Two stories show two different perspectives of the Vancouver market. Not only is this housing market unaffordable for local buyers, it now has a speculative value that some local investors think will cement solid returns in the future. As reported in the The Vancouver Courier by Joannah Connolly, the median price for a condo unit in Vancouver on both the west and east sides now rests at $977,000. That means that is the “middle” of pricing, with half the dwellings costing more, and half costing less. And that’s a mighty price figure. Broken down for the west side the median condo price is $1,088,000. On Vancouver’s east side the median price is $638,000.
While it is thought that stricter mortgage rules will bring housing prices down by roughly ten per cent, that has not yet happened, although rising prices has meant that properties are now sitting longer and longer as more people are priced out of the market.
Meanwhile Bloomberg Bloomberg News and the Vancouver Sun describe the Vancouver housing market as an investment strategy that can provide a ten per cent return annually. Vancouver is described as “among a clutch of cosmopolitan, attractive cities around the globe where the appreciation in home prices is seemingly unstoppable. New-home prices have gained 5 per cent since March, the biggest three-month increase since 1990, data released earlier this month show. Prices in Hong Kong and Sydney also continue to soar.”
Local statistician Jens von Bergmann of MountainMath Software notes that “sitting on a house can be more lucrative than working a job. A single-family property appreciated almost $600,000 on average in the area in 2016.” Mr. Von Bergman also observed that the value of Vancouver properties has increased by $47 billion which is more than twice the cumulative net income of Vancouver residents. And while the foreign buyers’ tax had a momentary impact on the housing market with those buyers moving from 17 per cent of sales to 1.8 per cent of sales the month after, the cost of a typical house “fell no more than 4 per cent before resuming its climb, according to figures from the Real Estate Board of Greater Vancouver.”
That means that Canadians are also moving the market upwards, with housing prices in Vancouver rising 69 per cent in the past five years. Compare that return to the stock market or government bonds-Vancouver’s real estate market outperformed them all.
There is still the expectation that the Provincial government may be stepping in look at capital gains taxes for speculators, and as is noted by just about everyone that when real estate market prices vastly exceed the salaries of residents, they can’t stay high forever. The question of course is when this “tipping point” will come, and how long it will be before Vancouver real estate moves from being a hot investment commodity and returns to the more mundane but absolutely necessary job of affordably housing its residents.
A sad commentary on Vancouver. You cannot build community when homes are looked at as mere investment vehicles.
Immigrants and foreigners, as well as locals realized a lone time ago that property taxes are low in Vancouver (per $100,000 of assessed value), that the city is landlocked, that immigration and GenY demand would drive demand, that interest rates are low and that gains are untaxed (or very poorly enforced if undeclared if not primary residence). As such it made a lot of sense to buy the biggest house you can afford.
Vancouver of course is not alone here as the same phenomenon happened in almost any desirable city worldwide: Toronto, Munich, Vienna, London, Singapore, Paris, Madrid, New York, Boston .. to differing degrees.
As I have stated here many times before, we tax incomes far too high and consumption (incl real estate as a form of housing consumption) far too low. if we eliminated BC income taxes and tripled to quadrupled provincial property taxes we would actually monetize the vast amount of cash for real estate that comes here. Many folks with money declare incomes elsewhere. Why work hard to make an extra $100,000 and get taxed 50% on it, if you can buy a $2M house and it goes to $3M and you pocket the $1M gain tax free. It is just common sense.
Our taxation policies need adjustment. We can learn from Texas where they just do that: no state income taxes (thus vast job creation and more cash in your jeans to spend) but very high property taxes and high state tax (around 8% which is high for the US). That model would work very well in BC also !
Look beyond Vancouver. This is a world wide phenomena, artificially induced by central bankers, effecting many global cities. The printing of vast amounts of money, conjured out of thin air by central banks, has caused massive asset inflation, especially in real estate.
https://www.nytimes.com/2014/07/08/upshot/welcome-to-the-everything-boom-or-maybe-the-everything-bubble.html
Can money be printed forever? Is the day of reckoning approaching?
The means tests and stricter mortgage rules are not meant to slow the market, but to prepare us for the inevitable.
The Capital Gains Tax is federal, so the Feds are not going to wipe out the savings that many Canadians have made to try and cool the Vancouver market.
Any shift from income taxes to property taxes would certainly increase residential rent costs. Earners paying less income tax might not mind but all those renters on a fixed income would be in trouble.
Some are calling for raising interest rates because it’s considered too easy to get a big mortgage. Only world markets can cause interest rates to rise. Canada canot do anything about the rates. 90% of Canadians, those outside the lower mainland, would cry foul if Ottawa were asked to forcibly raise interest rates in an attempt to reduce lower mainland housing prices.
If lower mainland housing costs do decline then an increase in other Canadians migrating to the area would only push the prices up again.
Why would rents go up ? Rents are usually set at market rates if vacant, or capped as existing tenants are rent controlled (4% for 2018) ?
There is an illusion and much far too much fake propaganda spread by far too many politicians on all 3 levels that they can do something about Vancouver’s high house prices. THEY CANNOT .. unless they hand out free or highly subsidized land. Why the lies? Merely to buy votes from the uninformed ?
The newly proposed Vancouver mandate to have 25% of all new construction be rentals will help produce rental units, but they will not be cheap AND the remaining 75% will be even more expensive as rental units (especially those with capped rents) will trade below market.
One needs to look at MetroVan as a whole (and not isolate Vancouver) as cheaper rents and condos exist further out in Surrey, New West, Burnaby or Delta.
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Reblogged this on Sandy James Planner.
Nothing new here..What about the future?
And if you bought bitcoins 5 years ago you’d be really laughing all the way to the bank.
Rather disappointing there’s so little comment on this, the biggest issue of our time in this city 🙁
No comments ? It is all over the newspapers & twitter & TV & radio.
Very little truth though, i.e. prices will NEVER come down, ever, unless massive government subsidies for high land prices !
We may get more supply but it ain’t cheap i.e. over $1000/sq ft. We’ll get more rental units though, in time. That will make the remaining 75% even more expensive. See also my comments above.