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?