Macleans: The real problem with Vancouver’s outrageous house prices

Macleans has a post up on Vancouver’s real estate:

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 little 3 bedroom, 1 bathroom bungalow in Vancouver is priced at $1.5 million. The listing suggests buyers just tear it down and build a new home.

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.

I don’t know… Granville Island was pretty busy yesterday, hardly a sign of a floundering business climate! Maybe the problem with “outrageous prices” is that the earnings stink.

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Best place on meth
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Best place on meth

"Far more insidious is the impact housing unaffordability is having on employers and the broader economy."

With mortgages sucking up so much of local peoples income there is not a lot left to spend in the rest of the economy.

This can work as long as prices are rising and equity is being created out of thin air that can be drawn upon but when prices stop rising (and god forbid start falling) then your local economy takes a beating.

There are still plenty of people out there with 35 years left on their mortgages.

Anonymous
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Anonymous

The article is somewhat interesting, sure, but as noted by Jesse above, it's rather old. That's a bit disappointing. I suggest adding a reference to the publishing date somewhere in the post. I read through the article at first thinking it, and the Bloomberg & WSJ pieces, had just recently been published.

patriotz
Member

@Best place on meth:

"This can work as long as prices are rising and equity is being created out of thin air that can be drawn upon"

More accurately, and ominously, when owners can borrow and spend against the expected future sale price of their properties.

Patiently Waiting
Member
Patiently Waiting

More examples of how high real estate prices hurt Vancouver, follow by more BS from Helmut.

"The house-price blues have claimed two of Randy Wong's mechanics. Over the past year, Greater Vancouver housing costs have driven two mechanics at Wong's auto repair shop in Burnaby to move to cheaper parts of northern B.C. and Alberta.

From its repair bays to its board rooms, the city of skyhigh house prices is struggling to recruit and retain talented workers. Recent spikes in realestate prices have aggravated the situation, spokesmen from a range of industries say.

"It's our biggest single recruitment challenge," says Ken Werker, managing partner with the Vancouver office of executive search firm Odgers Berndtson. "It has become worse in the last few years."

Read more: http://www.theprovince.com/business/House+prices+

Patiently Waiting
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Patiently Waiting
From the end of the Province story: Local private-sector employers are starting to offer recruits financial boosts to get into the housing market, Werker says. But the most realistic approach may be to convince outsiders Vancouver offers opportunity and quality of life despite its lofty house prices, he says. "Vancouver is a city in transition as it applies to expectations," he says. "When people move into a mature urban area like New York they expect to live in a small apartment." While I appreciate his attempt to problem-solve here, he needs to give his head a shake. Its one thing to change the expectations of Vancouverites who live and breathe the insanity everyday, but its quite another thing to extend the brainwashing to outsiders. You are not going to convince someone from, say, Chicago, that moving to Yaletown is like… Read more »
Troll
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Troll

Solutions, anybody? The best one those contacted by The Province could offer runs along these lines: Suck it up, princess. High Vancouver house prices are here to stay.

That about sums up the journalistic pedigree of the Province.

Read more: http://www.theprovince.com/business/House+prices+

CanNeverThinkOfaGood
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CanNeverThinkOfaGood

The housing bubble is definitely hurting the education sector. UBC may be able to afford to give their new hires a supplement or loan of some kind to buy into the housing market, but most other educational institutions cannot do that.

Anonymous
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Anonymous

@CanNeverThinkOfaGoodName: Great…so the taxpayer gets bent over again.

Makaya
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Makaya
The joke of the day, courtesy of CMHC: Two steady housing years ahead: CMHC Canada’s housing market has two good years ahead of it yet, Canada Mortgage and Housing Corp. said Monday, with low interest rates and a “moderately” expanding economy keeping price corrections at bay. I love this little sentence from the GM journalist: The Crown corporation – which insures Canadian mortgages – has had a consistently rosier view of the market than many private sector forecasters. And this gem: “With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011,” said Mathieu Laberge, deputy chief economist. I wonder if Mathieu has heard of household debt levels in Canada… I… Read more »
patriotz
Member

@Patiently Waiting:

Werker: “When people move into a mature urban area like New York they expect to live in a small apartment.”

Well the problem is that they don't. For example:

http://www.zillow.com/homedetails/45-Valley-Rd-La

30 minute train ride from Manhatten.

Best place on meth
Member
Best place on meth

@Makaya:

So the CMHC, god bless their simple little minds believes that low interest rates support high prices forever.

That's all it takes, nothing else matters.

Where has this theory worked before, I'd like to know?

N
Guest
N

Can anyone tell me how much rents have gone up since, 2006?

My landlady is now humming and hawing about whether to sell or refinance. She is considering refinancing and holding if she can raise the rent. I know she can't legally raise the rent more than a couple of dollars, but if she really is going to sell, I'd rather pay more rent and stay. (I also know that she would be an idiot to refinance and hold in hopes of more appreciation, but I have actually told her that I think prices will go down, so I have done by bit.) Does anyone have a link to some kind of official statement about how much rents have gone up, which I can point to as an indicator of market price?

Troll
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Troll

@Best place on meth:

So the CMHC, god bless their simple little minds believes that low interest rates support high prices forever.

Not really what they said, but I know you're not one for critical thought.

Anonymous
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Anonymous

@Patiently Waiting: As much as we'd like to shake all these prospective in-migrant workers and tell them it's only expensive to buy, not to rent…most people (especially in the median income range) feel that their only road to financial security is by owning a home, so if buying isn't an option they will want to look elsewhere.

Guy Smiley
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Guy Smiley
Makaya
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Makaya

We're second behind Belgium! A little more pumping from CMHC and we'll become first!

The Most Overpriced Housing Markets In The Developed World

Canada's home prices are overvalued by 54%

Home price to rent: 73 percent

Home price to income: 34 percent

But let's not be disappointed. in price to rent, we're already first 🙂

Anonymouse
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Anonymouse

@patriotz:

"30 minute train ride from Manhatten."

I'm not familiar with NY, but Google seems to suggest it's over an hour by public transport. How did you derive the 30 min figure?

WFT?
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WFT?

@Troll:

BPOM did not say that that is what CMHC "said" but that it is what CHMC "believes". A belief can be determined on the basis of reasonable inferences. Unless you are a mind-reader, that is the only way to determine what someone believes.

a
Guest
a

what the article talks abt is correct. I had a client which was suppose to come here and teach at the Emily Carr school of arts and once he saw the housing prices he declined the job and stayed in California.

Anonymous
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Anonymous

@N: "Does anyone have a link to some kind of official statement about how much rents have gone up, which I can point to as an indicator of market price?

"

One option is to search Craigslist for comparables then show your landlord.

patriotz
Member

@WFT?:

"BPOM did not say that that is what CMHC “said” but that it is what CHMC “believes”

I would say it's what CMHC wants the public to believe. The people writing it may well expect a bust for all we know. Indeed the more they expect a bust the more motivation they would have for getting the public to believe otherwise.

Alum
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Alum

oh, common guys

we are talking about condos here. condos are very affordable now.

for house prices, please post at vancovuer-house.info (if any )

AG Sage
Member

@Makaya: Quite a disconnect on that CMHC outlook. You'd think they'd be out repairing the barn doors, but in fact, they don't seem to realize they even own any horses.

Drachen
Member

@DEFAULT NAMEe:

I suspect he's just guessing.

I get times ranging from 1 hr 5 min to 1 hr 17 min if I lived there and left right now. However Google also says it would be a 33 minute Taxi ride. So call it the equivalent of Surrey or Langley. If you look there for a similar house you find they're in about the same price range.

Still, it's insane, wages are much higher in NY and NY really IS an international hub, where as Vancouver just pretends to be.

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