It’s hardly an original thought to think of housing as ecological: nothing stands in isolation, no piece is separate from the whole. My favourite example: the relationship of the West End to Downtown South in the 1990s. As thousands of units came on stream east of Burrard, they took the pressure off the West End, which changed neither in number nor rental rates, when adjusted for inflation, hardly at all. It remained, as it largely does today, a lower middle-income neighbourhood.
Despite perception at the time, the West End was not an island, isolated from the changes that occurred beyond its borders. Rather, its stability was in large part a consequence of that adjacent turbulence: those who arrived in the city could find accommodation in new buildings without having to compete with those in older rental suites.
That’s not the situation with single-family homes since they’re not making any more of the latter, while the condo market, at least, seems to have flattened out with additional supply.
Which makes me wonder how much the prices of single-family homes in markets beyond those impacted directly by investment and foreign capital are secondarily affected – when, say, a boomer couple cash out their west-side bungalow for millions more than anticipated and then pass along several hundred thousand to their children to purchase east of Main.
How much has that rising tide of money lifts prices elsewhere, and for whom and how many has it kept an unaffordable city still within achievable reach? Is that what explains how those who, by income, can’t afford to live or buy in Vancouver but nonetheless do? And is it a significant portion of the market?
Gee, some data might be useful.
True Story: My friends parents sold there house to foreign buyers, cashing in for well beyond their expectations. They were looking to downsize to a upscale condo, only every condo project they looked at, they entered into a bidding war with…….you guessed it, Foreign buyers. They still haven’t found anything. Be careful what you wish for.
This is why, if this is as significant an issue as an increasing number of anecdotes suggest, correctly taxing foreign money is necessary.
It’s only going to get worse…
http://www.vancouversun.com/business/real-estate/Freer+flow+Chinese+currency+could+boost+sales/11145353/story.html
When Boomers sell and spread their winnings among their children to help them get a toe hold in the market we get another crop of winners and losers, and here it has nothing to do with foreign buyers. The winners are the children whose parents were fortunate enough to sell into a massively rising like the West Side. The losers are the children whose parents live somewhere else and sell into normal markets and end up with little to spread around to their children after taking care of their own retirement.
We don’t focus on this kind of divide between haves and have nots because we see it as the inevitable product of how well our parents have done in life and how many children they have to spread their wealth to. And who would protest? But when one parent’s winnings help three or four children outbid the competition to get into houses on the east side, it looks like the locals and not the foreign buyers who are freezing the have nots out of the market.
Take the foreign buyers out of the equation and I suspect this would still be so, even if prices were lower, simply because of the numbers: if you transfer intergenerational wealth from one household (the parents) to several (the children), you multiply the demand for real estate and in a market of constrained supply and increasing demand, prices go up. The only way to counter this, I fear, would be for us to make Vancouver less desirable and I doubt that’s happening any time soon.
I’m not sure that parents will be able to keep passing windfalls to the next generation. As life expectancies grow and the cost of assisted living rises, most parents will be at high risk of running out of money long before they shuffle off this mortal coil.
I have elderly relatives with differing care needs. They do not want to be split up, but that’s exactly what would happen if they applied for government subsidized assisted living. So they’re looking at private care homes and the prices are staggering. For a high requirements resident the rate is $6,000 per month and her husband would need to pay almost $4,000 to live in the same facility.
If they sell their suburban home, they’ll have enough money for six years.
So it’s quite likely that not only will the next generation not inherit a dime, they’ll probably be stuck caring for one or both parents full time. Where the time and money for that is going to come from God only knows.
These are great points, I have shared these thoughts aswell, people underestimate the huge costs associated with retirement and getting old. The Conservatives and Liberals in BC are taking us closer and closer to American style private healthcare, children are become more and more obese with a looming diabetes epidemic on our hands that will be a big burden on our healthcare system.
American style healthcare ? Seriously ? It is still illegal in Canada to get private surgeries. It is ridiculous. I can’t even use my own money and spend it on my own knee or ear operation. I need to go to Mexico or USA. This ought to be unconstitutional !
I can’t wait for Dr. Brian Day to win this landmark lawsuit in BC: http://blogs.vancouversun.com/2014/03/10/dr-brian-day-vs-the-bc-government-and-anti-privatization-foes-legal-case-twists-turns/
Of course it’s not completely American……yet. But you have to ask yourself why with our so called great Universal Healthcare are patients sleeping in hallways and there are huge waiting lists for surgeries?
Excellent comments, David. Of course, the distinction between private assisted living and public subsidized seniors retirement housing as compared to top-of-the-line long-term care needs to be made. Private top line long term care facilities are not subject to random government inspections and the higher level of control and oversight imposed on subsidized facilities are. There is a shortage of the latter.
Thousands of seniors rich and poor lose their entire independence suddenly every year, and whether they can afford assisted living or not is irrelevant when they need top level long term care. There is a crisis building here that may overwhelm the entire healthcare system in the not too distant future regarding higher levels of care. With waiting lists doubling and tripling while patients suffer, I believe we may see more suicides by seniors every year who are forced to endure shared rooms and deteriorating conditions.
I have to say this is one of the biggest reasons why I am a strong critic of excessive spending on roads and pet projects like LNG while issues such as an ageing population are not even on the government agenda of planning list.