Jan 13 2008
The Art Of The Markets
The Vancouver Sun ran an interesting editorial today in which Bob Ransford discussed lower mainland housing prices. One very interesting argument he made was that Vancouver’s core is immune to world events that would generally crash real estate markets. The idea behind this is that Vancouver and British Columbia ”[are] a haven for people fleeing such doom and gloom, and that our real estate market therefore benefits from the uncertainty, instability and economic downturns elsewhere. People like to park their money in a safe, stable, beautiful place like British Columbia.”
We need to admit that Vancouver is a global city whose appeal spreads from the UK to South America to Asia. Wealthy individuals around the globe see real estate in our city as not only a neccessary luxury but a safe investment. When a businessman or celebrity can have bragging rights and an excellent return from their Vancouver penthouse who would say no? I feel safe in saying that the luxury condo market will only go up, but what about the rest of the province?
In the Lower Mainland markets there seems to be certain price ratios between certain areas that remain a constant. For instance A condo in Burnaby will be xx% of a condo Downtown, while a condo in the Westend will be xx% of one of Coal Harbour etc. The problem with this is that the demand forces are entirely different for all these areas. Luxury penthouses are hitting record highs of 20 and 30 million and bringing up the prices of 2 bedrooms in the same building. Now my question is, why does the owner of a 60 year old 2 bedroom in a 3 story walkup in the westend think his apartment is now more valuable because brand new luxury condos are increasing in price? Just something to think about.
And yes I understand supply and demand and how the markets work, I’m just trying to look at things from a fresh perspective. At the end of the day it falls on the consumers. When you’re looking to find an affordable place downtown remember to negotiate and play hardball. The value of a property is what someone is willing to pay for it. For those renting, its not your responsibility to cover someone’s mortgage payment because they paid too much for a property that is poorly designed or in an unappealing location. I would say based on the number of vacancies in the Spectrum buildings I think this is starting to occur.
If you are looking for an investment it is very important to prevent yourself from getting attached to any one property. There is a great story in Donald Trump’s first book, The Art of The Deal where he talks about a heritage mansion he purchased. I believe it was owned by the government and they had it for sale for 20 million. Donald describes the place as absolutely gorgeous, important Italian marble, beautiful grounds, the works. He also knows he doesn’t have to own it and won’t spend more than he has to. If I remember right (my copy of the book is lent out) his first offer was around 10-15 million. There were many interested buyers and his initial offer was refused. Eventually those buyer’s either backed out or their financing fell through, so he made another offer, lower than the first. Again it was refused, and again the potential buyers fell through. Continuring to make lower and lower offers each time he eventually purchased the mansion for 5 million dollars, not bad eh?
If you want to check out the full Vancouver Sun article that inspired this entry you can find it here:
Have an outstanding day,
Dan.
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