Canada's 'housing bubble' deemed close to bursting

[lio45]

Originally Posted by WhipperSnapper

How do you begin to offer affordability when $200,000 is being spent per unit just for the land?

As I was telling geotag, you just can't justify building rentals in such circumstances*; even if we accept a really low 5% cap rate, that's $10,000 in yearly rent you need to charge to the occupant for the land component alone! The building would be built by the government and donated to the landowner free of charge and the ROI would barely be tolerable for the new landlord...


*unless you're in a really really high-rent city; there are some of those on the planet. But not Vancouver.

[dleung]

Originally Posted by lio45

Huh, weird... Oh wait, that's for CMAs!!! So that doesn't contradict me at all. I've already acknowledged Montreal's sprawly suburbs are full of SFHs.

Basically, it's like I just said Manhattan didn't have many SFHs, and you reply with New York CSA data that shows there's a gazillion SFHs in New Jersey and Connecticut, and you think you've brought up something that invalidates my original point.

As I said, I'd like to see the Montreal map at the same scale. I'm pretty sure it would be very noticeable that the colors would be further away from the core. This has an effect on housing prices, obviously; if the island of Montreal was mostly SFHs right now, prices would be clearly higher.

You were commenting on the amount of colour on a map of a Metro area. If you were comparing city propers you wouldn't have called Vancouver "a city of several million", or make any reference to "suburban fringes of satellite cities". Montreal island is likely 1/3 grey, since unlike Van/TO, the vast majority of its multi-family is low-rise and far lower density than the highrise areas that populate the other two. 70% of Vancouver lives in 4% of its urban footprint.



http://www.news1130.com/wp-content/blogs.dir/sites/9/2016/12/21/home.pdf

[someone123]

Originally Posted by lio45

As I was telling geotag, you just can't justify building rentals in such circumstances*; even if we accept a really low 5% cap rate, that's $10,000 in yearly rent you need to charge to the occupant for the land component alone! The building would be built by the government and donated to the landowner free of charge and the ROI would barely be tolerable for the new landlord...

One silver lining is that a lot of condo speculators here choose to become amateur landlords, and a lot of condos are quasi rental buildings. The condo speculators lose money renting out the units, so they offer a subsidy to renters, but they hope to make a profit through increases in property values. This strategy was viable in 2016-2017 as condo prices went up by 20%. This is still worse for the tenants than the more stable and professionally-run rental buildings though, and it is worse for condo owners who prefer not to be around renters.

Up until now part of the answer of planners has been that the renters can move into basement suites and laneway houses. Even the laneway houses don't make a whole lot of sense economically; they are mini standalone structures with an involved permitting and development process. The average price to build a laneway house in Vancouver is something like $350,000, and I would guess they are mostly under 1,000 square feet. Maybe they are not even allowed at that size? I am not sure. Either way they are kind of a joke as an affordable housing strategy, and I doubt that absentee money launderers are going to bother with them.

[geotag277]

200k per unit? What are we talking about here? A 10 unit midrise ? Where does a 10 unit midrise make sense anywhere?

A simple four story development like this would make sense literally anywhere in Vancouver, and contains 25 units, is full of 3 bedroom units, and the minimum unit size is 2 bedroom 1500 sqft. If we assume the Vancouver land costs 2 million, for two adjacent lots, that's 40k per unit based on land cost. What's the problem?

Not to mention, I also think this should be expected to be developed almost anywhere in Vancouver, and it has 77 homes. It certainly would not require 15 million in land costs based on lot size. Of course, even in Calgary the above development was met with absurd NIMBYism, which is the main blocker for Vancouver density and has been since the 90s.

If developments like this were built on plots of land that currently occupy SFH all over Vancouver, they could be sold for reasonable prices. Of course, if you try to build these on plots of land next to skytrain towers which already have 30 story buildings surrounding them, you may not make the finances work, and unfortunately that is typically where the zoning allows them.

In any case, the only limitation in either case is zoning. If developers built the above for reasonable cost all over Vancouver, they would be printing money.

Regardless, when land values start to exceed thresholds as they have in Vancouver, I maintain it is up to the city to come up with ways to devalue that land in the name of affordability. Tie lucrative condo residential market should be tied to a sustainable rental plan, which would instantly devalue the land itself by tying lucrative investment potential with inefficient investments.

Vancouver may have been historically known as a low rent city, but ever since the foreign buyer tax, and the subsequent rebalancing of the market towards condos, rents have skyrocketed. They broke a record recently with average 1 bedrooms exceeding 2000 a month. Those are Calgary boom time numbers.

[geotag277]

Originally Posted by someone123

One silver lining is that a lot of condo speculators here choose to become amateur landlords, and a lot of condos are quasi rental buildings. The condo speculators lose money renting out the units, so they offer a subsidy to renters, but they hope to make a profit through increases in property values. This strategy was viable in 2016-2017 as condo prices went up by 20%. This is still worse for the tenants than the more stable and professionally-run rental buildings though, and it is worse for condo owners who prefer not to be around renters.

Up until now part of the answer of planners has been that the renters can move into basement suites and laneway houses. Even the laneway houses don't make a whole lot of sense economically; they are mini standalone structures with an involved permitting and development process. The average price to build a laneway house in Vancouver is something like $350,000, and I would guess they are mostly under 1,000 square feet. Maybe they are not even allowed at that size? I am not sure. Either way they are kind of a joke as an affordable housing strategy, and I doubt that absentee money launderers are going to bother with them.

I always thought basement suites in Vancouver were borderline inhumane. I mean, is this anyway to live in a city known for not getting hardly any sunshine during winter?



(This particular one is going for 1,250$ a month by the way)

I agree laneway housing is also a joke, a vestibule of a population stubbornly resisting the concept of building upwards which they need to be, holding onto their inefficient single family detached lot with any asinine vehicle to pretend that they can put a band aid over the ghastly inefficient use of land that is sitting right in front of them.

The Vancouver I knew in the 80s was better than that.

[dleung]

Your Calgary example is nice, but it's 3 lots. Any 50-60' lot in Metro Vancouver excluding Surrey is about $1.5M. That's $4.5M for the land, about $180k in land per unit. A 60' lot in the West Side is $3M, so $360K per unit in land. Your original number should be $80k (2M/25=80K)

[geotag277]

1.5m seems to be about right poking around in Vancouver city proper using the assessment tool. There seem to be plenty of candidates, like 321 20th ave e (1.5 m).

Once you get out to Burnaby is full of lots with about 500k in land value.

Elements is a boutique luxury building. If you split the floorplans you can squeeze 30 units. I would argue CoV needs to build higher due to obvious reasons, so build another 3 floors and push the units to 50 still offering generous sizes - you are at 90k. Elements could work in Burnaby, it would need to be taller for CoV, but still totally possible to offer reasonably priced units for Vancouver residents.

As an aside, just poking around google maps, it is pretty absurd how many SFH are still so close to the downtown core in Vancouver. Just insane. Hard to take any complaints about land value seriously when these lots haven't even been redeveloped. Everything from Frazer St to Oak St, W 16 Ave to W King Edward should have been redeveloped in, maybe the 90s.

[dleung]

Lol, your $1.6M example is a 25' lot in East Van. It will take 6 of those to equal the size of the project in Calgary.

I looked. A 60' lot starts at $1.5M in Burnaby, North Van, and Richmond, $900k in Coquitlam, $800k in Surrey. In any semi-desirable part of North Van or Richmond, it's over $2M.

To reiterate, if you replace a 50' SFH with 8 apartments (same density as 25-units on the 160x120' lot in Calgary), it'll average $200k in land per unit in Greater Vancouver, and $400k in the city proper.

[geotag277]

It's the city of vancouver adjacent to mt pleasant, bigger projects are appropriate for the area.

Edit: To re-iterate, if you are spending 200k per unit on a development, your land use guidelines aren't making any sense, and you should be able to build more units to even out affordability on that land.

[whatnext]

Originally Posted by lio45

...The thing with Chinese investors is that they're not interested at all in paying to lease housing in Vancouver as a living place for themselves. They want to buy and own. So they don't really drive up rents directly, as they don't compete for that. They do indirectly: they bid properties up, so they drive cap rates down, therefore there's less and less rentals available (the existing stock gets turned into condos, and no one builds rentals anymore) so scarcity drives rents up... but that gets fixed via making rental units mandatory.

Unfortunately municipalities in BC don't have the power to zone for rental-only development. Do they in other provinces?

A quick way to reset affordability would be to rezone huge swaths for multi-family but rental only. Let some speculators get burned.

[240glt]

Originally Posted by geotag277

I always thought basement suites in Vancouver were borderline inhumane. I mean, is this anyway to live in a city known for not getting hardly any sunshine during winter?



(This particular one is going for 1,250$ a month by the way)

I agree laneway housing is also a joke, a vestibule of a population stubbornly resisting the concept of building upwards which they need to be, holding onto their inefficient single family detached lot with any asinine vehicle to pretend that they can put a band aid over the ghastly inefficient use of land that is sitting right in front of them.

The Vancouver I knew in the 80s was better than that.

That's a hell of a lot nicer than some of the basement suites I lived in back in my early days

[Pinion]

.

[geotag277]

Originally Posted by 240glt

That's a hell of a lot nicer than some of the basement suites I lived in back in my early days

Sure, in your early days. Except this is being pitched as a density solution for Vancouver's housing problems. Not many early days Vancouverities can afford 1250 a month in housing costs.

And unless you were in fort mac, I don't think you were paying more than $1000 a month for it (and if you were in fort mac, you were also making boatloads to make up for it).

[240glt]

Originally Posted by geotag277

Sure, in your early days. Except this is being pitched as a density solution for Vancouver's housing problems. Not many early days Vancouverities can afford 1250 a month in housing costs.

And unless you were in fort mac, I don't think you were paying more than $1000 a month for it (and if you were in fort mac, you were also making boatloads to make up for it).

Probably the worst basement suite I lived in was in a house in downtown Kelowna with two friends while in College. The place was an absolute dump. I believe we paid $875/ month back in 1993.

When I lived on the coast, I had an apartment in Burnaby, I paid $650/month for a pretty small, modest place. But I was also making piss-all. That's the reason I left Vancouver for Calgary in 2000. I basically doubled my salary moving to Calgary

[someone123]

Originally Posted by geotag277

Sure, in your early days. Except this is being pitched as a density solution for Vancouver's housing problems. Not many early days Vancouverities can afford 1250 a month in housing costs.

And unless you were in fort mac, I don't think you were paying more than $1000 a month for it (and if you were in fort mac, you were also making boatloads to make up for it).

Yeah, people see these and think of them as student housing but increasingly they are the best options available to younger professionals (including people in their 30's) and there isn't much of an upgrade path. It's hard to save up for a condo when prices are going up by 20% a year and a suburban 1,000 square foot unit can set you back more than $500,000.

Originally Posted by Pinion

My brother makes almost twice as much as I do, but is 10 years younger, so in Vancouver that puts us on equal financial footing.

Vancouver is the least "fair" city I have experienced. There's little correlation between financial success and hard work. Success mostly comes down to luck in terms of having rich parents, inheriting housing, or having accidentally bought at the right time because of age. In some ways you might argue that this represents regression to an earlier, more primitive time and economy. Belief in the importance of luck versus hard work is one of the key things that separates developed countries from the rest.

[lio45]

Originally Posted by dleung

You were commenting on the amount of colour on a map of a Metro area.

Exactly, and I'm saying that for a metro of several million, I would expect a pretty large grey core, and color only in the outer belts.

Whenever it's brought to my attention how much of the inner core is SFHs in Western cities like Calgary and Vancouver, it's always a bit of a shock 'cause it's really unfamiliar urban typology. (I'm not that familiar with those cities; I've actually never yet been to Calgary.)

If you were comparing city propers you wouldn't have called Vancouver "a city of several million", or make any reference to "suburban fringes of satellite cities".

No, I was always talking about metro area maps. In fact the only wording I used that could have been more perfect is that I should have said "I'd expect a lot more grey in the city core of a metro of several million". It's the exact same thing of course, but just more nitpicker-proof with this new wording.

I'll try to make my same point even more clear by re-explaining. See that big belt of color around Vancouver's downtown peninsula in your map? IMO it's surprising to see that in the inner city neighborhoods in a metro of several million. I would expect that color donut to be further away, and I'd expect the grey circle to be larger than only the downtown peninsula.

If you've been paying attention to the discussions in this thread, you know that some people (geotag, and probably others) have argued (and they have a point) that the fact that the inner city neighborhoods are still too zoned for SFHs is a factor that's helping make Van even more unaffordable. Seeing how close to downtown the color belt is on that map immediately strengthens their point.

[geotag277]

It's almost impossible to overstate how absurd the SFH housing situation is in Vancouver.

Here's another way. You could fit almost 5 City of Vancouver's into the Island of Montreal. The City of Vancouver has 650k residents. The Island of Montreal has 2 million.

You could house 80% of the entire metro population of Vancouver on the Island of Montreal. Metro Vancouver is spread over an area 6 times the size of the Island of Montreal.

There is no excuse for Vancouver to have high housing prices except NIMBYism.

[MolsonExport]

Originally Posted by 240glt

That's a hell of a lot nicer than some of the basement suites I lived in back in my early days

second that. mind you, the rent for a grotty basement suite in Montreal in the early 90s was often $300/month (sometimes less), including utilities.

[whatnext]

Originally Posted by 240glt

That's a hell of a lot nicer than some of the basement suites I lived in back in my early days

No worse than many of the "basement flats" found in London's terraced houses that have been divided up.

[whatnext]

Housing affordability claims another political career in BC. First Christy Clark, now Robertson, Trudeau should be paying close attention if he wants to capture the same amount of BC seats next year:


Vancouver’s housing crisis priced Gregor Robertson out of bidding for mayor
The mayor had become unelectable.

Despite his best intentions, and a list of worthy accomplishments, Vancouver's Gregor Robertson – who said on Wednesday he will not stand for re-election – would have gone into the next civic vote dogged by the one issue that will cast a long and ominous shadow over his record: housing. And while he lectured the former BC Liberal government about not doing enough to stifle the unseemly rise in house prices in his city, it was a finger-wagging that came too little, too late. It was also tough to swallow.

This was his city after all. He was the one who, in the opinion of many, was far too cozy with developers. He was the one who, initially anyway, resented any suggestion that it was offshore Chinese buyers who were bidding up the cost of homes and creating an upward-spiral effect on prices across the region. When he lamented in a speech that the city was in danger of losing its soul, those listening couldn't help but shake their heads in disbelief.

Dude, who's been in charge?...

https://www.theglobeandmail.com/opinion/...ut-of-bidding-for-mayor/article37570556/