THE CHINA IMPACT

THE CHINA IMPACT

Has the Vancouver market been impacted by foreign investment?  I think it is safe to say, "Yes". Here are some simple facts that help us understand why.  

  • China's economy is almost 12.5 times the size of Canada's when looking at GDP on purchasing power parity. http://data.worldbank.org/data-catalog/GDP-PPP-based-table
  • There is no private ownership of land in China. When you purchase a home, you are purchasing a lease to use the property for a maximum of 70 years. http://www.globalpropertyguide.com/Asia/China/Buying-Guide
  • China's stock market is only 27 years old.  The investment culture is to invest in hard assets, such as property, rather than stocks. 
  • The Chinese government can track foreign bank accounts but they can not track foreign bought assets such as property.
  • As an international city, Vancouver real estate is inexpensive.
  • Canada has a history of economic stability.

In the last four years housing prices in Vancouver have risen 47%, in London UK, 54%, and Aukland NZ 75%.  http://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-6

What might you expect in 2017 and 2018?

In July, the Chinese Government will further their capital restrictions and impact the middle range buyers ability to move money out of China.  In anticipation of this, money has already been moved out but not necessarily invested yet.  In general we should expect foreign investment to still be significant but not as significant as it has been couple of years. 

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6 WAYS TO INCREASE AFFORDABILITY IN VANCOUVER

Why is there a homeownership affordability issue in Vancouver? The answer is simple: the market is under supplied for the demand, which pushes prices up, while at the same time the median income of the average Vancouverite is the lowest of all the major Canadian cities

Homeownership Price/Average Income = Affordability Ratio

 

Three Ways to Increase Supply:

Increasing supply is the area where currently most of the solution conversation is focused. Here are three ideas to consider:

  1. Rapid transit – the supply of housing is increased exponentially by providing excellent rapid transit to the suburbs and throughout different areas of the city. The “No” vote in 2015 transit expansion plebiscite has largely been cited as a vote of non-confidence in leadership and management as opposed to expanded rapid transit. Effective transit can significantly increase the housing supply.
  2. Multi-unit incentives – The local government planning departments should provide people with incentives to augment their current single family homes into multi-units. This has started with laneway housing and legal suites, however getting building permits and meeting ever changing development parameters makes this a frustrating, long, and costly process. Let’s figure out how to best enable more multi-units. 
  3. Three-bedroom development quotas – The elusive three-bedroom condo is increasingly hard to find in Vancouver. Perhaps local government could require increased quota of three-bedroom units in each large development projects.

One Way to Reduce Demand:

Most of this conversation revolves around limiting foreign investment with taxation.  Here is another idea that may curb the demand from the foreign investor.

To begin, it is important to understand what the foreign investor is looking for and then remove or limit any incentives to it.  

The current market puts a high value on a single family home that can be torn down and replaced with another single family home. Currently, in Vancouver it is much easier to tear down a house than restore it.  Any house, one built within the last 20 years or one with heritage status can and have been torn down.  But what if all new builds of single family homes had different building restrictions on them and, as a result, became less attractive to tear down and more attractive to restore? For example, if you are building a new single family home the building permit process is a low priority compared to those restoring a home and/or converting a property to a multiunit such as adding a legal suite or laneway house.  Funnily enough this seems to be more inline with Vancouver’s Green City goals.  The greenest house is the one that exists even with its inefficiencies.  This does not mean that some houses should not be demolished, however the pendulum has swung to a default position of tearing down and not restoring.

Two Ways to Increase Means:

This is the least talked about component of the affordability ratio and probably the one that needs the most attention because it is the least understood and requires the most strategic thinking.  The question is how does the city of Vancouver attract businesses and industry that will pay a wage more in keeping with the cost of living or at least competitive with Toronto and Calgary?

  1. Increase Vancouver Head Offices - Continue to incent and grow businesses’ head office location/re-location to Vancouver.  Vancouver has led Canadian cities in the growth of head offices from 49 in 2004 to 95 in 2014, an increase of 93.9% (https://www.biv.com/article/2014/10/vancouver-leads-nation-head-office-growth/)
  2. Partner with Industry Leaders - Work closely with current resident industry leaders, like Port of Vancouver and understand how the city of Vancouver can help them in their business plans. 

 

 

3 PRINCIPLES TO LEARN FROM IMMIGRANT PROPERTY BUYERS

My grandparents emigrated from the UK in the early 20th century and neither my grandmother or grandfather had a high school education. However, by 1934 they owned a two-bedroom house on east Pender.  The 1930’s property prices in Vancouver were not what they are now, but affordability was still an issue. What enabled my grandparents to buy property was not what they made in their salaries but how they went about it. Almost all of us in Vancouver are immigrants or descendants of immigrants and, from my own experience with friends and clients,there are lessons to be learned or at least remembered when it comes to buying property. Agreed, there are some immigrants coming with significant financial means, however, the principals they operate under are often the same.

  1. The Value of Property:  There is a high value on property as the primary investment almost to the exclusion of every other investment avenue.  Property is highly valued because it is tangible and over the long term keeps its value. Other investment options, such as stocks and bonds are not seen as a dependable an asset or an asset that provides practicality and stability for the family. There is an intangible value in having a family home. As a result, immigrants will make property their primary goal for saving and refrain from investing in other financial assets.

  2. It’s a Family Affair: Pooling money across generations is often the norm when it comes to purchasing a house. There may well be savings from four or five salaries and two or three generations that are being put towards the downpayment. The property will also serve as a home to three generations. The expectation is that the generations are one unit and operate financially as one unit. In my view, immigrants have mastered co-ownership.

  3. Livability over Esthetics:  The other assumption that is often employed is that the property must be livable but does not need to be perfect. This sometimes means compromising on location and sometimes on the house.  Ultimately it just needs to work on a basic level. Improvements are usually made over the long term or there will be trade up the property ladder when the timing makes sense. What is important and the priority is getting into the market. There are always exceptions to this rule, however, the generalization often holds true.

What is there to learn?  Well, make property investment the priority, do it as a family, and focus on needs not wants.  

 

 

TOP VANCOUVER REAL ESTATE VALUE IN FEBRUARY 2016

Attached Properties - Freehold Strata 

When looking at value in attached properties one of the key metrics is price per square foot.  Here are least expensive condos that sold in February based on price/sqft.

VANCOUVER EAST CONDOS 

204 - 16 Lakewood Drive  (Hastings)

List Price  $246,800    Sale Price $230,000
Sold Price per square foot: 306.67

Sold Date: 
2 Bedroom, 1 Bathroom, 750 sq/ft
Year Built: 1981
Maintenance Fee: $328.45
Days on the Market: 

VANCOUVER WEST CONDOS

106- 8622 Selkirk  (Marpole)

LIST PRICE:  $200,000     SALE PRICE: $200,000
Sold Price per square foot: $317.46

Sold Date:
2 Bedroom, 1 Bathroom, 630 sq/ft
Year Built: 1956
Maintenance Fee: $306
Days on the Market:

Houses - Freehold

VANCOUVER EAST HOUSES

2710 McGill Street (Hastings East)

LIST PRICE: $899,000   SALE PRICE: $960,500
Sale Date:  February 21, 2016
Days on the Market: 8
Year Built: 1946
Lot Size: 4,012 sq/ft  (standard lot)
Zone: RS-1

VANCOUVER WEST HOUSES

790 West 68th Avenue (Marpole)

LIST PRICE: $1,799,800   SALE PRICE: $1,695,000
Sale Date:  February 23, 2016
Days on the Market: 18
Year Built: 1963
Lot Size: 4,026 sq/ft  (standard lot)
Zone: RT-2

Vancouver's Least Expensive Detached Houses in 2015

We hear about the most expensive properties that sold in Vancouver over the last year but do not often hear about the other end of the market.  Here are the two least expensive detached houses; one for Vancouver east and one for Vancouver west.

Vancouver East Side

1595 East 26th Avenue (Knight)

1595 E fleming.JPG

LIST PRICE: $699,000   SALE PRICE: $647,500
Sale Date:  July 22, 2015
Days on the Market: 37
Year Built: 1910
Lot Size: 1,792 sq/ft  (irregular shape)
Zone: RM-1
 

 

Vancouver West Side

8795 Granville Street (Marpole)

LIST PRICE: $1,080,000  SALE PRICE: $1,048,000
Sale Date:  January 2, 2015
Days on the Market: 30
Year Built: 1942
Lot Size: 3,151 sq/ft  
Zone: RM-3A

Has Vancouver's first HCA (Heritage Conservation Area) impacted housing sales prices?

In late September 2015, the City of Vancouver designated First Shaughnessy as the city's first Heritage Conservation Area (HCA).  The counsel heard from two generally opposing audiences at the public hearings.  

  1. Those in favour of the HCA see the value in keeping First Shaughnessy heritage intact and improved whilst fearing a swath of new mega mansions not in keeping with established neighbourhood aesthetic.  
  2. Those opposed to the HCA see the value in allowing owners to demolish their house, regardless of its age or character and fear that the restriction on demolition to only post-1940 homes would result in lower property values for pre-1940 homes. 

The question is what has happened in Shaughnessy since the decision?

Eight properties have sold in First Shaughnessy since October 1, 2015.  Four were pre-1940 homes, meaning the new conservation guidelines would apply and four were post-1940, meaning they could be torn down.  In terms of lot size, each category had three properties that were between 10,000 - 15,000 sq/ft  and one property over 15,000 sq/ft. The comparison of price per square foot of the lot, the average price for pre-1940 was $439 sq/ft and the average price for post-1940 was $427 sq/ft. The range of prices for lot sq/ft price for pre-1940 was $319-$525 sq/ft and for post-1940 $276-614 sq/ft.  Lot sq/ft price is a good way to get a quick snapshot comparison but ultimately more factors should be taken in to account for a detailed comparison.  

Even from a simple snapshot comparison, It would appear initially that there has been no impact on housing values in First Shaughnessy as a result of the HCA.  The sale price comparison between pre and post 1940 homes is negligible.  I will update this in a few months to see what information more sales data will bring.