Blog dedicated primarily to randomly selected news items; comments reflecting personal perceptions

Tuesday, October 14, 2014

Outpricing The Neighbourhood

"In my opinion, I think it's good for the economy. In Vancouver, the house prices are perfect."
Qiqi Hong, Vancouver homeowner

"Vancouver has become a global resort city. The prices have decoupled from local wages."
Dan Scarrow, realtor, Macdonald Realty Ltd.

"The main difference [between previous waves of Asian immigration to Vancouver and the current flow of wealthy investors is] the megasize of the [Mainland] Chinese economy."
"We're going to continue to get a solid supply of millionaire investors."
Richard Kurland, Immigration lawyer, Vancouver

"If China is a place to make money, Canada is a place to save it. Canadian immigration status is one of the world's best insurance policies. Vancouver has become an international bedroom community."
Ryan Rosenberg, Immigration lawyer, Vancouver

We're talking housing boom here. With a soaring demand for detached homes in Vancouver's west and east sides; West Vancouver, Richmond and parts of Burnaby with the region's most sought-after properties, but priced well out of the reach of most Vancouverites, even those with stable, well-remunerated jobs. On the city's west side, detached house prices lofted 51.5% over the past five years with a benchmark price of $2.3-million.

One of the largest real estate companies in British Columbia has opened an office in Shanghai for the express purpose of eliciting buyers for the luxury home market in Vancouver. Dan Scarrow explains that 178 of his firm's 531 sales of single-family detached homes located within city limits last year -- 33.5% -- were bought by homeowners with ties to China.

Wave after wave of Asian migrants have crossed the Pacific as geopolitical uncertainty caused people to flee Mao's China, Taiwanese moved to escape cross-strait tension, Sikhs to leave social-religious insecurity India, and Persians to flee from Revolutionary Iran. Wealthy Hong Kongers uncertain over the results of the 1997 handover of Hong Kong from a British protectorate to a Chinese economic zone looked for stability abroad and found it in Canadian citizenship.

The most populous country on the planet has seen its economic fortunes rise over the last forty years and with it a huge class of new millionaires. And, as they become financially stable themselves, it seems that wealthy Chinese are eager to migrate to a more stable social-political environment which Canada represents. Over the past ten years about 30,000 millionaires have taken advantage of the federal government's investor immigrant program.

That federal program permitted anyone with a net value of $1.6-million to 'lend' the government $800,000 interest-free for permanent residency; yes, citizenship for sale. Ended in the 2014 budget the program is still likely to be relaunched. And the tight home-buyer's market in Vancouver will become even more out of bounds for most people who live and work in Vancouver. Such homes are not limitless, they are a very finite product.

With mountains to the north, the American border to the south, agricultural land reserve, multiple rivers and bridges and the existence of Stanley Park on vast acreage "There's not a lot of dirt here", quipped David Goodman, a principal at real estate firm HQ Commercial. Property owners originally from Hong Kong often leave their families in Vancouver, living the Canadian life while the paterfamilias returns to business in Hong Kong.

A report from Sothebys dated 2013 stated that 40 percent of Vancouver's luxury home sales went to foreign purchasers, mostly buyers from Mainland China, from Iran and from the United States. Vancouver is prized as a safe haven. Vancouver now represents the second most unaffordable city in the world, its house prices ten times the median household income, according to a 2014 report from the Demographia research firm. "Severely unaffordable markets are also more attractive to buyers seeking extraordinary returns on investment."

Vancouver now can boast with profound regret that it has the highest household debt as a percentage of annual income in Canada. "What is interesting about Vancouver is how disproportionate the affordability issue is, how big the house price is compared to the average income", stated David Ley, a geography professor at University of British Columbia. "In a bigger city, that effect might be a bit more diluted. But here, with 2.5 million people -- with limited land for development -- it has a huge impact."

"It's globalization. As long as Vancouver welcomes immigrants, there will be people willing to move here -- and inevitably prices will get driven up. That's the choice of Vancouverites: Whether we will welcome the benefits that come with this foreign investment, or whether we want to say no to globalization", explained David Ren who bought his ocean-side West Vancouver home for about $3-million several years ago.

Any Vancouverite with a good, not great salary who managed to scrape up a decent down-payment in the $100,000-range a decade ago when very modest single-family homes were still available for $500,000 and was prepared to rent out part of their new home to help pay the mortgage, is now sitting on an investment that has more than doubled, one that, if they so wished, they could call in, to make themselves rather wealthy, as long as they had no intention of remaining in Vancouver.

Labels: , , ,


Post a Comment

<< Home

()() Follow @rheytah Tweet