The real problem with Vancouver’s outrageous house prices

[WarrenC12]

Originally Posted by Jebby

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

Ok, libertarian.

Tomayto, tomahto.

[Migrant_Coconut]

As much as I'd welcome more low and mid-rises outside of downtown, the problem with a supply-side solution is that it doesn't matter how many condos and townhouses you build if they're all going to be (A) unaffordable for locals, and (B) bought up by speculators before they even reach the market.

Originally Posted by WarrenC12

Ok, libertarian.

Tomayto, tomahto.

Not every libertarian is a selfish narcissist Ayn Rand fan. Remember how the last thread derailed before we start categorizing.

[Jebby]

Originally Posted by WarrenC12

Ok, libertarian.

Tomayto, tomahto.

I'm not a libertarian and even if I were most don't agree with her.

[whatnext]

Originally Posted by 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.

And those insane SFH prices are making it economically impossible to build anything other than towers, mostly with 1 or 2 bedrooms. Anybody looking for something a little larger or in ground oriented multifamily is SOL in Vancouver. If SFH prices were forced to return to what local incomes support, townhouses, rowhouses etc would be economically viable.

[Vin]

Originally Posted by LeftCoaster

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.

Maybe that's because the issue hasn't been affecting them as badly as it has on Vancouverites? Their higher salaries compared to ours help too when it comes to more Torontonians able to afford housing. Well, at least until now....

[Vin]

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. 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.

Speculators only speculate on a market without enough supply but having really strong demand. Those are places where prices are driven up, and that's how speculators thrive. If prices remain flat with ample housing, speculators will go somewhere else.

Of course housing start has to be way above almost every other North American city, which is in tune with the fact that we are also way above others when it comes to the number of people coming to settle here. That's where the demand is.

Originally Posted by whatnext

And those insane SFH prices are making it economically impossible to build anything other than towers, mostly with 1 or 2 bedrooms. Anybody looking for something a little larger or in ground oriented multifamily is SOL in Vancouver. If SFH prices were forced to return to what local incomes support, townhouses, rowhouses etc would be economically viable.

Towers and high density living is good. SFH in Vancouver proper should be banned. Row houses (Terrace housing) or town homes, mid rises and towers should fill the entire landscape for at least half of the city.

[cornholio]

Originally Posted by Vin

Speculators only speculate on a market without enough supply but having really strong demand. Those are places where prices are driven up, and that's how speculators thrive. If prices remain flat with ample housing, speculators will go somewhere else.

Of course housing start has to be way above almost every other North American city, which is in tune with the fact that we are also way above others when it comes to the number of people coming to settle here. That's where the demand is.



Towers and high density living is good. SFH in Vancouver proper should be banned. Row houses (Terrace housing) or town homes, mid rises and towers should fill the entire landscape for at least half of the city.

The problem with your argument is that you forget that there is a country of 1.4 billion that a short 60 years ago was over 70% illiterate and just went through several decades of non stop rapid growth along with having trillions of western dollars being pumped into it. These are the people that are driving the speculation and have been for years now. Not only do they come with a very different mind set from a very different environment, there are so many that they them selves can create a speculative shortage. Pump and dump, or just pump and pump. They can create such massive capital flows that they can destroy markets, create bubbles overnight etc. (something Jebby has failed to realize).

The problem is you assume all speculators are rational and experienced

As for density it is great but I have been under the impression that metro Vancouver has seemed to have been overbuilding units for a number of years. We also have enough room for all housing forms. Having said that I agree that in the core single family homes should be able to be rezoned to at-least townhouses, everywhere. The market can then take care of the rest.

[Vin]

Originally Posted by cornholio

The problem with your argument is that you forget that there is a country of 1.4 billion that a short 60 years ago was over 70% illiterate and just went through several decades of non stop rapid growth along with having trillions of western dollars being pumped into it. These are the people that are driving the speculation and have been for years now. Not only do they come with a very different mind set from a very different environment, there are so many that they them selves can create a speculative shortage. Pump and dump, or just pump and pump. They can create such massive capital flows that they can destroy markets, create bubbles overnight etc. (something Jebby has failed to realize).

The problem is you assume all speculators are rational and experienced

As for density it is great but I have been under the impression that metro Vancouver has seemed to have been overbuilding units for a number of years. We also have enough room for all housing forms. Having said that I agree that in the core single family homes should be able to be rezoned to at-least townhouses, everywhere. The market can then take care of the rest.

By virtue of your argument, I suppose you view most of these speculators as irrational? But I don't suppose that irrational people can make millions in the first place. I do agree that some of the offspring and spouses of those really rich foreigners are making irrational purchases, but I think they are not the majority of foreign investors here. Thing is, our government was hungry for cash, and the desperate move to invite these foreign investors is what saved us from a "have not" province in the 90s to what we are now.

With that said, a sudden influx of foreign cash can create bubbles, but especially for markets such as Vancouver which are slow to provide adequate supply, even though we are desperate for their cash. Luckily, municipalities outside Vancouver are doing the right thing to absorb some of this pressure.

[LeftCoaster]

Originally Posted by whatnext

And those insane SFH prices are making it economically impossible to build anything other than towers, mostly with 1 or 2 bedrooms. Anybody looking for something a little larger or in ground oriented multifamily is SOL in Vancouver. If SFH prices were forced to return to what local incomes support, townhouses, rowhouses etc would be economically viable.

That's not really how land economics work.

Development land isn't sold based on the value of SFH, it's based on the allowable density and form of development stipulated by the sites zoning.

SFHs would need to be several times more expensive than they are today to have it not make sense to density, the problem is the city's reluctance to add density to traditionally SFH areas for fear of political blowback.

Originally Posted by Vin

Maybe that's because the issue hasn't been affecting them as badly as it has on Vancouverites? Their higher salaries compared to ours help too when it comes to more Torontonians able to afford housing. Well, at least until now....

How much more do you think people get paid in Toronto?? I'll give you a hint, it's about the same.

The issue is nearly as large here as it is in Vancouver. The only difference is the run-up here has been more recent and shows no signs of stopping.

[Jebby]

Originally Posted by LeftCoaster

SFHs would need to be several times more expensive than they are today to have it not make sense to density, the problem is the city's reluctance to add density to traditionally SFH areas for fear of political blowback.

And that's the real problem in the CoV. There is more than enough land for demand to be met by supply. The artificial constraint (from a municipal powers perspective) is zoning.

[Vin]

The verdict is in!


Vancouver's the worst place in the Lower Mainland to build a home due to red tape

http://dailyhive.com/vancouver/vancouver-red-tape-housing-construction


A tedious approval process and regulations mandated by the City of Vancouver could be exacerbating the municipality’s dire housing affordability crisis in a self-inflicted way.

According to a new report by the Fraser Institute, the largest city in the Lower Mainland region had the longest building permit approval time with an average of 21 months, with West Vancouver and Surrey trailing behind at 18.3 months and 13.2 months, respectively. In contrast, the City of Langley had the shortest approval time with an average of less than two months.


And more troubling is the finding that Vancouver’s regulations add $78,000 for every unit of housing built, which is over five times more than the compliance costs of neighbouring Burnaby at $15,000 per unit. The municipalities with the next highest costs were Surrey at $52,000 and Richmond at $41,000.

Such approval processes are delaying the creation of new housing stock, and the cost of construction and design regulations that must be adhered to are passed on to the consumer.

“Increasing housing supply in Vancouver could help lower prices, but unfortunately there are a lot of confusing and costly regulations on the books that deter new homes from being built,” said Kenneth Green, a senior research director with the Fraser Institute, in a statement.

Other factors that present a barrier to new housing development revolve around the uncertainty and ambiguity in the uses of land before rezoning and development applications. For major development projects, approval is tied to community amenity contributions to support the construction of new community centres, libraries, and public art, and such costs are also passed on to homeowners.

As well, a preference from Vancouver for less dense, mid-rise developments adds to cost as such types of development do not have the same economies of scale as highrises.

For such reasons, several of Metro Vancouver’s largest real estate developers refuse to work in Vancouver, instead focusing their efforts on other neighbouring municipalities particularly Burnaby.

“If municipal councils in the Lower Mainland, especially in Vancouver, really want to increase the supply of housing, they should consider more sound regulatory regimes that encourage – not stifle – residential development,” Green said.

Local opposition to developments from neighbourhood residents, commonly referred to as ‘NIMBYs’, are another challenge, particularly for dense projects with verticality.

Earlier this year, for instance, a proposal in Kerrisdale that would be considered relatively modest in the Eastside area, Broadway Corridor, and downtown Vancouver was met with fierce local opposition. Residents were against an eight-storey redevelopment, with rental and market housing, proposed by Dunbar Ryerson Church over fears it would cast a shadow over the area.

[SpongeG]

anyone who watches love it or list it vancouver could tell you that, the amount of times that show gets screwed up by red tape is crazy

[SkyboxInvestment]

There is more than enough land in Vancouver - problem is city doesn't allow denser buildings and taller highrises due to (previous poster said) zoning.

Most efforts are attempts to curb demand - nothing done on supply side.

[jlousa]

Come on, you work in the industry too. Don't give me the supply side story the city is building at an unprecedented pace and prices have done nothing but increase. Supply is being provided way quicker then population growth yet no downturn in prices yet. The current method of curtailing demand is what is finally having a dent and will be what bring about the correction.

[WBC]

Originally Posted by jlousa

Come on, you work in the industry too. Don't give me the supply side story the city is building at an unprecedented pace and prices have done nothing but increase. Supply is being provided way quicker then population growth yet no downturn in prices yet. The current method of curtailing demand is what is finally having a dent and will be what bring about the correction.

I want an example of a city where increasing supply has led to easing of prices...Just one example in the western world please in the recorded history...

Because all that extra density brought us is that now a 500 sq foot apartment costs more than a house 10 years ago...

[whatnext]

Originally Posted by WBC

I want an example of a city where increasing supply has led to easing of prices...Just one example in the western world please in the recorded history...

Because all that extra density brought us is that now a 500 sq foot apartment costs more than a house 10 years ago...

Yeah exactly. I can't believe people still believe in that real estate shill nonsense. Required reading from the Globe & Mail:


Have you heard the one about how supply is going to solve the great Canadian housing crisis?

If you’ve listened to the real estate industry or our political leaders, you likely have. A lack of supply is the great culprit behind soaring prices and the lack of affordable homes. Just build more condo towers and presto, problem solved.

Well, they’re building them in Metro Vancouver and Greater Toronto – lots of them. The Onni Group is now marketing a building in downtown Vancouver with units starting at $1.7-million. Another developer, Intracorp, is advertising Belpark, on the city’s west side, where you can get a two-bedroom, plus a den for $1.5-million. And on it goes.


These prices are not dissimilar to what people are being asked to pay for the stock going up in downtown Toronto.

This is the so-called supply that is going to solve our housing crisis...

...Here is the other brutal reality about the great supply argument: vast swaths of these units are being built and presold to foreign purchasers. These buyers, in turn, are either flipping the properties for a profit before they are even finished or hanging on to them as safe investments and renting them out. Sure, that might help bolster the rental stock, but why are locals who earn incomes in Canada and pay taxes here being shut out from buying these homes?

The problem is this type of foreign-investment activity is helping drive up prices. Everyone knows it and yet little is being done about it. Some of these offshore purchasers are, in fact, flipping the condos for a profit before final sale and avoiding paying the 15-per-cent foreign-buyers tax in the process.

No, there is lots of “supply” in Vancouver and Toronto. That isn’t the issue. It’s who’s getting access to that supply that is a big part of the problem. And it’s also the type of “supply” being built....
https://www.theglobeandmail.com/opinion/...-arent-a-supply-problem/article35091277/

[Cypherus]

Again, the problem is not foreign investors; it is permanent Canadian residents who have access to foreign wealth generally in China and are bringing that wealth into Canadian real estate. As well, some permanant residents are bringing in wealth of non-resident family or friends and investing it into Vancouver real estate on their behalf. The non-residents are never registered on the title even though it's their money that was used to acquire the property. So the effect is that a Canadian permanent resident owns the property, but the money is from overseas. The foreign buyers tax does not impact this main driver of high real estate prices. That's why it will not work in the long term. Only implementing a 100% capital gains inclusion tax on homes not designated as a principle residence, or on homes designated as a principle residence but exceed a $1 million threshold would solve the real estate problem.

[whatnext]

Originally Posted by Cypherus

Again, the problem is not foreign investors; it is permanent Canadian residents who have access to foreign wealth generally in China and are bringing that wealth into Canadian real estate. As well, some permanant residents are bringing in wealth of non-resident family or friends and investing it into Vancouver real estate on their behalf. The non-residents are never registered on the title even though it's their money that was used to acquire the property. So the effect is that a Canadian permanent resident owns the property, but the money is from overseas. The foreign buyers tax does not impact this main driver of high real estate prices. That's why it will not work in the long term. Only implementing a 100% capital gains inclusion tax on homes not designated as a principle residence, or on homes designated as a principle residence but exceed a $1 million threshold would solve the real estate problem.

Well, that's really two sides of the same coin. I agree the loopholes are too numerous. At least the hike in PPT will whack such buyers.

[mezzanine]

Originally Posted by WBC

I want an example of a city where increasing supply has led to easing of prices...Just one example in the western world please in the recorded history...

Because all that extra density brought us is that now a 500 sq foot apartment costs more than a house 10 years ago...

I don't think you can find a study that "proves" that (how would you set up the control vs study situation? how would you eliminate other variables like economic downturns?) but a non-partisan californian govt anaylsis suggest that building more housing/density helps moderate prices. an important point is that upmarket housing depreciates and decreases in value as it ages.

Lack of Supply Drives High Housing Costs. As we demonstrate in California’s High Housing Costs, a shortage of housing results in high and rising housing costs. When the number of households seeking housing exceeds the number of units available, households must try to outbid each other, driving up prices and rents. Increasing the supply of housing can help alleviate this competition and, in turn, place downward pressure on housing costs.

Building New Housing Indirectly Adds to the Supply of Housing at the Lower End of the Market. New market–rate housing typically is targeted at higher–income households. This seems to suggest that construction of new market–rate housing does not add to the supply of lower–end housing. Building new market–rate housing, however, indirectly increases the supply of housing available to low–income households in multiple ways.

Housing Becomes Less Desirable as It Ages . . . New housing generally becomes less desirable as it ages and, as a result, becomes less expensive over time. Market–rate housing constructed now will therefore add to a community’s stock of lower–cost housing in the future as these new homes age and become more affordable. Our analysis of American Housing Survey data finds evidence that housing becomes less expensive as it ages. Figure 1 shows the average rent for housing built between 1980 and 1985 in Los Angeles and San Francisco. These housing units were relatively expensive in 1985 (rents in the top fifth of all rental units) but were considerably more affordable by 2011 (rents near the median of all rental units). Housing that likely was considered “luxury” when first built declined to the middle of the housing market within 25 years.

This article is parsed in this WaPo article. another point is that in neighbourhoods where there is intense development existing ppl are less likely to be displaced. if there are renovictions in the west end, for instance, what would it be like if there were no condo construction in the DT penninsula?

In this research, displacement is defined as when census tracts have population growth over time but a simultaneous decline in low-income households. The researchers also counted census tracts where the overall population was falling — but falling particularly rapidly among the poor.

In tight markets, poor and middle­-class households are forced to compete with one another for scarce homes. So new market-rate housing eases that competition, even if the poor are not the ones living in it. Over time, new housing also filters down to the more affordable supply, because housing becomes less desirable as it ages. That means the luxury housing being built today will contribute to the middle-class supply 30 years from now; it means today’s middle-class housing was luxury housing 30 years ago.

Building more density isn't the only answer (mandating a greater % of larger units for families, further disincentives for speculation, etc) but IMO it would be a mistake to ignore building density. We'd wind up like san francisco.

[trofirhen]

What role can / could the BC / Federal government play in un-making housing such a hot, speculative, and for many, unaffordable commodity.
Looking at the examples in the thread about Vienna, I understand that the city has large tracts of land to build on, rather unlike Vancouver.
But something has to give, and this situation, whether driven by supply-siders, foreign investors, or just a mindset, has to change. Housing is a right.
Correct me if I'm wrong on that.