The “Running out of Land” Club

You often hear of high price/rent for SFH in the City of Vancouver being justified because of the scarcity of land. I thought I would do a comparison with the City of San Francisco, which is slightly larger than the CoV and has a population of about 800,000. But the really big difference is that it comprises a little over 1/10 of the metro population compared with 1/4 for the CoV. So you’d expect San Francisco to have a higher scarcity premium. Well no.

Take a look at this listing for the West Portal neighbourhood in San Francisco’s west side for $1,075,000:

And here’s the same house for rent for $5200/mo:

The rest of the neighbourhood:

Price/rent for this property would be 207.

What about the comparable numbers for, say, Dunbar? Maybe $1.5 million and $3500/month? That’s a price/rent of 428.

Now you might say yes but property taxes are higher in SF. That’s true so let’s see how much higher.

This property is assessed at $402,019 and has property taxes of $4,836 /year. That’s because of California’s looney property tax system which taxes at the most recent sale price, not market value. If you bought the house for $1,075,000 you’d pay $1,075,000/$402,019 * $4,836 = $12,931/year.

Total property taxes in CoV are 4.21377 mills, so a $1.5 million property would pay $6320/year.

Calculate price/(rent-property tax) and you get 261 in SF versus 504 in Vancouver.

And I didn’t factor in mortgage interest and property tax deductibility and the ability to lock in low rates long term in the US.

You’d pay more for just a lot in Vancouver than the whole house in San Francisco. What sense does that make? In which city is land really more scarce? What do the rents tell you?

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The main point is that price/rent doesn't care about lot size. If the small lot size in SF is responsible for the price being low, why is the rent so much higher? If the large lot justifies the selling price in Vancouver, why is the rent so low?

San Fransisco is an expensive city to live in, period. Vancouver is just an expensive city to buy in.

Patiently Waiting

If fools want to buy presales, its their risk. No CMHC involved. They are actually adding to supply which us bears should cheer.


“From Jan. 1 to June 1, MAC reported that of 500 buyers spread over 17 of their projects in Metro Vancouver, 330, or 66 per cent, are of Chinese descent.”

Chinese decent makes up over 30% of Vancouver proper don't they? I remember Yaletown Park presales in 2004 were line ups of Chinese. I haven't been to a Concord Pacific presale office in years but I recall it was always full of people of Chinese decent. This has been the case since they started preselling condos in the 90s. This is nothing new.

"I suspect recent inflows from mainland China play a big part."

That is what the realtors want you to believe. Their marketing plan is working. Good on MAC for pointing out the myth.

Patiently Waiting

@Collum: Wifebeater.




Li Kai Shing

I tell you…those are not Asians…they are Spanish Peeples squinting into the sun.

Finarry….you peeplez = dyslexic….its not Asians( = spanish squinters) driving the market..its Asians drivers in the market….crassshhhhh….bwhahahahaha


@jesse: I'm a housing bear and an optimist too and I don't want to see rates rise. I'm hoping for what happened in the US or Japan after their housing bubbles: a long collapse with rates staying low.



My significant other is Asian as well. And I don't disagree that the CMHC could pull the plug on this market tomorrow.

But Vancouver is incredibly skewed compared with the rest of Canada, so there's clearly something else at work in this city than interest rates and mortgage insurance that have the same effect in Regina as they do on the West Side. I suspect recent inflows from mainland China play a big part.

Li Kai Shing

If it Froats, Reeks…Fries or FQ's rent it…



"Yet a significant portion of these buyers are actually local residents not foreigners. "

They live here, they have mortgages here, likely sponsored by our beloved CMHC. This study tells me nothing. My significant other is Asian. So what? Family's been here 50 years. Big deal. Why don't they find out something useful, like what percentage of mortgages taken out in the last ten years in Vancouver are insured by CMHC? Now that would be interesting…



MAC also created this report so I am not sure how much credibility to any data that comes from a RE marketing firm.

These are up there with the REmax reports stating prices are rising 1000000000% for the next month.


Hey Patriotz:

The SF house seems to be a very small lot size. If you reduced the lot size of the Dunbar house to something similar, it's selling price would be less while the rental price will stay the same.


Local Chinese are driving Vancouver market, study says.

"From Jan. 1 to June 1, MAC reported that of 500 buyers spread over 17 of their projects in Metro Vancouver, 330, or 66 per cent, are of Chinese descent."

Not offshore investors, but residents. The Sun seems to think this is important but the fact is that it's so easy to become a resident, or have a resident family/friend buy for you, that it's a next to meaningless distinction.



I don't know, that story says the San Fran vacancy rate is over 8%. That's well over Vancouver's.


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Li Kai Shing

I rent……beer


i agree

never rent from an amateur landlord

took me a while to figure it out though..

speaking of which i gotta move again. anyone recommend a professional property manager ? (kitsilano)

I've dealt with Advent so far (bit slippery). anyone have experience with another agency ?

I'm hoping for another 2 year rental to see if this thing implodes…


@DaMann: "What if he doesn’t show up for 10 years" Yeah it's frustrating but raising overnight rates won't necessarily cause long rates to go up. I'll be honest though: why do I, a real estate bear, want higher interest rates? Because it will cause house prices to crash faster if they go up. But my self-interest isn't a good enough reason for adjusting monetary policy. The answer, in my view, includes government fiscal policy aimed at reducing debt loads relative to incomes. Current levels are unsustainable; there needs to be a reduction in debt accumulation and current trends indicate even 10 years isn't long enough to raise incomes enough before there's trouble if rates start rising fast. I'm an optimist — I am hoping that the government is going to be pursuing policies that ensure debt loads relative to incomes… Read more »

Not much of a name..

@DaMann: It's a big hot potato. Someone's going to get burned holding it at some point.


36, DaMann: I totally get what you're saying and it pisses me off too. We can see and feel the destabilization in this insane house of cards, but we're all just sitting here waiting for that little breeze that'll end the lunacy and reward those of us who are doing the right thing.

Having said that, we have to remember this: If the chumps feasting on that free money are doing so to finance 95% of an $800,000 rotting dump somewhere in the bowels of the east side or any of the other ridiclous things so many Canadians have done during this period of credit gorging and debt accumulation, are they really ahead?

Momentarily, maybe. But next year? Five years from now? I just don't think so.


@patriotz: What if he doesn't show up for 10 years? I don't believe that myself but if that is the case then it doesn't matter if he actually shows up, by the time he does he will be a poodle. All the chumps feasting on free money for the last few years WOULD actually in fact be ahead 10 years down the road if rates don't really rise. Banks give a few mortgage points and take a few points for the last few years, it means nothing. Carney needs to stop chirping and start acting. Right now the "fools" with high debt are winning and it pisses me off to no end. people just laugh at me when I talk about higher rates, and at this point I don't blame them. I got a 3.3% inflation raise this year, last… Read more »


Space889, Tim Horton's recruits workers in Manila and brings them to Canada. It's all about low wages.