The Burrard Street Blog

If you live in Greater Vancouver I don’t need to describe the rapid increases in housing prices seen over the past 5 years. All that one really needs to know is that:

1. Homeowners not planning to sell in the near future have seen the property taxes follow the increase in their property’s value without seeing any relative gains.
2. First time buyers making anything less than 6 figures are being pushed further and further away from Downtown Vancouver, The North Shore and Vancouver, often those making even 150,000+ a year aren’t able to afford to live in central areas once they factor in car payments and family expenses.
3. Vancouver’s younger generations are desperate to get into the market although many have lost hope they will ever be able to afford to live where they grew up.

Now of course there have been a lot of benefits derived from the housing boom. Increased jobs, more money flowing into the city, a lot of prosperity for intelligent investors and those in the real estate industry, and an increased net-worth of all homeowners.

Like it or hate it, the price of real estate in Vancouver is not going to fall significantly and I do not take issue with that fact. Vancouver is a gorgeous, relatively safe city situated to continue as a major international trade centre due to its proximity to the Pacific Rim. As a long time Vancouver resident what I do take issue with is the large proportion of unoccupied condos and properties held as investments by non residents. RBC’s affordability index ranks Vancouver as the #1 least affordable place to live in Canada. RBC’s index is based on 2 values, people’s mortgage payments and their incomes. The higher the mortgage payment relative to income the less affordable an area is. Pretty simple stuff.

Vancouver is so ridiculously unaffordable for a many reasons. The main reasons I will point out are:

1. Vancouver is not a business hub in the same way Toronto is. We don’t have many corporate head offices or a large financial centre. This means there are not as many high paying jobs here. People look at New York and say “Well Vancouver could see those prices one day New York has” but this simply isn’t the case. New York sees an incredible amount of fund managers and investment bankers making 7 figures, we just don’t have that in Vancouver.
2. Speculation. As happens far too often in markets around the world speculation is running rampant in the Vancouver real estate market. Huge marketing teams push condo development presales and buyers hope to flip them for a quick buck. This means the market prices don’t reflect true resident demand for housing. Speculation drives market prices up beyond what resident’s incomes support.
3. Foreign buyers play a role in market prices as well and their transactions are completely unrelated to incomes within the city. This isn’t as large of segment as people want to believe (it is far too easy to take out ones frustration on a vaguely defined outside group) but still plays a significant role in driving up affordability.

The other issue I feel is worth of discussion is intentionally unoccupied properties. By unoccupied I am referring to properties bought but not rented or owner occupied. The reason this really upsets me is that it drives up rents and hurts those who already can’t afford to buy. There is a huge amount of new condos being built in this city, many bought by investors yet rents are rising and occupancy rates are below 1%. Try finding an apartment for rent on craigslist, I’m told it is chaos as a place will be listed and taken in the same day. My opinion is that intentionally unoccupied properties play a huge role in maintaining high rents despite an increase in the amount of available housing.

In Part 2 of this article I will discuss at least one out of left field idea for evening things out and making Vancouver a little more affordable for its citizens.

Today’s entry is the first of a series on the different aspects of an apartment that give it the “wow” factor we’re all seeking. We start the series with a look at something that seems to be slowly disappearing below 30 stories in the downtown core, and that is a breathtaking view.

So often we hear about granite this and stainless steel that, it becomes easy to forget about another very important part of your home: What you have to look at every morning. I’m not talking about your spouse (that is one view I can’t help you change) but rather your condo’s view. Whether it is of the mountains, the ocean or the city, when you’re purchasing a home you may be looking at that same view for 10, 20 or 30 years and it needs to inspire you. For me, view and location are the most important aspects of a home purchase (assuming of course it has granite this and stainless steel that, great amenities and friendly neighbours). One could say a magnificant view is quite the panty dropper, while an unattactive one is a definite price dropper.

The Mountain View
For some nothing is more majestic than a view of the beautiful North Shore Mountains. It may be their size and strength as, unlike housing prices, they have remained constant for thousands of years. Some enjoy being reminded of mother nature and all her possibilities; perhaps looking out each morning to check the snow conditions and decide if they should call in sick and hit the slopes.

The Ocean View
Similar to its partner the mountain view, the Ocean View offers one a sense of just how great mother nature is, a reminder of how small we are compared to the earth which we have the privledge to inhabit. Also in common is the sheer beauty of the view on a perfect summer afternoon, sails riding high as the sea is alive with boats. Personally, I have never found mountain or ocean views very appealing after sunset.

The City View
To me their is no greater view than an impressive city view. While a view of the mountains or ocean may make one feel small compared to mother nature, sitting atop the city at 30 or 40 stories looking down can make a man feel like a king. What better way to start your day than to look out of your floor to ceiling windows and see all the people you need to meet, stores you can shop at, buildings you want to buy and restaurants you plan on trying? To me there is no comparison, well unless of course you can have all 3.

The Rooftop Garden
I used to live in the Electric Avenue building on Burrard and Smithe. My suite was on the top floor and as such it had access to what I liked to call the John Kalovich floor which provided semi-private access to a 360 degree rooftop garden. The view in my corner suite was fantastic but couldn’t compare to this. In the mornings I’d complete my runs by climbing the 24 stories of stairs to the garden, and I can tell you there is no better feeling in the world (yes I was listening to eye of the tiger, and yes I made a habit of proclaiming I was the king of the world while looking down on the city).

It may not always be possible to find the absolute perfect view you want, in the building you want. This is where the 360 degree rooftop garden comes into play. By having communal rooftop areas a building allows more of its residents to live like kings, even if its only for a few hours a week. As an ambitious up and coming investor, having a rooftop garden on your own home allows you to take a few minutes each day to look out over the city you want to one day own and feel inspired, taking that feeling with you for the rest of your day.

At the end of the day one has to ask, what is a view worth? Some tell me a view is everything to them, while others proclaim their blinds are closed all day anyhow so why waste the money or spend more time in an elevator than neccessary? Whatever you decide on your view, look into the surrounding airspace rules and make sure it is yours to keep. The beautiful view from my former corner unit in Electric Avenue will be no longer when the 40 story condo across the street completes sometime in 2009.

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:

http://www.canada.com/vancouversun/news/westcoasthomes/story.html?id=b0412dc8-0639-4bf9-96b5-5c47265cc2ca

Have an outstanding day,

Dan.

The CBC aired an excellent program on condominium pre buy units. The main message was condo buyers have little legal rights and should be very careful about buying anything pre construction as it is all subject to change.

 To summarize the advice given at the end of the program:

• Take a measuring tape to the model suite and compare the measurements with the floor plans
• Look into the developer’s record
• Visit a completed building by the same developer and ask residence if they are happy
• Hire your own real estate agent and lawyer
• Show the contract to your lawyer, sometimes it can be improved

You can watch the full program online here:

http://www.cbc.ca/marketplace/2008/01/09/condo_crunch/