“If we all agree that lowering the value of current homes is not a realistic policy option, then it’s critical we get more creative in order to increase housing affordability.”
- Daniel Fontaine, Editorial, 24HRS, 14 Dec 2011. Mr Fontaine is “former Chief of Staff to Vancouver Mayor Sam Sullivan”
Hat-tip for the above link to ’4SlicesofCheese’, who adds:
“No, we don’t all agree, that’s the problem right there. Policies like mortgage relaxation led us here, why should we not use policies to address this as well?”
Policy makers are very reluctant to take any steps that lead towards price reductions:
“At a public debate, both Robertson and NPA leader Suzanne Anton said neither would put limits on foreign investment, which many observers believe is behind skyrocketing real estate prices in Vancouver.”
- from 24hours, 13 Nov 2011
“…government’s role should be to modulate severe market swings and not precipitate them. Shocking the market has potential to wreak havoc on households, especially those who may be over-leveraged or recent buyers.”
- Sandy Garossino, independent candidate for City Council in recent elections, VREAA, 11 Nov 2011
“This is a tough one. As a home-owner I do not want my home to drop too much in value but that said a correction is definitely needed in our city regarding real estate prices.“
- Joe Carangi, NPA City Council candidate, VREAA, 2 Nov 2011
“People who already own homes would be unfairly hurt by a policy that would lead to a drop in real-estate values. If the current homeowner has taken out a mortgage for say 90% of the worth of their home, and values then drop by 10%, the homeowner has lost 100% of her or his equity. I am strongly supportive of policies that would bring new housing to market at below market cost.”
- Tim Louis, COPE City Council candidate, at VREAA, 11 Nov 2011
—
The longer speculative bubbles remain inflated, the greater the number of citizens who get on board before the inevitable crash.
Humane policy makers with a Martian perspective (complete outsiders) wouldn’t hesitate to deflate the bubble instantly, to stop it doing further damage. To do that, they’d simply have to cut off the fuel supply (cheap government backed financing). The bubble would pop; prices would crash; citizens could then get on with sorting out a sensible housing policy amidst the sensibly priced rubble. Vancouver wouldn’t be bothered by another speculative mania in housing for a generation.
In the real world, policy makers shuffle around woefully inadequate ideas aimed at, they believe, decreasing the overall pain.
Calls for ‘affordable’ new-build housing are almost all band-aid solutions. They largely would result in relatively low quality product at proportionally roughly the same elevated costs as all other local properties. Those buying into such schemes would be the most vulnerable to the coming inevitable price deflation.
In the grand scheme of things, though, it doesn’t really make much difference to the outcome whether policy makers step aside or shuffle around paper while it all plays out. As they’re paid to do stuff, we suspect we’ll all be shown a good deal of shuffling.
– vreaa
> “I am strongly supportive of policies that would bring new housing to market at below market cost.”
Which would immediately be flipped until they are at market price. Is this guy really that out of touch with reality?
“Price Drops Will Result From Market Forces, Not Policy Change”
That’s because the Bank of Canada doesn’t have the guts to raise interest rates above “emergency” levels for years upon years. Hence, everyone can afford the payments on a million dollar crack house.
yes. carney sure can talk tough but what does he really do? the tough talk is pure cya for what’s coming. again, it’s not original material – easy al became maestro for talking tough.
Impossible, no government official has enough integrity to do this.
One simple change would be to put a cap on the amount of CMHC insurance available to banks. I think it used to be $400,000 after all the idea is to help new home buyers get into the market, not subsidize risk for people moving up or buying million dollar homes.
As you see this is a policy that used to be in play and can be again.
Check out The Tim in Seattle:
http://seattlebubble.com/blog/2011/12/13/big-picture-2011-examining-home-affordability/
http://seattlebubble.com/blog/2011/12/15/big-picture-2011-price-to-income-ratio/
http://seattlebubble.com/blog/2011/12/14/big-picture-2011-price-to-rent-ratio/
Improving affordability involves lower prices. We seemingly cannot collectively bring ourselves to undergo detox; instead we let a harmful addiction fester.
Seattle et alia, at least, have begun to understand this. The Tim is holding out for more price drops. Greedy bastard!
Thanks for the links, jesse.
We have too many “single family houses” in Vancouver and this is what keeps home ownership, and general housing affordability, out of reach for regular folks.
Vast areas of Vancouver should be upzoned, all the moldy Vancover Specials torn down, and mid-density new family housing built in its place. This will create more civil and affordable communities.
Too few politicians are willing to stand-up to the NIMBYS and do what needs to be done.
“Vast areas of Vancouver should be upzoned, all the moldy Vancover Specials torn down, and mid-density new family housing built in its place”
this would effectively double the cost of the remaining (undeveloped) detached homes sooner than you can blink your eyes. Is this what you had in mind?
Not sure if it would double, but it would do something like that. But if you upzone large areas, instead of one block at a time, the effect should be less on individual properties.
The developers will pay what they have to pay to get the land to develop. Its not really my concern how much.
formula1 -> By what reasoning would SFH prices ‘double’ with such rezoning?
If one can suddenly build 2 duplexes on a single SFH lot, will that take the price from $1.5M to $3M? I think not. Please share your math.
One aspect of this is that you’re probably assuming demand is constant despite price level. It isn’t.
The SFH is far from dead. All we have now is a situation where lots of SFHs (tens of thousands of them) have basement suites.
When prices drop, the rent up and down will still determine the ‘fundamental’ price floor, but, as we all know, those prices determined from income flow are far, far below current prices.
What’s the fundamental price of a two-unit building which would flow 10% cash-on-cash with 20% down, but whose price you think may drop another 15%? Price/rent only provides a fundamental floor if you think the market’s stable or rising.
holy crap dude. 10% rental yields in van?! heresy! quiet or you’ll be accused of witchcraft.
“If one can suddenly build 2 duplexes on a single SFH lot, will that take the price from $1.5M to $3M? I think not”.
again, supply and demand vreaa. The more lots converted to duplex the less there are SFH – and the more the premium to secure one.
Besides, the scenario you outline is not far fetched. Developers have routinely purchased Kits 50′ lots at 1.1-1.2M and developed triplex plus coach home and sold the entire package for over 3M. What does this do for the remaining 50′ lots? Do you expect every seller to not notice how much money is being made and continue to sell for yesterday’s price?
“The SFH is far from dead. All we have now is a situation where lots of SFHs (tens of thousands of them) have basement suites.”
Not an “SFH”, it’s in effect a townhouse. We’ve been through this…
[Agreed. Sorry. Back-of-the-class. -ed.]
Yeah, I hate that “effectively a townhouse” aspect of Vancouver. Most of the “SFH” should have been ripped-down a generation ago and replaced with nicer but legally denser housing.
As SFH gradually disappear, this doesn’t mean a huge windfall is necessarily coming to all SFH owners. And if you asked most SFH residents, they would be distressed by the redevelopment of their neighbourhood.
I watched the story about the woman shot in East Van in front of a fugly “million-dollar” Vancouver Special. That deep in East Van, that cheesy a house on a street of cheesy houses, at that price, is not going to last. It will be when a bunch of homeowners on that street are in inevitable financial distress that a developer will swoop in and quietly buy-up the block at a bargain. Then the path to redevelopment begins.
[That is an outcome we suspect has a high chance of coming to pass. -ed.]
rusty,
in that case, you’d better buy some detached homes
@beyond debt – i think you may be correct, sir
but i think it will be later in the decade than sooner. much later
So would a SFH with a basement suite still be counted as a SFH by the official numbers or does it have to have a separate address to be considered not a SFH?
Also I have seen cases where a SFH on a large lot be turned in to two SFH. or 2 SFH into 3 SFH. This has been happening over the last 20 years, you can spot the shrinking lot sizes with VanSpecials.
a bit stale but just saw it. maybe someone posted already. 6 yrs past peak …
http://tinyurl.com/83eyf6p
Price drops? In a startling development, experts agree that prices can’t go down. And by “experts” I mean pumpers of Australian real estate.
“I can’t see a national drop of 10 per cent, there hasn’t even been that this year.”
Oh well then, that settles it, if it didn’t happen this year then it could never happen! I mean this person helps people invest in residential real estate, she obviously knows what she’s talking about.
http://www.smh.com.au/business/property/houses-to-fall-10-next-year-tell-him-hes-dreaming-20111216-1oyid.html
jesse -> Regarding the ‘Vancouver Up-down Horizontal Duplex’ (also known as a ‘Van Dupe’ ??):
I know we need densification, and that sensible rezoning and the building of good quality solid townhomes (concrete, steel, hardwood -> world class construction, why not, people?) makes a lot of sense, and really is the way to go. Could make for truly handsome buildings, actually.
But, it’s easy to reconvert a ‘Van Dupe’ into a SFH, if that’s what a buyer wants. Watch some of this perverse de-densification occurring as a sub-chapter during the collapse.
“But, it’s easy to reconvert a ‘Van Dupe’ into a SFH, if that’s what a buyer wants”.
physically it can be done, but costly.
That SFH converted to “dupe” is now worth 75% more. Any buyer must pay for both dupes before converting back. My brother-in-law is doing this by buying the other half of his duplex. Then you have construction costs…yikes!
formula1 -> What we’re talking about here is the ‘horizontal duplex’, the ‘Van Dupe’ = the SFH with basement suite; not a side-by-side duplex. Easy to reconvert back to a SFH.
no such thing. One address = one home. The “Van Dupe” is a fictitious renter construct
There is a Van Dupe right across my house.
A gutted heritage style SFH with basement suite which includes a converted garage, has its own separate address.
Or I am constructing a fictitious renter story.
two addresses would make it a duplex 4slices…and census Canada would drop off a separate survey to compile their housing stats
Yeah, I know people who did just that when they bought a house in New Westminster. They didn’t need the suite income, and didn’t want to be landlords, so they made the downstairs suite into a den with extra kitchen (minus stove which was thrown out) and bathroom.
The only problem they faced was property taxes, since city hall knew about the suite. They had to let a city inspector verify the de-commissioning of the suite before they could be re-assessed at a lower rate.
Oh and they paid a price comparable to if they had bought a SFH in the same neighbourhood.
BTW when I was shopping for a rental house a few years ago, I came across a few examples of landlords renting out what appeared to be two-unit houses to one tenant. They only wanted to deal with the one tenant, and sometimes actively discourage subletting of the extra unit. They probably just don’t want the extra headaches of multiple suites, or problems from city hall or neighbours.
Here’s an example of what I’m talking about:
http://vancouver.en.craigslist.ca/pml/apa/2751156128.html
For what it’s worth, these horizontal duplexes exist in other cities too.
Example: Somerville, Massachusetts. Full of students attending Tufts, MIT, Harvard, and professionals working at Cambridge tech and biotech companies. Full of SFH configured as multi-family housing.
http://boston.craigslist.org/search/aap?query=somerville+multi-family&srchType=A&minAsk=&maxAsk=&bedrooms=
In the spirit of “Market forces vs. Policy Change”… Today’s Quote ‘O TheDay!….
“If potential buyers would stop expecting property prices to keep decreasing and the developers would cut down their price, these units would be sold in a year!” – Chen Baocun, Deputy Secretary-General, National Real Estate Manager Alliance, Beijing
[ChinaDaily] – Beijing to keep limitations on house purchases
http://tinyurl.com/blsesfj
That’s more like quote of the year.
That’s right up there with “Buyers aren’t being realistic.”
Although tragic and a disaster anytime it happens, when a house burns down it is always interesting to me when they report on the news how many people are displaced. I think there was one earlier this year in east van where about 14 people lived in one house that probably had multiple suites.
Anyways SFH is anything but that nowadays …
I still can’t figure out the hate-on for basement suites, seems like they provide quite a few benefits with only minor drawbacks:
- provide affordable housing
- lower carbon footprint
- increase tax-base
- increase security (providing you screen properly)
- offset risk of a correction (for homeowner) through cash flow
Anyhow, as I have mentioned many times, I love the basement suite. The cash flow is nice and so far my screening has been bang on. Of course, my (so far) unrealized capital gains have been much nicer.
I know for some people they are above living in a basement suite. Though mine is very quiet (double insulation, double drywall), safe and I think, quite desirable (based on demand).
And for others they are above having strangers live in their house (but are perfectly fine with sharing a tower full of them). These would include the elitist ‘Van Dupers’. For whom sitting out a massive boom in a once-in-a-lifetime RE cycle is far preferable (superior) to enjoying the social benefits of homeownership as well as the economic benefits of cash flow and capital appreciation.
Once upon a time people desired houses for the privacy they provided. Having basement tenants is fine for above mentioned reasons, many people prefer to own the privacy and land to the benefits of cashflow .
This also ties in with the theme of housing being looked as an investment rather than shelter and place to raise family.