vancouver real estate

[gurjot]

does anyone has a opinion about vancouver real estate market?

[triedtestedand]

I presume you mean Vancouver BC? (vs Vancouver Washington) ... ;-)

 

I thought it was way overpriced when I moved here five and a half years ago, and then just watched it keep going up ... purchase-to-rent ratio and other affordability indices (e.x. % disposable income spent on housing) are consistently super high ... only thing I can think that keeps it going is continued influx of cash from retirees, oil millionaires from Alberta, expats and new canadians who (like me) read (and believe) the reports about it's global  rankings as a city.

 

I choose to rent, avoid a mortage, and mostly sleep well at night ...

[Parsad]

I've lived here all my life, and the one thing I never grasp is exactly how high and how far Vancouver real estate prices can get.  I thought it was considerably overpriced three-four years ago, yet it has gone up since.  I consider it quite overvalued today as well, but unfortunately there is only so much land here, and the region is incredibly desireable.  At some point we'll see a correction, but I have no idea when.  Cheers!

[Viking]

I likely will be moving back next year, so there is my bias to bigin with...

 

When you look at the 'metrics' real estate in Vancouver is clearly overpriced. Who knows were it goes from here. In the short term, the Olympics is clearly distorting things (construction, employment etc).

 

I think what happens with commodities also will play a role (i.e China rocks, BC and Vancouver benefit big time).

 

Last fall fear was in the air and the real estate market in Vancouver was a mess. My read is the worst is yet to come. There is a decent chance that after the Olympics (and unemployment skyrockets) and the US enters part two of their double dip recession, the economy & real estate market in BC get ugly again.

 

 

 

 

[SharperDingaan]

 

Look at what happens to Cape Town (South Africa) after the 2010 World Cup. Its a useful 'lab' with a lot of similar relative characteristics to Vancouver (economic & physical 'place', cosmopolitanism, etc.)

 

SD

 

[Aberhound]

I bought near the end of the last 10 year stint of government led by the socialists. I thought the price was expensive at the time. Then a more sensible government came to power and lowered the marginal tax rate by 6% to 44%, froze spending until the budget went into surplus and eliminated a third of regulations. Throughout the period mortgage rates fluctuated but remained low so you could usually get a mortgage interest rate around 4% to 5%. My kids' public schools are excellent. People moved here from around the world and the biggest price increases occurred at the high end.

 

Currently mortgage rates are even lower, 2.25% float or 3.9% 5 year fixed. Meanwhile the sales tax was replaced by a value added tax which has further reduced the cost of setting up businesses here. Corporate tax rates have been dropping and the rate will be 15% on the first $500,000 then 25%. Property taxes for residential is low, $3000 to $5000 per year seems most common with valuation determined every year.

 

Prices are determined on the margin. If California continues with its silly economic policies prices will continue to rise here, both because we will continue to attract immigrants and because the stagnation in California will keep interest rates low. If California copies our policies some of our migrants will go there instead, interest rates then will shoot up with inflation and our relative real estate prices will return to mean. 

 

 

 

[ubuy2wron]

Vancouver residential real estate is a run away train wreck about to happen. I have lived in Vancouver all of my life and it is a VERY liveable city especially today. Prices in Vancouver  today are comparable to London, New York ,Paris and Hong Kong. Prices reached this level because of a combinatrion of once in a generation or two low interest rates and an artificialy restrained supply. The vast majority of developable land was taken out of the supply 30 years by something called the Agricultural land reserve. Every metric re affordabilty  is flashing red. Wages have actually declined in the past decade yet prices are up by my guesstimate 300% . Middle class Asians are finding it very attractive because of our liberal immigration policies( the rich have already come and gone with a passport and are back in Asia making money. We also find ourselves in a funny situation where credit is abundantly available for resre purchasers but incredibly restricted for developers. If you can fog a mirror you can get a mortgage with less than 10% down basnks will even lend you part of the down payment. If you are a builder however credit availabilty is about zero. This is because the govt is basically guaranteeing all res mortgages today but offering no such promises to the developers.

[gurjot]

thanks everyone for your input.

 

thanks

[triedtestedand]

Speaking of Vancouver real estate ... Google just launched "street views" for a number of Canadian cities ... Vancouver included ... cool stuff!

[shalab]

I have visited Vancouver, B.C a few times on pleasure. ( on the way to whistler or Victoria ). Incredibly beautiful city with awesome views and restaurants. I won't mind living there. I checked out some real estate prices there about three years back - it looked expensive even from the American standard where there was a huge bubble going on. At that time, people said that most of the buyers were from the US and were responsible for the prices to go up. Not sure if it is true.

 

cheers!

shalab

[Parsad]

Hi Shalab,

 

It was partly U.S. purchasers, but the bulk was coming from other parts of Canada (in particular Alberta & Saskatchewan), as well as quite a few European and Asian buyers.  At one point back then, it took 70% of the average household income to service the average home in Vancouver...mortgage, interest, property taxes, maintenance.  That number has not changed much in the last two-three years. 

 

I thought we were in a bubble three years ago and I still think we're in one now, but alot of people disagree or come up with reasons why it isn't...net migration into the city, desireability, lack of inventory, lack of land or qualified sites near the city, waterfront land is built out, etc.  People always have an answer why something isn't in a bubble, until the pin prick hits and then suddenly everyone saw it coming.  Right now, no one sees anything coming. 

 

Incidentally, there was a fairly recent penthouse sale in our downtown area for $15M for 6000 sq feet on the 43rd floor of a new building...and that isn't raising any eyebrows!  There's a house in a very nice area not far from where I live in one of Vancouver's suburbs.  A very nice house on about 1.5 acres of land...they are asking $19M!  The house was built for $6M a little over ten years ago!  That area while being quite nice, isn't even close to Vancouver's nicest areas.  I can only imagine some of the listing prices those homes would fetch.  Cheers!

 

 

[Ballinvarosig Investors]

I thought we were in a bubble three years ago and I still think we're in one now, but alot of people disagree or come up with reasons why it isn't...net migration into the city, desireability, lack of inventory, lack of land or qualified sites near the city, waterfront land is built out, etc.

If you've been through one real estate crash; you've been through them all! I still remember the crash in London in the late 1980's and heard exactly the same reasons as you've listed as to why London property prices were justified.

 

• "Sophisticated" Japanese were on a spending rampage and would pay any amount of money for a property in London.
  
• Property in high-end areas like Mayfair was so rare that supply restriction would always ensure rising prices.
  
• London was the financial/media/fastion/etc capital of the world; the rich and famous will always want to move here.
  
• Historically low interest rates will remain low - it's a new paradigm.
  

 

Despite all the old usual gobbledegook, "real" real estate prices ended up halving a decade after the peak.

 

If property does begin to wobble, then watch the Canadian banks. Here in Ireland, we're a few years into our slump and we've watched the Irish banks going from having a total market cap of something like €150 billion to about €5 billion today (they would be zero's but only for the Irish government guaranteeing them). I doubt that things will get as bad in Canada as they did here, but any bank with a high degree of commercial real estate and rapid growth in the 2000's is a candidate for disaster.

[shalab]

Thanks Sanjeev! You have an awesome city which deserves some premium. It may also be the Whistler effect where the build out and winter olympics is fueling the craze. Even plain sites in Vancouver island (but with water front views ) were insanely priced.

 

 

[lessthaniv]

If you look at a topographic map of the lower mainland you'll find the livable land is restricted by mountains to the North, an ocean to the West, a border to the South. The city itself is nestled in the western quadrant of the lower mainland. Our transportation system is very weak as compared to other major metropolitans in the world. So, the supply of quality land that is situated close to the city is somewhat limited. As long as immigration to BC continues and demand exceeds supply - I can't see the situation changing. We're definitely overvalued compared to other cities but  it may stay that way for a long time.

 

<IV

 

 

[nodnub]

even if you live in a overvalued area, it sometimes makes sense to own rather than rent:

 

If you have a family then you don't want to be forced to move if the property is sold. If you can't find another rental in the same school catchment area then your kids may have to change schools mid-year.  This has happened to an acquaintance of mine; they are now renting their third house within 12 months. Obviously that is an extreme case, but it would be a disruption even if it occurred once. 

 

If you do not have a family but you have a very busy professional life: dealing with a move and finding a new rental can still be very time consuming (depending on local rental market).  If you are a professional that can amount to lost income.

[nodnub]

I think these factors as well as human tendency of inertia prevent a lot of people from making the best economic choice in the rent vs buy decision in any given area.

[rmitz]

I think these factors as well as human tendency of inertia prevent a lot of people from making the best economic choice in the rent vs buy decision in any given area.

 

Also, something I haven't seen mentioned here yet...usually the bigger/nicer homes have a more limited selection in a given area, so there might just not be any equivalent properties for you to rent.  Add to that the fact that in most cases rentals are not taken care of nearly as well as owner-occupied houses, tax benefits, the fact that moving is costly and a pain...(I don't trust any movers with my fragile stuff).  What about the ability to make improvements or changes to the house to make your life better?  Owners have very little incentive to have efficient appliances or good insulation, in most cases.  To me, I can see these things as easily being worth a premium (all costs considered).

[Guest Bronco]

Why would anyone live in that town with that hockey team?

 

Get a goalie.

 

(please, just kidding on both)

[lennie_88]

Another sign that Van real estate is likely overvalued: everyone I talk to thinks that it can only go up and that renting is dumb without any mention of value. I plan to be a renter until owning is out of vogue. Not great for being popular at party's but neither is value investing!

[Matson125]

Anyone have any ideas on shorting either the real estate market as a whole or interest rates in Canada?  I can't seem to find anyhting like TBT here in Canada?

 

Cheers

 

Michael

[ubuy2wron]

Here is a link that appeared on another thread that refers to unaffordability. If you plug in current values I think Vancouver is likely the #1 in the unaffordabilty index in the English speaking world. Someone was asking about short ideas if you think a serious decline is likely Genworth Canada may be a fertile choice. I have not dug deep enough to take a position but throw it out there as an idea.

 

http://www.demographia.com/dhi.pdf