Average Vancouver home will cost $2.1 Million by 2030

[AriGold]

Vancouver is nothing more than a hedge city to the Chinese.

Ding, Ding, Ding...

[D-Money]

Renting is a better investment than buying a home said no one ever... Until now.

I have heard quite a few people say they bought/were about to buy a home because they were sick of throwing rent money down the tube each month...but who were likely paying substantially more interest + property tax + maintenance/condo fees than they ever did in just rent.

If you're buying when values are low, that's one thing. But there is a very real and likely possibility that prices fall or at least stagnate for a while.

I bought in Calgary during the last lull (historically high prices, but they proceeded to go much higher soon after). But we rent out our basement, and that money covers half of our mortgage/tax/utilities. So any additional money we pay is directly applied to the principle, almost like putting money into savings while living virtually rent-free. It's pretty sweet.

[RonMexico]

I gotta figure out how to get out of here.

[key2thecup]

Vancouver is nothing more than a hedge city to the Chinese.

Real Estate Goes Global

The most expensive housing market in North America is not where you’d think. It’s not New York City or Orange County, California, but Vancouver, British Columbia.

Now, Vancouver is a beautiful city—a thriving deep-water port, a popular site for TV and movie shoots. By all accounts, it is a wonderful place to live. But nothing about its economy explains why—in a city where the median income is only around seventy grand—single-family houses now sell for close to a million dollars apiece and ordinary condos go for five or six hundred thousand dollars. “If you look at per-capita incomes, we look like Reno or Nashville,” Andy Yan, an urban planner at the Vancouver-based firm Bing Thom Architects, told me. “But our housing prices easily compete with San Francisco’s.”

When price-to-income or price-to-rent ratios get out of whack, it’s often a sign of a housing bubble. But the story in Vancouver is more interesting. Almost by chance, the city has found itself at the heart of one of the biggest trends of the past two decades—the rise of a truly global market in real estate.

We’re all familiar with the stories of Russian oligarchs buying up mansions in London, but this is a much broader phenomenon. A torrent of capital from wealthy people in emerging markets—from China, above all, but also from Latin America, Russia, and the Middle East—has flowed into the real-estate markets of big cities in other countries, driving up prices and causing a luxury-construction boom. A recent report by Sotheby’s International Realty Canada examined more than twelve hundred luxury-home sales in Vancouver in the first half of 2013 and found that foreign buyers accounted for nearly half of sales. In Miami, a huge influx of money from Latin America has enabled the city’s housing market to recover from the bursting of the housing bubble, and has set off a condo-construction spree. Australia has become a prime market for Chinese investors, who Credit Suisse estimates will buy forty-four billion dollars’ worth of real estate there in the next seven years.

What’s so special about the places that attract all this foreign money? The economists Joseph Gyourko, Christopher Mayer, and Todd Sinai have developed a theory about what they call “superstar cities.” Looking at data from 1950 to 2000, they found a small number of cities where housing prices rose steeply, and concluded that high earners tended to cluster together over time, with the result that rich cities tend to get richer.

Vancouver isn’t an obvious superstar. It’s not home to a major industry—as New York and London are to finance, or San Francisco to tech—and it doesn’t have the cultural cachet of Paris or Milan. Instead, Vancouver’s appeal consists of comfort and security, making it what Andy Yan calls a “hedge city.” “What hedge cities offer is social and political stability, and, in the case of Vancouver, it also offers long-term protection against climate change,” he said. “There are now rich people around the world who are looking for places where they can park some of their cash and feel safe about it.” A recent paper by two Oxford economists bears this out, showing a tight correlation between London house prices and turmoil in southern and Eastern Europe. The real-estate boom in Miami has been magnified by political unrest in Venezuela. And Vancouver, which has a large Chinese population, easy access to the Pacific Rim, and nice weather, has become a magnet for Chinese investors looking for insurance against uncertainty. A Conference Board of Canada report found that Vancouver’s real-estate market is tightly connected to what happens in the Chinese economy.

The globalization of real estate upends some of our basic assumptions about housing prices. We expect them to reflect local fundamentals—above all, how much people earn. In a truly global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there. So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them. Yan says, “If the choice is between losing ten to twenty per cent in Vancouver versus potentially losing a hundred per cent in Beijing or Tehran, then people are still going to be buying in Vancouver.”

The challenge for Vancouver and cities like it is that foreign investment isn’t an unalloyed good. It’s great for existing homeowners, who see the value of their homes rise, and for the city’s tax revenues. But it also makes owning a home impossible for much of the city’s population. And the tendency of foreign buyers not to inhabit investment properties raises the spectre of what Yan has called “zombie neighborhoods.” A recent study he did found that a quarter of the condos in a luxury neighborhood called Coal Harbour were vacant on census day.

One option would be to severely restrict foreign ownership, but that’s politically difficult, and not great for a city’s economy. It might make more sense if the Vancouvers of the world simply charged foreign buyers a premium for the privilege of owning there. “We’re one of the places where people seem to want to park their cash, and there aren’t that many of those places,” Yan says. “So let’s raise the parking fees.” As for the rest of us, we’d better get used to being tenants.

http://www.newyorker.com/magazine/2014/05/26/real-estate-goes-global

[McBackup]

Vancouver needs to enact some kind of regulation against this. If you're going to buy property here it has to be lived in.

[Hobble]

Vancouver should start doing what Nashville does for Playoff games.

Reduce foreign investors, have to live in Vancouver in order to buy it.

[McBackup]

Vancouver should start doing what Nashville does for Playoff games.

Reduce foreign investors, have to live in Vancouver in order to buy it.

That could work, it would be hard to monitor and enforce though, and there are too many variables. I was thinking massive taxes on any residence that isn't lived in.

[Puck'nAnimal]

My maternal grandfather bought our house in Kits after the war, after he came back from the interior, handed it down to his kids - that was the only way they could hang on to the property. Mother finally sold it in 2011 for $1.6M and split the proceeds. Never be able to buy there now with the prices. They're insane.

As Deb said, it's the overseas investors that are driving the market and in conjunction, driving the prices up to the point where you have to move all the way out to Langley or Abbotsford just to find anything reasonable and believe me, it ain't going to stay that way for long either.

[McBackup]

As Deb said, it's the overseas investors that are driving the market and in conjunction, driving the prices up to the point where you have to move all the way out to Langley or Abbotsford just to find anything reasonable and believe me, it ain't going to stay that way for long either.

I have a feeling something's gotta give first.

[Standing_Tall#37]

That could work, it would be hard to monitor and enforce though, and there are too many variables. I was thinking massive taxes on any residence that isn't lived in.

And they could change insurance rules so that you weren't insured unless you reside there at least 6 months a year. Or if people opened their eyes and saw there was a world outside of Vancouver and sold and left, demand would go down, eventually bringing down prices.

[Violator]

The government should just gift down payments for people and the first year of mortgages.

[McBackup]

And they could change insurance rules so that you weren't insured unless you reside there at least 6 months a year. Or if people opened their eyes and saw there was a world outside of Vancouver and sold and left, demand would go down, eventually bringing down prices.

Its not really a problem if someone buys a house and doesn't live there, so long as somebody does. You can rent it, have tenants, whatever, but when you just buy a house as a way to hide cash thats when it becomes an issue.

[grandmaster]

So lucky we got into the market when we did. My father's house is now the only saving grace for my 2 kids. Without that, there be no hope

[soshified]

I just wish at least these foreigners would know the culture or would be able to speak the language. Instead, they act all confused and sometimes angry when they come up to me speaking in Chinese, expecting i know it just because i look like one.

I love this city and would very much like to live here in the future with my family. But as each day passes, the hope decreases.

To the article: I'm shocked it isn't higher

[grandmaster]

These are the main things that turn me off from living in Vancouver:

1) housing is ridiculously priced

2) rush hour

3) too many hippies

[drummer4now]

These are the main things that turn me off from living in Vancouver:

1) housing is ridiculously priced

2) rush hour

3) too many hippies

Then you definitely would not like the island..

It will be the last bastion in BC..

[GLASSJAW]

These are the main things that turn me off from living in Vancouver:

1) housing is ridiculously priced

2) rush hour

3) too many hippies

really? every time i'm in vancouver i cannot help but think how rude and corporate it is. what are hippies if not friendly culture vultures?

[Rink on Renfrew]

Long time reader long time poster.

So ....

What happens when ..

It all goes away?

The false $

I guess we keep working away.

Weird.

speaking as a Canadian?

Legit Canadian?

[DefCon1]

thats assuming that fukishima isnt leaking radiation by then otherwise westcoast will be a dead zone

What a wild imagination. Maybe the big Earthquake will hit the west coast in the next 10 years or aliens might invade Vancouver in 2030.

[DefCon1]

Don't be afraid of the rest of our wonderful country. My wife and I went from Kitsilano to Calgary. We miss some aspects of the Vancouver life, but man - making ends meet has been so much easier.

I wouldn't recommend moving to Calgary now though, because the job market is tanking with the price of oil. But selling a house in Vancouver and buying one in most other cities/towns in Canada would leave you with a nice chunk of liquid savings.

After living in Calgary and Edmonton, then staying in Toronto and Vancouver, I could honestly say that the only places worth living in Canada is Vancouver and Toronto. I would say that Vancouver actually might be the only place in the country if the person doesn't like living in a really cold place. Calgary, Edmonton, Saskatoon, Winnipeg, Ottawa, Halifax etc. just aren't the places most people like to live, maybe only select few tolerant Canadians that love snow and embrace the cold and small city environment. I've also lived in other places in Asia and United states (few months) and I would not hesitate to move out of Canada if Vancouver ever became an unliveable place (due to expenses). The smartest decision would be to sell the Vancouver property at a high price and invest in a condo or a house in Guangzhou where the economy is rapidly growing.