Everyone talks about it – except our leaders. There has been little sustained comment or debate by elected officials, local or provincial, on the forces and influences that have pushed the value of real estate in this city into the global market. And not just the world market generally but to very highest levels, with comparisons to London, New York and Shanghai.
Of course there’s fear of unleashing forces of xenophobia and racism, but the result is that there’s no apparent willingness to discuss the issue in our legislatures and council chambers. Our local leaders are dealing with this like the federal Conservatives deal with climate change: Because there’s nothing that can seemingly be done within their ideological constraints, they simply choose not to talk about it.
That can’t last.
In the meantime, the conversation is held in, well, conversations everywhere else – and in the media.
Here are some articles that popped up coincidentally in my feed, and one on the TV news, in the last day.
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Thomas linked to the first:
Gold’s traditional role as a store of wealth has been usurped by contemporary art and apartments in cities such as New York and London, according to Laurence D. Fink, head of the world’s biggest asset manager.
“Historically gold was a great instrument for storing of wealth,” the chairman of BlackRock Inc. said at a conference in Singapore on Tuesday. “Gold has lost its lustre and there’s other mechanisms in which you can store wealth that are inflation-adjusted.” …
“The two greatest stores of wealth internationally today is contemporary art….. and I don’t mean that as a joke, I mean that as a serious asset class,” said Fink. “And two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, in London.”
Startling to see apartments in Vancouver in the same category as “stores of wealth” in Manhattan and London. Not a category that is going to do us a lot of good in the long run – or at least most of us. But for those who benefit in the short run, they serve as a buffer for those who might want to change the rules of the game.
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Maybe that’s changing too, if this GlobalBC news piece is an indication:
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The Financial Post also ran this item a few days later:
Canada’s housing market is now heavily influenced by non-permanent residents, which make up the fastest-growing demographic force in the county, according to a new report.
CIBC World Markets Inc. deputy economist Benjamin Tal says Ottawa needs to consider the impact on the economy of this group before it makes any more changes to the temporary workers program.
“It’s not an insignificant element in the mosaic we call the housing market, that’s what I’m saying, especially in the rental market,” said Tal, in an interview. “You can assume many of these people rent and [that affects] investors and the condo market.”
He wrote in his report that non-permanent residents now number almost 770,000, which is a record high. Almost 50 per cent of that figure is made up of workers, with about 38 per cent students. The rest of the group falls into the humanitarian or refugee category.
“The pace at which this category is growing is also unprecedented,” Tal wrote, adding that, over the last 10 years, 450,000 non-permanent residents have been added to the country.
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When condos on the south shore of False Creek back in the late 1980s were pre-sold in Hong Kong before they became available in Vancouver, it created a backlash that resulted in agreement by the developers that it would not happen again. Will the same happen this time? – even though, as Tsur Somerville argues in the interview, commercial real estate is unlikely to remain vacant, the issue that is shaping public anxiety about residential real estate.
“No one buys an office building to hold it vacant. People buy office buildings because they want rent. Who owns it doesn’t matter because they’re going to go out and get it, and fill it best they can anyhow,” he says.
However, Somerville says that vacant properties are a greater problem.
“I’m a lot more concerned with the vacant property, independent of who owns it. I’m much more aligned with ‘let’s find a way to tax property that’s not being used, that’s vacant, [and] use that money to then help low-income people looking for housing,’” he says.
“That strikes me as a nice connection between a need and what’s causing it.”
The momentum for change in taxation continues to build. Our political leaders don’t have a lot of time left to figure out how to deal with it.
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A fourth piece arrived in the Sun:
Land assemblies are popping up all over Vancouver, such as this one at Quebec Street and 35th Avenue.
… the proliferation of land assembly is triggering some alarms at city hall. City planner Brian Jackson said he is concerned that the overall plan to increase density and provide greater affordability is morphing into “the commodification of housing as a sure thing to bank.”
“There is a strong policy basis for a variety of housing options,” said Jackson. What it shouldn’t do “is allow for unlimited development opportunities and speculation.”
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Barbara Yaffe follows up in her column in the same issue:
Jackson says the land assembly activity that has been accelerating amounts to property speculation. “It treats housing as a commodity as opposed to a place where people live. We want to discourage that,” he says.
The activity is likely the result of an interim zoning policy adopted by the city three years ago, aimed at encouraging affordable housing development along Vancouver’s arterial streets.
But unless a developer brings the city a redevelopment proposal that offers housing that is truly affordable, Jackson says the city will reject the rezoning applications.
Also, if the land parcel includes character or heritage style homes, rezoning chances are slim.
The dilemma, of course, is that the densification of arterials with townhouses – requiring such site assemblies currently leading to the speculation described – is exactly what the city requires and intends. Even a city-wide plan designating and pre-zoning such opportunities would not necessarily discourage speculation and land-value capture. Indeed, if the city incorporated CAC-equivalent charges, it might even accelerate it.
The problem remains: so long as Vancouver real-estate is the new global gold, it will get priced accordingly.
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Ray Spaxman links to a Guardian column that discusses the impacts in London:
“A colleague shared this fascinating but very long article from London. Of course we are not London, but this certainly resonates with me, does it for you?”
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They have been accompanied, and often outbid, by a newer kind of international development force, supercharged by the untold riches of sovereign wealth funds, national pension funds and the gushing pump of petrodollars. … These inflated land deals, with foreign buyers ready to pay over the odds, are spawning a new form of equally oversized and exclusive developments.
The principal reason can be traced to the fact that awarding planning permission in the UK comes down to a Faustian pact. If the devil is in the detail, then the detail is Section 106 of the Town and Country Planning Act 1990, a clause which formalised “planning gain”, making it in the local authorities’ interests to allow schemes to balloon beyond all reason, in the hope of creaming off the fat of developers’ profits for the public good.
“Council chief executives will allow schemes to be pumped up as much as they can go before they get political push-back from councillors,” says one planning officer from a London borough that has suffered from a recent a spate of towers. “And the worst schemes happen when there is no political resistance at all.”
It is a system that is all too open to political pressure, given that any officer who advises against a new development can be conveniently framed as “anti-growth”, heartlessly preventing a promised tidal wave of new public amenities from flooding into the borough. Based on negotiation and discretion, the result is entirely down to the individual planning officer’s ability to squeeze out as good a deal as they can get, a battle that all too often ends in the developer’s favour. …
And it is a war in which the side representing the public interest has been systematically drained of expertise.
Curious what people think the city will look like after 10, 20 more years of rapidly rising property prices. Vancouver land value was mention side-by-side with London and Manhattan. But, both of those cities have a huge industry of high income financial jobs. We don’t. Will we? If not, who will live here? Who will move here? Who will leave?
What will a stereotypical Vancouverite be like? We kind of started with poor hippies. Moved on to tree hugging polar fleecers. Then yoga pants. Now BMWs and Louis Vutton?
Sometimes, I think the City planning dept is making a mistake. Instead of planning/developing for who lives here, they should be building for who will live here.
“Sometimes, I think the City planning dept is making a mistake. Instead of planning/developing for who lives here, they should be building for who will live here.”
That’s not a Vancouver only problem. I see it all the time in my line of work–all this work goes into processing a subdivision/rezoning but it’s all to maximize lot layout or the number of units. Lose a lot to ensure a wider pedestrian connection (or one at all) so that future residents can have a more walkable neighbourhood? No, we can’t do that cause we’d lose a lot. And that argument works with managements/Councils. So, we ‘plan’ for the future but through the short term lens of developer profits.
Much foreign cash parked here .. often vacant. Why don’t we tax it more, and incomes less ?
And more here on “Canada’s Unhappy Affair with China’s Princeling Millionaires”
http://news.nationalpost.com/full-comment/terry-glavin-canadas-unhappy-affair-with-chinas-princeling-millionaires
As the article from London above says, many of these massive developments are financed and driven by pension funds. Our very own substantial Oakridge redevelopment project with a proposed 13 towers, up to 45 stories. No wonder there is speculation of neighbouring properties. This area is going to be substantially changed and the financing is coming from the pension fund of employees of the government of Quebec. Oakridge Mall is owned by Ivanhoé Cambridge.
About Ivanhoé Cambridge
Ivanhoé Cambridge leverages its broad expertise, investing in, operating and developing real estate properties and companies to deliver optimal returns for its investors. Through multiple subsidiaries and partnerships, Ivanhoé Cambridge holds assets located mainly in Canada, the United States, Europe, Brazil, Mexico and Asia, which totalled more than Cdn$42 billion as at December 31, 2014. Ivanhoé Cambridge is a real estate subsidiary of the Caisse de dépôt et placement du Québec lacaisse.com, one of Canada’s leading institutional fund managers.
This is where the big money is coming from along the Cambie corridor. From a pension fund in another province. Who will buy? Who knows?
The decision for this to go ahead was made here in Vancouver. There is nothing the Canadian government could, or should, say about local development like this.
I’m not sure that it’s pertinent here when Gordon talks about forces of xenophobia and racism and ideological constraints limiting local decision makers. This is a Quebec/Vancouver deal.
The redevelopment of Oakridge by Ivanhoe Cambridge does not explain the rampant speculation in residential properties throughout the Cambie Corridor (i.e. at King Edward and Cambie). The money driving that speculation is not all coming from La Belle Province.
“Because there’s nothing that can seemingly be done within their ideological constraints, they simply choose not to talk about it.”
Great post.
Canada as a whole (and Toronto and Vancouver especially) has a massive housing bubble. Our rent-vs-own cost ratios are incredibly high, higher even than San Francisco and New York. Even if you think we’re somehow special and we somehow deserve these high valuations, I don’t think anyone can imagine that we have anything like the economies of SF (tech headquarters for the world) or NY (finance capital of the world).
We’re solidly into the ‘irrational’ zone of bubbles and as many people should remember from 2001, once we start to think of this as the New Normal and start thinking this will never stop and once all of the suckers who could possibly buy in have bought in is when the fun really starts. Canada now has subprime mortgages booming and even dewey-eyed 20-somethings are buying half-mill condos with their parents’ retirement savings. At this stage, how many people are able to buy in? How many suckers are out there to keep this thing fueled?
I know we can’t predict the top but forecasts that prices can continue rising at 5-8% above inflation for the next decade are a fever dream. There was an article about how we should be storing our money in Vancouver housing instead of gold! How many people are even aware that housing prices don’t always go up? We have a lot of issues but in five years i doubt we’ll be worrying about *high* housing prices.
Author
Ray Spaxman sent out this email:
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On April 23 Michael Geller E-mailed Barbara Yaffe in response to her informative article about land assemblies in todays Sun.
He wrote:
The prices now being paid for some land assemblies in Vancouver remind me of the prices paid for black tulips in 17th century Holland and my early Research in Motion stock! It’s nuts.
And while some tell the city the CAC policy simply depresses the value of land, I believe the recent flurry of activity proves otherwise.
While some investors will likely lose money on some of these assemblies, others will lead to the development of even more expensive homes.
The key is to create more opportunities and certainty as to where rezoning can take place….to pre-zone land, clearly establish reasonable amenity charges, combined with other methods of financing growth.
The current system is very troublesome.
Cheers, Michael.
I would like to add the following to the discussion.
Thanks Michael for pushing the debate along.
Until we actually get a better idea of where the demand is coming from and where it is likely to continue to come from, and who is creating the demand and for what purpose, and know what the current zoning capacity is, and what and where the most-acceptable future capacity could occur, and with what alternative planning policies, the City will continue in its own money-making processes of selling density for public amenities without really knowing why housing is just getting more expensive and not knowing whether there are alternative policies that might be better for the future of Vancouver, and especially for Vancouverites, – (phew!) – and we will not find the answer.
And that search needs to be undertaken with a truly “engaged” community so we can regain confidence that government is doing the right thing.
And, housing is just one of the serious challenges we are facing.
The real key lies in becoming better informed about what is actually happening, why it is happening, what is likely to happen, what alternatives do we have, and which alternative do we wish to pursue. It is, of course very complex, but it is becoming more and more imperative that we find the resources and initiate the processes TO FIND OUT.
So you can see it is not just me who is concerned, here is a quote from a recent report from the UK Government Office for Science. It is doing excellent research into this subject. .
Future Cities will need to adapt to, or in some cases work to mitigate against:
Climate Change
Population Growth,
Globalisation of economy, demographics, risk and ecological dependencies
Technological developments
Geo-political changes
Human mobility
Ageing populations
Inequity and social tensions
Insecurity -(energy, food, water.)
Changing institutional and governance frameworks.
Is it more important to find a planet we can escape to, or find a way to keep earth inhabitable? Where should we apply our best resources? Which of our governments are coming to grips with this?
Ray
History illustrates a pattern of domination by one group over another. It is an endemic condition among humans; it is embedded in the modern city in the form of enslaved renters and freehold owners. Future Cities will be populated by coin operated cyborgs. No one will worry about the biosphere because it won’t be needed; the cyborg is the adaptation. There will be no point in escaping because this is the natural course of exploitation; the path chosen by humans.
If we adopted the same taxation policy on foreign home ownership as Australia which only allows the purchase of newly constructed homes, the destruction of heritage houses in the west side of Vancouver by Chinese buyers would not exist.
Not every home destroyed is a “heritage” home. Quite a few are quite ugly. However, the lack of integration, lack of language skills and sometimes blatant abuse of laws, is indeed quite alarming.
Here is the rational behavior of an affluent immigrant: buy a big house or condo, as property taxes are quite low. Send wife and kids here. Husband might stay abroad or come only occasionally. Pay almost no income taxes as income is derived abroad. Buy little ie pay little PST. Yet: send kids to schools and get free ESL training, then bring over elderly parents for almost free healthcare. That is indeed rational behavior done by thousands, likely tens of thousands.
As such, while not disallowing immigration, or foreign ownership even, we need to tax it far higher. How about like Texas: no state income taxes, but property taxes that are roughly quintuple to 8-fold what we pay here per $100,000 assessed value.
Plus introduce land transfer taxes of 1% per $1M, up to $15M ie 15%. That would monetize the land development and house flipping for the provincial and city benefits.
Since foreign ownership is tough to track, but income taxes are not, give a rebate of some of these increased taxes to BC income tax paying resident.
The tax code needs a revamp indeed with this “new gold” of properties in mind. It has been getting worse for over 20 years now and I see no end in sight, in fact it might get worse looking at volatile situations in places like Syria, Iraq, Iran, Russia, China, Middle East, N-Africa etc. all trying to exit and or at least place their money (ill-gotten or hard earned legally) into safe countries like UK, Germany, France, USA, Canada, ..
The Chinese are buying westside homes from Chinese developers that are interested in the small home to lot ratio hence they can tear it down heritage cottages and maximize monster home construction plain and simple. Just like they are building Monster homes in West Van and now White Rock and South Surrey.
Totally Agree on the rest of your points. Someone should overlay a graph of Vancouver’s parabolic real estate spike in the last year and a half with a timeline of when the Chinese government started to crackdown on corruption, but no one wants this to be identified in BC.
http://www.vancouversun.com/Business/asia-pacific/Capital+flees+China+despite+booming+stock+market/10997945/story.html
The province has no problem tracking the Hells Angels moves, seizing their assets, property and clubhouses from ill-gotten gains yet turn a blind eye to Chinese overbidding on real estate by millions on dollars. What a joke.
Hell, Mayor Moonbeams girlfriends mother was just arrested on corruption:
http://www.vancouversun.com/news/metro/Wanting+mother+reportedly+arrested+China+corruption+charges/10999078/story.html
Time to stop the scapegoating and come up with real solutions.
If you would have bothered to take 20 seconds, you would have found out that what Austrailia did to limit foreign investment is not working that well. Affordability is still a big problem.
http://www.abc.net.au/lateline/content/2015/s4222696.htm
In Toronto, the cost of renting is coming down thanks to a large number of new condos being built.
Adding expensive row homes along arterials isn’t going to help much either. The reality is that with the high cost of land, we need to build up, way up or large portions of the city are going to be totally unaffordable to people with average incomes.
It’s this, and getting over the delusion that everyone should be able to afford a house. With or without densification of existing neighbourhoods, there will be no more single family houses.
What we need are more AND better townhouses/rowhouses/etc. Not just more, but better. More diversity in # of bedrooms, larger outdoor and indoor amenity spaces, tree retention, architectural diversity, all of it. Simply saying ‘more supply’ means more cookie cutter/ bland development like the Cambie Corridor is shaping up to be.
Richard, one of the problems in Australia is their building material and labour costs are very high compared with Vancouver and they do not build density on the scale we do so the pressure remains on single family homes. I would argue their taxation laws have maintained “unaffordable” which is due to a low interest rate environment versus the “insanely unaffordable” we have reached in the last year and a half due to the flood of Chinese money.
Real Estate here has gone parabolic in a year and a half when things should be slowing after a meteoric rise of 10 years or so. Shouldn’t Properties purchased for $450k over the asking price raise a red flag? These scenarios never played out in the height of the US housing bubble. You say we should focus on building more condos but with the article above suggesting Vancouver condos are safer than gold and pursued by international buyers than what is to stop Chinese from buying all our apartment stock? There are 1.4 Billion people in China, if you are safely classifying 5% of the population as millionaires which is a conservative number, that is 70 Million People. They could buy up all of Canada. Not to mention the billionaires who are capable of buying numerous properties.
Foreign investment in real estate was sustainable in years past when we had an actual range of interest rates and currencies with purchasers from all areas of the globe in small amounts. What is happening now is not. If the government is going to artificially keep interest rates low while inflation is soaring, and countries race to devalue their currencies, then they need to tax foreigners to return funds to the citizens that reside there.
Indeed.
Thus, raise property and land transfer taxes and lower, perhaps to 0, provincial income taxes !
Property taxes in Vancouver are the lowest in the country per $100,000 assessed value. Why ?
Next time, I recommend googling how many millionaires there are in China before guessing at 5 per cent of the population and saying it’s a conservative number: http://time.com/2852740/china-millionaires/
Actual number: 2.3 million, still the second highest number in the world.
“China recorded 2,378,000 millionaires in 2013, compared to the U.S.’ 7,135,000 millionaires, according to Boston Consulting Group’s 2014 Global Wealth Report.”
Well, that is less than 0.2% for China (given 1.3B folks or so there) but about 10 times the % for the US, roughly 2% (given about 350M folks in the US) !
And in Canada: just shy of one percent: 320,000 or so according to this http://www.thestar.com/business/2014/06/18/were_rich_number_of_canadian_millionaires_climbs_to_320000.html
No wonder houses prices continue to climb as folks with money usually want to live in a nice city (with water and mountains, perhaps) in a nice condo or house.
For the less wealthy plenty of inexpensive housing, advertised as 100 homes below 169,000 and 200 homes below 199,900 in last weekend’s Vancouver Sun: http://www.liveprime.ca .. a highrise in Surrey .. not just 2 blocks from the beach or close to downtown.
Hailing originally from Europe, and traveling there frequently, I can only say that house prices in Vancouver are not overly expensive in good locations, as all cities in Europe are expensive too. You want a nice house in a decent neighborhood close to shopping, recreation and city 1M Euro or more is now the norm, and, like here, cheaper further out, or in ugly cities or those with no jobs or amenities.
Scapegoating? And there you go Richard, falling right into the trap I mentioned earlier.
Don, of course not everyone can afford a house, but I suggest most of us would find it fairer if Vancouverites were first in line for them and not have their price inflated by external forces.
Exactly. The complacency is astonishing. If I hear one more person say, “Lets wait till we have the facts before rushing to judgement”…..Its obvious no one wants to produce this study as it protects special interests. The speed at which this is happening means we must act now, call your MLA, sign a petition, protest.
http://sofard.tumblr.com/post/113616107456/the-decline-of-vancouver?soc_src=mail&soc_trk=ma
The decline of Vancouver ?
Reminds me of this saying: “No one goes there anymore. It’s just too crowded.”
Prices are always influenced by external forces.
Vancouverites have first dibs ? Or First Nations ? Then folks from Burnaby or Surrey ? Followed by folks moving here from PEI or Calgary ? Or the U.S. ? or Persia/Iran ? or China ? You are advocating government controlled housing allocation ie rationing ?
The only solution that works is taxation, with rebates for seniors or BC income tax payers.
Sadly we have been so shamed by admittedly deplorable incidents in our past like the head tax, the Japanese internment and residential schools that we are reluctant to discuss one of the main causes of the problem. We all know what is happening but nobody wants to be the one to say it out loud.
Vancouver is heading in the wrong direction. We don’t have anything remotely approaching the culture of London or Manhattan. Rather we are becoming a cold weather Honolulu, with overpriced real estate and locals working multiple service industry jobs to keep their heads above water.
Agree completely. Time for change. Sign the petition:
https://www.change.org/p/premier-christy-clark-mayor-gregor-robertson-mayors-and-city-councillors-of-the-gvrd-restrict-foreign-investment-in-greater-vancouver-s-residential-real-estate-market?just_created=true
Vancouver house prices were increasing at a ridiculous rate before there was a such thing as a Chinese millionaire immigrant.
In the 20 years leading up to Expo 86 Vancouver house prices doubled 3 times.
In the 30 years since then they’ve doubled a further 4 times.
There have been many ups and downs along the way, but on average the price of a house in Vancouver has been going up 10% per year for five decades.
So why are we so worried today? Why are so many calling for regulations to stop foreigners from bidding up our real estate?
There were years when incomes outpaced inflation, when people could get ahead simply by working hard. There were years when inflation was much higher than it is today. A 10% growth in real estate value didn’t look like much when the bank was offering 12% on a GIC.
But incomes stopped growing in real, inflation adjusted terms a long time ago. Today local buyers’ wages are moving along at the 2% inflation rate, if they’re moving at all, while housing continues to grow at the same 10% rate it’s been at for the last 50 years.
Ordinary citizens are like pedestrians on the side of a highway watching their dreams get smaller every second. It’s hard to blame them for wanting someone to install a traffic signal and turn it red.
Big cities, with lots of jobs, universities, attractions, shopping, urban parks, cultural amenities, clean air, major airport, especially on an ocean with beaches and mountains behind, and a limited land mass, artificially kept small by local governments, will, and always have been, expensive. You honestly think other attractive cities, like Vienna, Paris, London, Singapore, Hongkong, Sydney, Munich .. are any less expensive ?
So, a few choices remain for the “pedestrian”
a) change / lobby / be the government that will
– expand land mass for new housing, and/or
– build more rapid transit so destinations further out can be within reach, and/or
– allow more multi-story housing in a sea of single family houses so close to a city and/or
– reduce foreign investment through law or taxation, and/or
– reduce immigration
b) move, i.e. use a different highway using your analogy, and/or
c) change vehicle (i.e. become a driver on the highway) and not remain a pedestrian i.e. join the upwardly mobile single family home owning part of society by opening up a business, move for a few year to make more money elsewhere (like I did) then come back ..
What do you suggest, David ?
You can stop at your first sentence, “With lots of jobs..” Vancouver does not have an employment market like any of those cities you mentioned, that is the reason people feel screwed here because they don’t have a hope and hell of competing. Also 4 of the cities you mentioned tax or restrict Foreign real estate purchases.
Plenty of jobs here but plenty of folks “work” elsewhere but live here. I agree that some action on foreign ownership is warranted. Many people live here and work FROM Vancouver (but pay income taxes elsewhere) and that is why taxation of property (both its transfer, ownership but also gain) – as opposed to incomes and consumption only – is a very important topic to discuss.