Busting the myths of Vancouver real estate
VANCOUVER— From Wednesday's Globe and Mail
Published Tuesday, May. 24, 2011 11:18PM EDT
Last updated Tuesday, May. 24, 2011 11:22PM EDT
Vancouver: Not really as unaffordable as you think it is.
Also not being bought up by wealthy offshore buyers from China who are speculating on real estate.
That’s the anti-conventional-wisdom message that the city’s best-known marketing guru, Bob Rennie, is promoting, with numbers to back him up.
Mr. Rennie, who commissions research on real-estate trends for an annual talk to the industry, said that once the skewed prices paid by a small group of mostly mainland Chinese buyers in Richmond and the west side of Vancouver are removed, housing prices are comparatively reasonable.
As well, the numbers indicate that only about 1 per cent of those high-end buyers are non-resident investors.
“When you’re looking at the numbers, you have to build a fence around the west side, where there are external forces operating that have nothing to do with local forces,” Mr. Rennie said.
Yes, he said, the sale prices on those houses have increased dramatically in the past year.
But that top one-fifth of the market operates in its own world and has almost nothing to do with what is happening with real estate in the rest of the region that is connected to the local-buyer market, he said.
Some expressed disbelief in Mr. Rennie’s assessment when it was delivered last week.
But people who specialize in housing affordability in the region say their statistics also indicate that the perception of Vancouver’s affordability problem is distorted by high prices in some places.
“It’s concentrated in a few areas and it’s concentrated in single, detached homes,” said Dale McClanaghan, a housing consultant who works with local governments to design affordable-housing policies.
Mr. McClanaghan said in an interview this week that while house prices in Richmond and west-side Vancouver increased by 18 per cent last year, according to real-estate board figures, increases in the rest of the region were only about 4 per cent.
Apartment-price increases were also low, and prices have declined in some areas.
Does that mean Vancouver doesn’t really have an affordability problem at all?
No, say Mr. Rennie and other specialists like Mr. McClanaghan. But it’s the same affordability problem of other large cities, made somewhat worse by the fact that Vancouver doesn’t have the kind of room to grow or pro-supply policies that a city such as Calgary does.
Both say the region has to keep working on strategies to ensure that middle-range housing continues to get built for the local market of middle-income households.
But Mr. Rennie noted the average condo in Metro Vancouver sold for a mere $313,000 last year after the most expensive condos in the top fifth of the market were taken out.
Similarly, single-family homes in the top fifth of the market average $1.72-million. But once those high-end sales are removed from the price-averaging mathematics, home buyers in the rest of the region paid an average of $632,000.
He said Vancouverites tend to overestimate the impact of offshore buyers on real estate because Vancouver is a small city.
“Most cities that have the level of foreign attention we do have much larger populations, so it’s easier to absorb,” Mr. Rennie said. But Vancouver, seen as a haven with good schools, gets disproportionately more buyers from abroad looking for a landing spot than cities such as New York or Los Angeles.
That makes people think the whole city’s prices are being moved up by a relatively small group.
It’s led people like former city councillor Peter Ladner to suggest some kind of special real-estate tax or other barrier for offshore buyers.
Mr. Rennie was critical of those remarks, which have generated considerable attention in the past month.
“I worry that Mr. Ladner’s comments are more speculative than the people he’s talking about,” said Mr. Rennie, who said the vast majority of Chinese buyers here are not investors, but people moving to the city for the same reasons as many others.