How to gloat gracefully about your B.C. home’s new value
I just got my assessment in the mail and the value of my home has increased by 23 per cent this year. Should I gloat?
Well, that depends. Did you buy your house in 1984 for $88,000? Is it in Kitsilano? Has the value now exceeded $3-million? If so, then yes, by all means, gloat. Tell everyone around you how smart you were to have purchased the house when you did. Tell them that, even though you were a stoned and aimless hippie at the time, you “had a feeling, man.” Tell them that you can’t believe how things have worked out for you and that your house is now worth $3.1-million. Tell them how, at the time, you supplemented your seasonal income with generous unemployment-insurance benefits, and how you took winters off as part of “the UIC Ski Team” until you went to architecture school.
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Young people – like, people under 35 – seem to resent me. They say they work hard, are well-educated, earn decent incomes and yet can’t afford to buy into the Vancouver market. They say the gap between wages and home prices has been growing. What should I say to them about my assessment without making them feel bad?
Try this line: “Well, things have sure changed, man.”
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It seems to me that this whole Vancouver property thing has turned out to be nothing more than a way to make rich people even richer. Am I wrong?
No, you are not wrong.
I don’t resent Stephen Quinn’s hypothetical lucky property lottery winner any more than I resent any lottery winner.
The thing of it is, I think that my generation feels like not only are they not able to afford to enter the lottery, that the lottery doesn’t exist.
We don’t really care about striking it rich and shouting ‘eureka!’ … we care about having a place to live which isn’t really any different than we might were we have had were we 20, 40, 60 years older, nothing more, maybe even a bit less, just a place.
Things indeed have changed, causing vast increases in residential real estate in general and single family house values specifically. Six to 7 come to mind but there may be more:
A) Vancouver was a remote backwater city 30 or certainly 50 years ago. Today it is a major hub, employer base and export/import super power connected with over 40 daily flights to Alberta and a dozen to Asia.
B) interest rates used to be 7-17% and today sub 3% allowing bigger mortgages for the same overall monthly payment
C) China wasn’t even a player 30 years ago. Now they export, import and send managers, seniors, university kids and major (legal and illegal ) $s worldwide to buy houses, companies and resources. Vancouver is a major recipient of people and $s, due to location on Pacific Rim and accelerated in the late 80’s by LiKa Shing Expo 86 land purchase, coupled with Hongkong leaving UK and associated uncertainty and money flight.
D)MetroVan politicians artificially restrict land expansion , and especially new single family dwellings. Density is king, also referred to as green policies and sustainability. This forces up land values and especially limited land in good locations like Point Grey, W Van, Richmond and a few others.
E) BC and MetroVan politicians have failed to introduce taxation policies or outright restrictions affecting foreign ownership of urban land and single family houses.
F) More and more people, both in absolute numbers and as a % live in cities.
G) Houses are undertaxed and its gain not taxed at all making it a premier investment compared to any other including the stock market or other private equity,
These are seven that come to mind. There may be more.
Thomas, some good points. Agree with several of them.
However, on point D, I disagree. In fact, increased land values in Point Grey, West Van and Richmond are a reflection of extreme low density zoning (single family housing only). Somewhere between 65-70% of residential land in the CoV is still zoned for single family only:
https://twitter.com/GRIDSVancouver/status/640544192045826049
It’s these three areas (Vancouver westside, West Van, Richmond westside) of single family zoning in the Lower Mainland that have seen the majority of residential price gains. It’s definitely not high density zoning that is pushing up prices in these areas (as you claim above), it’s the exact opposite that is causing high prices: low density zoning.
The strict restrictions on density also lead to the following:
“Density restrictions work to increase segregation, mainly by exacerbating the concentration of affluence. This contradicts the commonly held belief that exclusionary zoning leads to the concentration of the poor. Instead, the authors find that the main effect of density restrictions is to enable the wealthy to wall themselves off from other groups.”
http://www.citylab.com/housing/2016/01/how-zoning-restrictions-make-segregation-worse/422352/
Another is that all signs show a slowing of world growth, which will further affect the slowing stock market. This, along with the new rise in interest rates in the US causes uncertainty in the equity markets. Therefore one investment that is earning more than bank or bond rates and is not slowing down is Vancouver real estate. So, it’s a buy.
The increase in US interest rates is not this time to try and slow a fast expanding market and control inflation. It’s to try and artificially create the idea that the economy is growing. The effect is more likely to slow auto sales and possibly slow economic industrial expansion, as well as hasten some insolvencies.
If this does happen they, Janet Yellen and the Federal Reserve, will lower rates again rather than have the economy slow with job losses too.
Then, again, as before, real estate will be more attractive as more people continue to migrate to the cites, Vancouver’s connections with the Pacific Rim becomes stronger and money is cheap in this underpopulated stable democracy.
While oil stays low too and pipelines stop the Candian product reaching markets, the Canadian dollar itself is cheap too. How much has it gone down since the oil price decline?
Monaco is not cheap, neither is Geneva, Zurich, London, Paris or Singapore. Vancouver is still reasonable in comparison.
Well argued Eric.
The US economy is actually decently growing, thus the US prime rate hike. Five and ten year bond rates – the base for five and ten year mortgages – are quite a bit higher in the US vs Canada thus higher mortgage rates in the US.
Vancouver residential real estate, in US $ or closely linked currencies like the Yuan is about 10% cheaper still than two years ago despite the torrid single family house price increase in Can$s by over 25% from 2013 to 2015.
For example, the Texas economy and our Texas based residential rental property assets have performed exceptionally well the last 4-5 years. Unless we see drastic taxation increases or foreign ownership restrictions – both unlikely with our timid do-not-rock-the-boat-as-it-is-still-floating provincial and MetroVan politicians – the rise in Lower Mainland real estate prices will continue for a while for the reasons you and I mentioned.
Condos less so as there is less land per sq ft of condo.
Ditto with industrial real estate, also land locked.
Details here http://www.rebgv.org/sites/default/files/CE%20Sales%20Stats%20-%20Lower%20Mainland%20-%202015%20Q3%20%282%29.pdf
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I might add that salaries in those places are generally higher than Vancouver’s (which are low by Canadian terms even) and in the case of Singapore, about half of housing is state-run, so the cost of the other half of housing doesn’t really reflect any sense of overall affordability.
Ian; many cities like the ones I mentioned, including Shanghai, Hong Kong, Moscow, etc., are more expensive than Vancouver and the earnings are less. Salaries don’t really effect the costs. Can the average working stiff Amsterdamer buy a decent canal house on one of the central grachts?
Author
True … I didn’t say that vancouver had lower salaries than all other cities, just generally the ones you mentioned. Vancouver certainly isn’t the only one dealing with this issue, and is not the worst hit.
I must say though, that knowing what some friends have recently paid for condos near the olympic village, that this doesn’t seem that bad: http://tinyurl.com/jrkpqb5 … one important distinction, however, almost 50% of amsterdam housing is socially rented, with a goal to keep at least 30% so for new construction: http://www.iamsterdam.com/en/local/live/housing/rental-property/housing-policy
So no, the ‘average’ stiff might not be able to buy a luxury one (but one wouldn’t be extraordinarily out of reach by Vancouver terms), but unlike Vancouver, they could certainly hope to live in one. Vancouver’s goal is 20%, and many proposed developments fail to meet even that … 13% in this one: https://pricetags.wordpress.com/2015/05/06/more-on-poor-doors/