The real problem with Vancouver’s outrageous house prices

[Alex Mackinnon]

Originally Posted by SFUVancouver

"Nobody goes there any more, it's too crowded."

I'd say it's more of a question of short term profits versus long term stability. A lot of the jobs created are ones that leave at the drop of a hat or the loss of a tax credit (cough film cough).

The high cost of housing in the mean time dampens the long term competitiveness of the city as a whole.

[LeftCoaster]

Originally Posted by Alex Mackinnon

I'd say it's more of a question of short term profits versus long term stability. A lot of the jobs created are ones that leave at the drop of a hat or the loss of a tax credit (cough film cough).

The high cost of housing in the mean time dampens the long term competitiveness of the city as a whole.

Honestly, there aren't too many industries not like that any more.

If not tech, film and FIRE, which jobs should BC be chasing?

[Caliplanner1]

Originally Posted by BodomReaper

Unregulated capitalism, where the central planners have deemed that 81% of the city should be off-limits to residential redevelopment, and much of the remaining 19% is already built to the arbitrary density cap (ie. maximum quota on homes) set by the planners.

As LeftCoaster pointed out, a rapidly growing population + record job growth are rather interesting symptoms of "self destruction".

Oh and here's a quote from the report, which hammered this point many times: "Without exception, severely unaffordable markets have severe land use restrictions."

Maybe if we were to regulate the inflow of foreign (housing investment) money we wouldn't need to deregulate certain low density housing areas. Too much of a good thing can turn sour/bad fast.

As for LeftCoaster's jobs report,..two things are possible outcomes...a) that such new jobs fuel higher housing costs, b) the salaries of such new jobs can't keep up with the cost-of-living (re: rate of (hyper?) inflation in Vancouver.

The government (as you seem to be suggesting) could of course deregulate/EASE its control of real estate development and let a free-for-all (re: laissez faire) supply and demand regime drive the destruction of neighborhoods and thus turn all of Vancouver into a RELATIVELY high priced skyscraper jungle (like Manhattan) with its raft of environment problems.

[nds88]

Originally Posted by LeftCoaster

Honestly, there aren't too many industries not like that any more.

If not tech, film and FIRE, which jobs should BC be chasing?

I think BC (and Canada in general) doesn't have the infrastructure and talent to support big tech in the immediate future. We aren't anywhere near as attractive as the US. Hootsuite is a wonderful local story, but its *only* a 1 billion dollar company with about 1,000 employees. Snapchat, IMO a useless app, just went public and is valued at $30 billion. This is just one of dozens of billion dollar plus companies in Silicon Valley with probably hundreds of companies in the $100m+ category. I don't foresee BC coming anywhere near this in the next 25 years. It will grow, but we will mostly be satellite offices for larger companies.

Our greatest local e-commerce success is Clearly Contacts, which sold for $400 million dollars. About 300-400 jobs, but honestly not lots of higher paying jobs. A wonderful local story, but still, a $400m business over 10 years is just a rounding error for what we need. The CEO was a talented guy and even he couldn't make his next e-commerce business work here.

Our biggest tech success Hootsuite, is also a piss in the ocean (no disrespect to Hootsuite). I don't foresee Vancouver having multiple non-speculative billion dollar plus tech companies providing long term secure, higher paying jobs. The start up tech scene is fraught with risk and failure, so it needs to be backed with stable long term high value jobs. We need to generate quicker capital to invest and build a proper tech environment. Doing it in bits and pieces isn't going to work.

We have trillions of dollars under our feet and growing from our dirt. We need to better capitalize on our resources, forestry, mining, clean coal, natural gas, LNG, pipelines etc. We need to efficiently, and reasonably safely, ship out energy to Asia. Re-invest the capital generated from this into tech and other non-resource based economies. Oil will one day be obsolete, so why are we dicking around not capitalizing on it? By time we happen to get anything done, it will be a valueless commodity and trillions of dollars worth of opportunity would have passed.

We can debate whether having a large base of super wealthy Chinese is a pro or con, but the fact is there are 1,000s of these individuals in Vancouver. Vancouver can be the bridge for Asian capital to enter North America. Let's capitalize on this. Its an environmentally friendly industry too and we have the infrastructure to support them (bi-lingual Asian Canadians, shopping, food, lifestyle, education). I can foresee Vancouver being one of the top 10 financial centers in the world, but only if we take advantage of this. We can offer financial services to these Chinese individuals and in some ways rival London, NYC, Hong Kong and Singapore.

I foresee two problems with this. Too many extreme "environmentalists" will block progress for resource development. We are too politically correct here as well. Wall Street is seen as evil and I doubt people will embrace becoming a financial hub that helps "corrupt" money. It'll be occupy wall street or Donald Trump style protestors/whiners blocking any of this type of change.

[retro_orange]

Originally Posted by nds88

I think BC (and Canada in general) doesn't have the infrastructure and talent to support big tech in the immediate future. We aren't anywhere near as attractive as the US. Hootsuite is a wonderful local story, but its *only* a 1 billion dollar company with about 1,000 employees. Snapchat, IMO a useless app, just went public and is valued at $30 billion. This is just one of dozens of billion dollar plus companies in Silicon Valley with probably hundreds of companies in the $100m+ category. I don't foresee BC coming anywhere near this in the next 25 years. It will grow, but we will mostly be satellite offices for larger companies.

Our greatest local e-commerce success is Clearly Contacts, which sold for $400 million dollars. About 300-400 jobs, but honestly not lots of higher paying jobs. A wonderful local story, but still, a $400m business over 10 years is just a rounding error for what we need. The CEO was a talented guy and even he couldn't make his next e-commerce business work here.

Our biggest tech success Hootsuite, is also a piss in the ocean (no disrespect to Hootsuite). I don't foresee Vancouver having multiple non-speculative billion dollar plus tech companies providing long term secure, higher paying jobs. The start up tech scene is fraught with risk and failure, so it needs to be backed with stable long term high value jobs. We need to generate quicker capital to invest and build a proper tech environment. Doing it in bits and pieces isn't going to work.

We have trillions of dollars under our feet and growing from our dirt. We need to better capitalize on our resources, forestry, mining, clean coal, natural gas, LNG, pipelines etc. We need to efficiently, and reasonably safely, ship out energy to Asia. Re-invest the capital generated from this into tech and other non-resource based economies. Oil will one day be obsolete, so why are we dicking around not capitalizing on it? By time we happen to get anything done, it will be a valueless commodity and trillions of dollars worth of opportunity would have passed.

We can debate whether having a large base of super wealthy Chinese is a pro or con, but the fact is there are 1,000s of these individuals in Vancouver. Vancouver can be the bridge for Asian capital to enter North America. Let's capitalize on this. Its an environmentally friendly industry too and we have the infrastructure to support them (bi-lingual Asian Canadians, shopping, food, lifestyle, education). I can foresee Vancouver being one of the top 10 financial centers in the world, but only if we take advantage of this. We can offer financial services to these Chinese individuals and in some ways rival London, NYC, Hong Kong and Singapore.

I foresee two problems with this. Too many extreme "environmentalists" will block progress for resource development. We are too politically correct here as well. Wall Street is seen as evil and I doubt people will embrace becoming a financial hub that helps "corrupt" money. It'll be occupy wall street or Donald Trump style protestors/whiners blocking any of this type of change.

1. Who paid you to say that?
2. This isn't Panama.
3. No. There is no benefit to the %99.

[Cypherus]

Originally Posted by Bcasey25raptor

Vancouver is in decline, saw this coming years ago, people are fleeing and businesses are closing up, this city is turning into an empty overpriced overseas bank account for rich chinese communist party insiders.

Something needs to change NOW, not next year, NOW or this city will die.

I have firsthand experience of millions of dollars being poured into Vancouver from mainland China, but most of it now has been diverted to Toronto and even Seattle. Based on experience, many of the mortgage brokers lending money to Chinese "students" and "homemakers" which is common on their mortgage applications were also in on it (note: student and homemaker is a "code word" to the mortgage broker who happens to have the same ethnic background of the borrower that they have money overseas, so their mortgage will be approved despite not having to prove their income like every other Canadian resident). Wonder why a student can spend 57 million dollars buying properties and also qualify for mortgages (http://www.theglobeandmail.com/news/...cle31892652/)?

It's also common to have $50,000 transfers from up to twenty people from mainland China to accumulate a single deposit of $10 million for the the principle individual who wishes to acquire Vancouver real estate. Using permanent or Canadian residents to acquire properties while the money is actually from a mainland Chinese investor who uses twenty people to funnel $50,000 each to the Candian buyer (agent) was the typical strategy, and circumvents the foreign buyers tax.

For a city that has nothing to do, and is under rain for 10 months a year, is not the appeal. Vancouver is just a safety deposit box for the Chinese wealthy.

[Changing City]

Originally Posted by Cypherus

It's also common to have $50,000 transfers from up to twenty people from mainland China to accumulate a single deposit of $10 million for the the principle individual who wishes to acquire Vancouver real estate. Using permanent or Canadian residents to acquire properties while the money is actually from a mainland Chinese investor who uses twenty people to funnel $50,000 each to the Candian buyer (agent) was the typical strategy, and circumvents the foreign buyers tax.

I'm not doubting your experience with offshore investors, but wouldn't you need 200 people sending $50,000 each to accumulate a $10 million deposit?

[Sheba]

The next step?

Foreign buyer tax isn't a cure-all: report

A new report suggests a foreign buyer tax alone can't solve Toronto's soaring housing prices.

The report, titled "In High Demand" and released Monday by Ryerson University's City Building Institute, favours a tax on foreign buyers — similar to the one introduced in Vancouver last summer — but suggests it should be implemented in addition to a "progressive surtax" on expensive homes owned by people who aren't paying income tax, including people with foreign capital.

"The surtax essentially gets wiped out if you're earning money locally and paying taxes locally or in Canada," said report author Josh Gordon, an assistant professor at Simon Fraser University.

It's a system that hasn't been implemented elsewhere, Gordon said, though it was first proposed several months ago by his colleague Rhys Kesselman.

The surtax would target foreign buyers who don't contribute to the local labour market, as well as wealthy Canadian citizens who have "aggressively evaded taxes," the report said.

And it would also be progressive, like income tax. The surtax would only apply to the value of a home over a certain threshold, the report said. The further you get from that threshold, the more the property is taxed.

[Vin]

We can already see Toronto's approach sounds a lot more progressive and well thought-out.

[whatnext]

Originally Posted by Vin

We can already see Toronto's approach sounds a lot more progressive and well thought-out.

Note a key point from that article, which many here should absorb:

..."This isn't normal. A lack of supply isn't causing this. It's a surge in demand, and demand that's beyond the normal growth of population, construction and new listings of homes," said Cherise Burda, executive director at the Ryerson City Building Institute.

"I think often demand is overlooked by this cry for more supply," she added. "We can't build our way to affordability."..

http://www.therecord.com/news-story/...re-all-report/

[Jebby]

A lack of supply isn't causing this. It's a surge in demand

If demand is outpacing supply, then yes it's a lack of supply...

[LeftCoaster]

Originally Posted by Vin

We can already see Toronto's approach sounds a lot more progressive and well thought-out.

Toronto's approach so far has been to do nothing, certainly not more progressive and thought out.

The idea you are referencing came from Ryerson University and is actually co-opted from one of the options BC/CoV considered.

[Jebby]

Originally Posted by LeftCoaster

Toronto's approach so far has been to do nothing, certainly not more progressive and thought out.

I disagree. The more regressive option is to interfere with taxation. The progressive approach would be to liberalize the market and allow supply to catch up with demand.

[whatnext]

Originally Posted by Jebby

I disagree. The more regressive option is to interfere with taxation. The progressive approach would be to liberalize the market and allow supply to catch up with demand.

You miss the point. Demand is being skewed, largely for two things: foreign money and speculators. If the BoC were doing its duty, interest rates would have risen by now and speculators would be starting to feel the squeeze. Dealing with foreign money needs to be handled by the Federal and Provincial governments. I've posted the stats several times showing housing starts in Vancouver are already well above the per capita level of almost every other North American city, supply isn't the problem.

[Jebby]

Originally Posted by whatnext

You miss the point. Demand is being skewed, largely for two things: foreign money and speculators. If the BoC were doing its duty, interest rates would have risen by now and speculators would be starting to feel the squeeze.

Oh I agree that the BoC is heavily to blame. Interest rates should be much higher than they are.

Originally Posted by whatnext

Dealing with foreign money needs to be handled by the Federal and Provincial governments.

Disagree. There should be a completely free flow of capital into Canada.

[LeftCoaster]

Originally Posted by Jebby

I disagree. The more regressive option is to interfere with taxation. The progressive approach would be to liberalize the market and allow supply to catch up with demand.

When demand and supply function naturally I'm all for market economics, but the last 5 years have shown us that the supply/demand relationship has broken down as it is influenced by a non-market force. The ensuing price escalation was having material effects on employment growth as firms had difficulties hiring Vancouver based employees, so the government stepped in on behalf of the economic growth of the region.

Also when physical constraints like mountains and ocean inhibit your ability to add supply that makes true supply side liberalization of the market impossible.

[Jebby]

Originally Posted by LeftCoaster

Also when physical constraints like mountains and ocean inhibit your ability to add supply that makes true supply side liberalization of the market impossible.

There isn't a lack of real estate in Vancouver. There's a lack of density.

[LeftCoaster]

Agreed on part of the market, more desity is 100% needed, but the biggest run-up in valuations over the past 3 years was SFH and land. Outside of limited fill opportunities we aren't building and more land.

[WarrenC12]

Originally Posted by Jebby

If demand is outpacing supply, then yes it's a lack of supply...

If this were widgets and we could just crank up our widget factory, you're right. But this is residential housing in urban environments. Your naive Econ 101/Ayn Rand argument would have disastrous results.

[Jebby]

Originally Posted by WarrenC12

If this were widgets and we could just crank up our widget factory, you're right. But this is residential housing in urban environments. Your naive Econ 101/Ayn Rand argument would have disastrous results.

lol why bring up Ayn Rand? I'm not a follower of hers at all.