‘Vancouver’s Real Estate Bubble Trouble’, by Bryant Urstadt [Businessweek, 24 Jun 2010], is a fine article. We’d like it even more if it highlighted fundamentals such as price/income and price/rent ratios that would unequivocally have telegraphed to outsiders our über-bubble status. But you can’t have everything. Here are some excerpts, anecdotes and quotes extracted from the piece. -vreaa
“Real estate is like a sport here.” – Tracie McTavish, president of Rennie Marketing Systems
“To a visitor, it can seem as if Vancouver’s main industry is real estate, like it used to seem in Las Vegas or Orange County. A newcomer, emerging from the gate for international arrivals, is greeted with three separate backlit billboards, all offering architects’ renderings of planned communities. Aspac Developments promises that they’re “building a legacy of excellence.” Concord Pacific describes each of its multiple developments as “a master planned world unto itself with park, schools, daycares, shops, restaurants, and resort-style amenities.” Polygon calls itself “Vancouver’s Builder of Choice,” and offers contact information in English and Chinese. Driving out of the airport and up Vancouver’s main thoroughfare, Granville Street, one notices billboards for brokers and advertisements on the backs of buses for Realtors and developments.” - the author’s experience of arriving in Vancouver.
“Some of the brokers in Vancouver think they’re rock stars. Many have made $500,000 or $1 million this year.” – Grant Connell, a broker with Sotheby’s, a former professional tennis player who spent years on tour. As of June of this year, he had 52 completed sales. “I sold the first for $4 million right when it came on. The second was a little later to market. It took a long time to sell for $3 million. There’s your 25 percent 2008 correction right there.” - Connell on 2 homes in West Vancouver he sold in 2008; and then on the resurgence in 2009 – “It was just spastic. [He points to a narrow lot right on the beach, a vacant slot between two nice homes.] That was a $5.2 million sale last year. They tore down the home but never built anything.” … “Throughout 2009 assignment letters were being flipped. The minute I actually heard a taxi driver talking about flipping assignments, I knew something had to give.”
“The type of price increases that we’ve seen in Vancouver are unlikely to be sustained. There might be some downside risk to that market.” – Robert Hogue, senior economist at RBC Royal Bank.
“My basic view is that we have a Canadian version of the U.S. real estate bubble. Not exactly the same, but close enough. We’ve relaxed lending standards, we have high unemployment, and we’ve reached a point of unsustainability in the housing market. I see real estate values falling shockingly.” – Garth Turner, financial writer and former member of Parliament
“Vancouver has had the highest prices in Canada for some time. The geography is constrained. You’ve got the Pacific on the West, the mountains to the north, the U.S. border to the south, and land reserves to the east. That puts tremendous upward pressure on land prices. We also have solid population growth with a sizeable proportion of immigrants. There are high-net-worth Asian purchasers buying as investments, as second homes, or for satellite families.” – Cameron Muir, chief economist for the British Columbia Real Estate Association
“Yesterday we did an open house for a $3.5 million home, and six groups came through. They were all Chinese. I’d say over half our high-end listings go to China buyers.” - Grant Connell, realtor
“Broker Andrew Hasman sees 70 to 80 percent of his high-end listings go to mainland Chinese. He oversaw an open house recently for a $1.8 million home. Of 100 visitors, 91 were from China.”
“Spend enough time speaking with [David] Rosenberg, Hasman, Muir, and others, and prices in Canada seem to make a kind of sense, a rational response to market forces that just so happens to have pushed prices way above the norm.”
Connell acknowledges that things are overheated. “I see it more stalling than anything. Units are starting to sit,” he says, opening the door to a $3.8 million four-bedroom penthouse in Vancouver’s downtown, in the seven-year-old Classico building. Decks on two sides look out over the tankers moored in English Bay, and Grouse Mountain beyond. It is a second home, full of stainless steel, granite, and floor-to-ceiling windows. At $1,688 a square foot, it is well over Manhattan’s average. “This would have been snapped up just a couple of weeks ago,” says Connell. But he’s not overly concerned. “Everybody always has a take on Vancouver,” he adds, “and nobody ever seems to be right.”