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  #1  
Old Posted Jun 10, 2011, 4:43 AM
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The real problem with Vancouver’s outrageous house prices

The real problem with Vancouver’s outrageous house prices

Jason Kirby, Maclean s, On Friday June 3, 2011, 12:03 pm EDT


The international media have finally clued in to the wackiness on Canada's west coast, otherwise known as the Vancouver real estate market. Last month Bloomberg noted that when compared to median household incomes Vancouver homes are more expensive than even New York. The story linked soaring prices to the influx of wealthy buyers from mainland China. Today the Wall Street Journal retraces the exact same material. The warning in both pieces is clear: Vancouver's housing market has become disconnected from reality and is primed to crash.

This is a well worn theme for many Canadian reporters. Here at Maclean's we've reached the same conclusion several times going back to 2008, and, admittedly, we've been proven fully and completely wrong. I still think prices here in Vancouver are nuts, but each day as I walk to work past the high-end coffee shops and panhandlers I see more "For Sale" signs going up, along with plenty of "Sold" stickers, too.

But here's the thing. The real threat to Vancouver isn't that the housing market might crash. That's happened here before. It undoubtedly will happen again. Such is the boom & bust nature of real estate in Lotusland.

Far more insidious is the impact housing unaffordability is having on employers and the broader economy. You hear stories of smart, young people leaving for jobs elsewhere. At the same time smart, young people from elsewhere aren't coming here for jobs. The price of real estate and cost of living are too high, while pay is simply too low relative to other parts of the country. Business in Vancouver, a local newsweekly, delves into the dilemma in its latest issue with the story "Home truths hurt talent search." (You need a subscription to read the story online but here's the lead.)

To take a job in Vancouver, Calgary-based senior information management consultant Joey Roa would have to give up living in a 3,000-square-foot house just outside the downtown core. He'd have to give up his 20-minute on-foot commute for what he figures would be "a considerable drive, at best." He'd have to start paying provincial tax. He'd see his current $1.15-per-litre gas prices rise to what he terms Vancouver's "insane" pump prices.

And with Vancouver's salaries failing to keep pace with Calgary's oil-rich pay scale, he'd likely be looking at a pay cut to boot.

Needless to say Roa is staying put in Calgary. He's turned down several offers from head hunters in Vancouver, and the BIV story includes recruiters who are having trouble luring educated and experienced workers to the city. In short, Vancouver is increasingly being seen as a no-go zone for top talent.

...

http://ca.finance.yahoo.com/news/The...20808.html?x=0
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  #2  
Old Posted Jun 10, 2011, 5:06 AM
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So, if Vancouver had more urban sprawl it might have more people, but what would we gain? The laws of supply and demand are still at work, and many people are willing to make the trade off as they always have.
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Old Posted Jun 10, 2011, 6:22 AM
trofirhen trofirhen is offline
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Any chance that if / when Vancouver's bloated housing prices do go "pop" that the city will return more to normal, and be on a more level playing field?

It would be a tragedy to see it price itself out of the talent market, and slowly wither on the vine, other cities overtaking it just because real estate and real estate investment went out of control.
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Old Posted Jun 10, 2011, 7:19 AM
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As I've said before, people living and paying taxes on a regular income in Vancouver can't hope to compete with well-heeled foreign buyers literally arriving with bags of cash.

What's interesting is that even mouthpieces of the realty industry are beginning to wake up to this:

Anecdotal evidence of buyers from the People's Republic of China (PRC)- Mainland China - buying up luxury houses and condominiums on the West Side of Vancouver and Richmond are true, according to a unique survey done by Landcor Data Corp. of New Westminster. If anything, the accounts may be understated, at least in the very high-end market...
http://www.rew.ca/fullstory.htm

Now before anyone goes "Yeah, but that's the luxury market" keep in mind that just a few short years ago many of those homes wouldn't have been considered luxury or that smaller more affordable homes were torn down to create those "luxury" homes. I'd also be interested to know why the study wasn't extended down to the 1-2million dollar mark, and if so, what the skew would have been.
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Old Posted Jun 10, 2011, 2:17 PM
quobobo quobobo is offline
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Originally Posted by whatnext View Post
As I've said before, people living and paying taxes on a regular income in Vancouver can't hope to compete with well-heeled foreign buyers literally arriving with bags of cash.
They're rich, sure, but it's really odd that you keep mentioning their nationality like that's should make a difference.
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Old Posted Jun 10, 2011, 2:27 PM
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Hardly a new view on things. Those of us who have seen the spike in RE have been saying the same for years. Fundamentals have been out of wack for some time.

The only saving grace here, and something that is often not mentioned, is that rental prices are reasonable here, probably not much higher than Calgary or Toronto. Sure, it may now be more expensive to own here compared to New York etc, but what about renting?

Perhaps we are seeing a shit back to less home ownership here. It is time though that there were rules put in place for foreign ownership. It's clear that they are driving up prices.
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Old Posted Jun 10, 2011, 3:05 PM
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It is time though that there were rules put in place for foreign ownership. It's clear that they are driving up prices.
It is beyond disturbing how many of you think that you have the right to prevent others from selling their own property to whoever they like - especially based on a person's citizenship (xenophobic much?).
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Old Posted Jun 10, 2011, 3:09 PM
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Originally Posted by quobobo View Post
They're rich, sure, but it's really odd that you keep mentioning their nationality like that's should make a difference.
Ah yes, the veiled racism inferrence and only a few posts in.

It "makes a difference" for several reasons relating to SpongeG's article:
a) they're not earning their money from here and that makes it hard for anyone living, working and paying taxes here to compete in the housing market with them.
b) as the article points out that's negatively impacting businesses trying to recruit talent to actually work and create jobs here.

It doesn't matter (to me or the issue) whether they're from the People's Republic of China or the Democratic Republic of the Congo. What matters is it has become an an outside influence both distorting the market and becoming a negative to the economic health of the region.
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  #9  
Old Posted Jun 10, 2011, 3:27 PM
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Originally Posted by quobobo View Post
It is beyond disturbing how many of you think that you have the right to prevent others from selling their own property to whoever they like - especially based on a person's citizenship (xenophobic much?).
You're entitled to your opinion. I find it "beyond disturbing" that you're attempting to stifle discussion of the issue by making insinuations of racism. Maclean's and Real Estate Weekly are hardly fringe publications.

If 74% of high-end properties were being snapped up by the British, I'd still be arguing my point against it. Would you be arguing yours?
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  #10  
Old Posted Jun 10, 2011, 3:31 PM
WarrenC12 WarrenC12 is offline
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Like others have mentioned, rents are fine. The rental market is extremely elastic, so it will always line up roughly with local incomes.

I think a bigger problem is the brainwashing out there that says "you have to own" and "you're throwing away money if you rent".
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  #11  
Old Posted Jun 10, 2011, 4:03 PM
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Quote:
Originally Posted by whatnext View Post
Ah yes, the veiled racism inferrence and only a few posts in.

It "makes a difference" for several reasons relating to SpongeG's article:
a) they're not earning their money from here and that makes it hard for anyone living, working and paying taxes here to compete in the housing market with them.
b) as the article points out that's negatively impacting businesses trying to recruit talent to actually work and create jobs here.

It doesn't matter (to me or the issue) whether they're from the People's Republic of China or the Democratic Republic of the Congo. What matters is it has become an an outside influence both distorting the market and becoming a negative to the economic health of the region.
So based on this principle, would it matter to you if the buyers were coming from another part of Canada, like what has been happening in the Interior with Albertan investors?

You've been beating this particular drum for a while now. Unfortunately, blaming the Mainland Chinese, British or other 'outsiders' is simply sensationalist (although the cynical part of me wonders how big this issue would be in the media if it WERE the British or Germans as opposed to PRC Chinese) and ignores reality: Vancouver is a desirable place to live; China's economic development means there are an increasing number of people with a lot of money; and many of them think Vancouver a safe haven to park their money and bring their families.

Bitching about it and wringing one's hands about how [insert ethnic group / nationality here] are driving up property prices is pretty counterproductive unless you are trying to feed a xenophobic backlash -- particularly when it comes to visible minorities. My suggestion is to get over it. Instead, write to your elected officials to start bringing some pressure to bear on them to constructively deal with the issue. A little bit of political will to increase transaction taxes to curb speculation or place restrictions on where and what type of properties foreigners can own similar to what Switzerland does shouldn't be beyond the realm of possibility.
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  #12  
Old Posted Jun 10, 2011, 4:16 PM
Pinion Pinion is offline
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Quote:
Originally Posted by quobobo View Post
It is beyond disturbing how many of you think that you have the right to prevent others from selling their own property to whoever they like - especially based on a person's citizenship (xenophobic much?).
The reason why Vancouver's market is so f-ed up is because China itself has laws preventing its own citizens from causing a (bigger) real estate bubble domestically. BC's right - no, obligation - to prevent a similar disaster has nothing to do with xenophobia or racism. If anything it's racist to allow a horde of nouveau riche to ransack the rest of the world as they please. Where's their respect for our quality of life and culture?
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Old Posted Jun 10, 2011, 4:25 PM
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Originally Posted by Pinion View Post
The reason why Vancouver's market is so f-ed up is because China itself has laws preventing its own citizens from causing a (bigger) real estate bubble domestically. BC's right - no, obligation - to prevent a similar disaster has nothing to do with xenophobia or racism. If anything it's racist to allow a horde of nouveau riche to ransack the rest of the world as they please. Where's their respect for our quality of life and culture?
Umm, no. You'd better check your facts before making these sorts of claims. China has had a real estate bubble of its own that the government has been trying to let the air out of (the laws I suppose you are referencing). Shanghai property prices have shot up in recent years and in some instances now rival Hong Kong. In fact, there is talk now that the real estate bubble is about to -- or has already -- popped (http://blogs.forbes.com/kenrapoza/20...arting-to-pop/).

Ransacking the rest of the world? Lovely imagery. I suppose these nouveau riche "hordes" don't pay property taxes on the houses they own or HST? Or perhaps the goods and services they buy when they are in Canada are stolen or given free of charge?

The above post is a perfect example of the emotional backlash that sensationalist media headlines targeting a specific group creates.

Last edited by Hourglass; Jun 10, 2011 at 5:05 PM.
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Old Posted Jun 10, 2011, 4:25 PM
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Originally Posted by WarrenC12 View Post
Like others have mentioned, rents are fine. The rental market is extremely elastic, so it will always line up roughly with local incomes.

I think a bigger problem is the brainwashing out there that says "you have to own" and "you're throwing away money if you rent".
Well, you do kinda throw away money when you rent. When you buy a place, the equity slowly changes, and over time you build up a big nest egg. How many people who rent actually put away as much money? If you can afford a place, why would you choose not to buy???
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Old Posted Jun 10, 2011, 4:32 PM
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It is of note that the majority of buyers are local. However, perpetuating things like "The Chinese are buying everything" does one thing really well. It scares people. It scares people into thinking that the current market is normal and sustained by foreign buyers. As a result, people are scared into thinking that if they don't buy now they'll be priced out forever.

Mainland China scares people. I'd hazard a guess that you can pin a lot of the inflated price, not on the actual foreign buyers, but on the perception that people have of them. The same rhetoric is printed in the paper over and over and over. Eventually, people believe it. You never EVER see cold hard numbers about how many buyers are foreign. YOU ONLY EVER SEE ANECDOTAL EVIDENCE or short pieces focused on one sector.

Why? Is it because these numbers don't exist? Come on. Let's face it, the real estate industry is trying to find an angle to claim that "Vancouver's different" and that "Vancouver is a special case". The reality is quite sobering, when you really come to think about it... We, the people, are responsible for our own state.
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Old Posted Jun 10, 2011, 4:59 PM
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Well, you do kinda throw away money when you rent. When you buy a place, the equity slowly changes, and over time you build up a big nest egg. How many people who rent actually put away as much money? If you can afford a place, why would you choose not to buy???
I know lot's of people who can afford to buy - and could afford to buy the last 5-10 years. But, they seem to think they have some sort of "right" to purchase a 1000 sq ft luxury condo downtown. They are eternal bears. And always will be.

When the market corrected 20% a couple of years ago they still refused to buy as the market was "definitely" going down another 30%.

If you can afford to buy - then buy (even if it is not your "ideal" place). Work hard for 5 years - take a cut in your standard of living and get some of that mortgage debt paid off.
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Old Posted Jun 10, 2011, 5:04 PM
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Well, you do kinda throw away money when you rent. When you buy a place, the equity slowly changes, and over time you build up a big nest egg. How many people who rent actually put away as much money? If you can afford a place, why would you choose not to buy???
Looking around today, most places cost more in interest and taxes than rent. That's throwing away money 101. Plus tying up your credit.
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Old Posted Jun 10, 2011, 5:11 PM
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Originally Posted by WarrenC12 View Post
Looking around today, most places cost more in interest and taxes than rent. That's throwing away money 101. Plus tying up your credit.
From my own experience, I wasn't paying much more than if I were renting. Definitely helps to pay the mortgage off as soon as you can. And now I completely own the place - no mortgage.
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Old Posted Jun 10, 2011, 5:15 PM
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I see none of the complainers have been willing to touch Hourglass's core remark:

Quote:
Originally Posted by Hourglass View Post
So based on this principle, would it matter to you if the buyers were coming from another part of Canada, like what has been happening in the Interior with Albertan investors?
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Old Posted Jun 10, 2011, 5:17 PM
mr.sandbag mr.sandbag is offline
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Originally Posted by twoNeurons View Post
It is of note that the majority of buyers are local. However, perpetuating things like "The Chinese are buying everything" does one thing really well. It scares people. It scares people into thinking that the current market is normal and sustained by foreign buyers. As a result, people are scared into thinking that if they don't buy now they'll be priced out forever.

Mainland China scares people. I'd hazard a guess that you can pin a lot of the inflated price, not on the actual foreign buyers, but on the perception that people have of them. The same rhetoric is printed in the paper over and over and over. Eventually, people believe it. You never EVER see cold hard numbers about how many buyers are foreign. YOU ONLY EVER SEE ANECDOTAL EVIDENCE or short pieces focused on one sector.

Why? Is it because these numbers don't exist? Come on. Let's face it, the real estate industry is trying to find an angle to claim that "Vancouver's different" and that "Vancouver is a special case". The reality is quite sobering, when you really come to think about it... We, the people, are responsible for our own state.
well said... last i checked my new building - Social - is well full of people from vancouver... can you believe it, trendy mount pleasant and all... empty nesters, families, first time home owners and just about everyone else... im so tired of this story
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