin with}, small manufacturing, and services to leave the city and has stopped many from expanding with good talent because no one in the rest of the country will move here due to the extreme price of housing.

This has resulted in the economy and city finances becoming addicted to real estate revenue............the city's economy would collapse if there was even a significant housing fall little a lone a crash. The city has become more of a resort than a true city for it's people but due to political agendas when the topic is brought up by enraged middle class citizens who's kids are fleeing the city, the developers bring up the "racist" card.

That is greatly beginning to finally wane as many Chinese who actually live here and want to contribute to the city are fed up with the prices too and are demanding an end to the speculation by Chinese investors.

Real estate is Vancouver's drug of choice but like all drugs, it felt good at first but now you are completely addicted and you don't dare try to quit because the withdrawl symptons could nearly kill you.

[mhays]

I hear that Canadian immigration law has changed, but would love to hear your version of it.

One result is that in Seattle some of that investment is being redirected to us, on a smaller scale. So far it's mostly in the high-end SFR and highrise markets. Since our prices are still recovering from the recession, a lot of homeowners (and we contractors) are loving it.