“As a fairly new resident from the UK I am completely flabbergasted at the prices in Vancouver. Even though I arrived with a reasonable lump sum, I’m not able to make a dent in a reasonably sized property within the city.”

Posted on 4 March 2011 | 34 Comments

fordinho comment in Vancouver Sun 3 Mar 2011 7:42pm – “As a fairly new resident (from the UK) I am completely flabbergasted at the prices in Vancouver, and even though I came across with a reasonable lump sum of finance, I’m not able to make a dent in a reasonably sized property within the city.
Again as a novice, it does appear to me that the whole market is artificially inflated by foreign investors pumping their money into properties (funds gained through whatever means) but I do have a question – does anyone know whether there are any restrictions in doing this? Surely you cannot buy any untold amount of properties in Canada (while residing in another country and having no intention of ever living here) to use purely as an investment tool?”

This entry was posted in 05. Where do Buyers get the money?, 08. Overextended Buyers, 14. Social Effects of the Boom and tagged Anecdotes, British Columbia, Bubble, buyers, Canada, Foreign buyers, Housing, Real Estate, Sentiment, Vancouver. Bookmark the permalink.

34 responses to ““As a fairly new resident from the UK I am completely flabbergasted at the prices in Vancouver. Even though I arrived with a reasonable lump sum, I’m not able to make a dent in a reasonably sized property within the city.””

Peter Pan | 4 March 2011 at 7:13 am | Reply

In Canada, there are citizenship restrictions on who can invest in a bank, telecommunication companies, broadcasters, newpapers, but nothing about who can invest in one of life’s necessities – shelter. Vancouver has become nothing more than a casino for Mainland Chinese speculators who have faced new restrictions at home. I have nothing against landed immigrants or naturalized Canadians from buying homes here, but our real estate market should not be used for speculative purposes by foreign nationals. Our real estate prices will rise and fall with the vagaries of lending practices in Mainland China. The Aussies imposed citizenship/residency restrictions on real estate investment – why not us?
- vreaa | 4 March 2011 at 7:41 am | Reply
  
  We don’t foresee such restrictions here, anytime soon.
  Those with an interest in RE continuing to be buoyed by any such activity make up a far, far more powerful lobby group than those that are critical of it.
- Peter Pan | 4 March 2011 at 12:16 pm | Reply
  
  Ironic, n’est-ce pas…
  
  http://www.chinadaily.com.cn/business/2011-03/02/content_12102998.htm
  
  “In the middle of last month, the Beijing municipal government moved to prohibit home purchases by non-local registered families who have no proof of social security or income tax payments in the city for five straight years.”
  - vreaa | 4 March 2011 at 1:04 pm |
    
    Yeah, we saw this; agreed, very ironic.
    The reason for the discrepancy is almost definitely due to differences in government interests.
    
    The Chinese government appears far more interested in avoiding the longer term social change that may result if their bubble was allowed to get even larger before imploding. Their government is entrenched, they don’t have to worry about the next election, they are far more interested in trying to avoid widespread economic hardship and the subsequent risk of political uprising. So they are highly motivated to ‘manage’ a soft-landing with interest rate, borrowing & ownership restrictions.
    
    Here in Canada, governments are interested in being re-elected, and the way they do that is to keep happy the 70% of households who own their homes. This commonly leads to decisions that are popular in the short term but unwise over the longer term. A pity, but there it is.
  - groundzeropat | 4 March 2011 at 9:04 pm |
    
    That’s what the Canadian Government should do to protect us but it won’t happen because our country is run by low lifes who will sell our companies and land to the highest bidder. We are where we are because of our government creation of historically low interest rates for several years and not having any limits on home purchases by foreigners. When this thing blows up the taxpayer will be left holding the bag of CMHC’s $1,000,000,000,000.00 of mortgage debt as promised by the Fed to the banks. The debt slaves that are signing the mortgage docs of today is also signing the death warrant of Canada.
  - Michael | 6 March 2011 at 10:57 am |
    
    Things like this is also why I believe that as far as alternative energies and “world dominance” goes the Chinese will have a leg up on us within a decade. As VREEA pointed out, they are essentially a dictatorship and don’t need to worry (too much) about what the population wants.
    
    So far, it strikes me that they have taken a much better longterm view at the situation than any Western nation has. They seem to be quickly moving towards the new reality while the west is playing peek-a-boo.
El Magnifico | 4 March 2011 at 7:48 am | Reply

I currently live in London and I showed this posting to my colleagues: http://tinyurl.com/4mc7eg9

They couldn’t believe it… It’s funny how things that appear “normal” in Vancouver sound absolutely “incredible” pretty much everywhere else… Who in his right mind would spent $2.4m for a shack?

When the bubble burst, it’ll be very painful for the average Vancouver family.
- vreaa | 4 March 2011 at 7:56 am | Reply
  
  That listing is getting international attention (US and UK so far).
  For the record we’ll link to an archived image, as the MLS listing will disappear at some point.
  Yes, we know that this is a ‘land-value’ sale, but it’s still funny nonetheless.
- Froogle Scott | 4 March 2011 at 8:28 am | Reply
  
  Listings that picture a tiny house or cottage left over from a different era intensify the surreal nature of the West Side RE market in Vancouver, but it’s really just a sight gag. The cottage will be blown away and the asking price is for the land and has nothing to do with the structure. Even on the East Side, for older, smaller houses, the structure portion of the annual property assessment is perhaps 1/10th of the overall assessment. 90% or more of the market value is in the land for these ‘time capsule’ properties. Probably 100% in the case of the Point Grey listing.
  
  This particular lot is about 40% larger than the standard city lot (33×122) and using the City’s allowable floor space ratio of 0.6 for areas zoned residential, would accommodate a new house of almost 3500 square feet — some affluent person’s beach-area palace. Whether the final package is worth $3M plus is, of course, still debatable.
  - UnagiDon | 4 March 2011 at 1:56 pm |
    
    Here’s a useful analogy:
    Imagine a Mercedes dealership giving away a free cup of coffee with every car that they sell. The dealers are confused when buyers come in and persistently ask questions about the quality of the coffee.
    
    (If that was too obscure, I’m suggesting that the land is like a Mercedes car, and the house is like a free cup of coffee.)
  - vreaa | 4 March 2011 at 10:34 pm |
    
    To complete UnagiDon’s analogy, we’d have Mercedes ads showing nothing but a picture of a very modest cup of coffee.
    
    It’s amazing that the realtors even bother to post a picture of the house in these instances… surely they should just show a plan of the plot, and perhaps a photo of the view or the local beach (or, as has occurred recently, of a local school). By posting the teardown shack, they are exposing our city to international ridicule.
  - Get Real | 4 March 2011 at 10:42 pm |
    
    The analogy is inherently flawed!
    
    It is NOT a Mercedes, more like a Toyota or Honda. Some are delusional enough to believe that it is Rolls Royce.
specialfx3000 | 4 March 2011 at 8:35 am | Reply

I would love for a builder to pay 2.4M for the shack and lot, bulldoze the shack, build a 3500 square feet home on it with the hope to put on the market for cha-ching dollars but in the end only to be able to sell for less the 2.4M a year from now. That would be sweet.
- vreaa | 4 March 2011 at 8:59 am | Reply
  
  When (eventually) there is a top, particularly if there is an initial sharp drop off from that top, we’d expect there to be quite a few SFH-developers left underwater. We’ve consistently been impressed at how relatively low their profit margins are, even given the rapid price appreciation we’ve seen.
  
  It’d be fascinating to have a good look at the ‘books’ of such developers over the last decade. We assume that there are a prudent group, who have been essentially adding value to land via construction, and banking good profits over the years. We suspect there are just as many who have been rolling the profits into the next venture, holding many properties, and living pretty high on the hog, too. The latter group could very well end up having nothing to show for the ‘boom’ when it’s over.
  
  Anybody with any info as to how these guys are operating, we’d appreciate hearing from you.
  - Epica | 4 March 2011 at 10:22 am |
    
    my father has been building and developing in the lower mainland for over 50 yrs. (so not a one off or freshly minted boom builder) during these “fruitful times” those who truly earn a living in this industry call it “false profit” as they have to keep building and need to turn around and buy again.
pricedoutfornow | 4 March 2011 at 8:57 am | Reply

Personally, I don’t believe we have to wait for China’s real estate bubble to crash in order for ours to. We have (and will have even more) people who are already struggling under the weight of their debts. When interest rates go up, these debts will be even harder to pay. Thus, fewer people will buy houses., more will list. The Chinese can’t possibly buy every single house in Vancouver or BC or Canada to save this market. And they’re not. Go to Kelowna, look at all the For Sale signs (it’s quite shocking, actually!) and ask where are the Chinese? Kelowna is only a 50 minute flight from Vancouver, you think these “rich Chinese” would have figured out that it’s a better deal to buy a million dollar house on the lake there (where a million dollars actually DOES get you something that looks like a mansion!) rather than a million dollar tear-down on Knight street. Something just doesn’t add up here.
- Canayjun | 4 March 2011 at 9:22 am | Reply
  
  Have to agree with your assessment. It seems to me there are two zones where Chinese are buying. The rest of the market seems to be topping out. The Chinese are in it for the capital appreciation. When they see the price of houses falling in the non-Asian zones, it will spook them. Eventually, even they will stop buying and the price of houses will fall even in the Asian buying zones. The biggest buying frenzy tends to happen right before it all falls apart. The Conservatives induced a last minute buying frenzy by changing the borrowing rules with a March deadline. This did not impact the Asian buyers that much. So even if you see a massive feeding frenzy by the Chinese, all that means is the market for those houses will probably fall like a rock, while the market for the non-Asian areas might experience a softer landing. However, I think the RE industry has all but assured a hard landing by trying to prolong the inevitable with fake lineups and so many false reports.
  - Vangrl | 4 March 2011 at 8:33 pm |
    
    or we could just have a bunch of ghosts wander around Richmond and the West Side.. that might deter the foreign buyers
interested | 4 March 2011 at 9:28 am | Reply

VREAA, I found the description of “quite a few SFH developers [being] left underwater” to be quite prescient, given that when the seas rise, the land that this little Belmont beach shack sits on will quite possibly be underwater. Land value or not and underwater or not, 2.4 million for a 60 X 90 sf flat and marshy lot – with no views and in the midst of the Locarno summer craziness – is insane.
- Vangrl | 4 March 2011 at 8:38 pm | Reply
  
  agreed, that lot is not that great, look how close the neighbouring houses are and no view to speak of
jesse | 4 March 2011 at 9:51 am | Reply

A family member who lives in London looks at Vancouver RE and laughs. Pretty much all of London is “walking distance to good shopping” and, to his surprise, London wasn’t that much more expensive than Vancouver. Food from supermarkets is actually cheaper.

He’s looking to buy a 120 square metre rowhouse with yard about 20min train ride from Central London, 2 minute walk to a high street, and close to a reputable school, for about 4X his family income. Plus he gets 6+ weeks vacation per year.

From his PoV, London offers a way better quality of life than Vancouver does.
- El Magnifico | 4 March 2011 at 1:09 pm | Reply
  
  I’m watching the BBC tonight and one of the headline is “house prices here have fallen by 2.8% since last February in the UK”! If/when that happens in Vancouver, I wouldn’t like to be a recent home-buyer that put 5% down only…
  
  By the way, the ECB will raise its rates soon. A movement followed by BOC?
  - Nemesis | 4 March 2011 at 2:59 pm |
    
    Assuming, for the moment, that Trichet is a strict aherent to ‘Taylor’s Rule’ one would have thought he would already have pulled the trigger… Regardless, I don’t think he’ll do it (or Carney for that matter)… Certainly, at least not first (i.e. they’ll take their lead from the Fed; unless the Euro periphery starts to ‘blow’ – in which case Trichet may well have to/but only if you believe they want a strong Euro (which I am certain they don’t – think competitive devaluation/’race to the bottom’ going forward into ‘austerity’ [for some] mode). And given the current sorry state of the Fed’s balance sheet can Bernanke afford the added risk???
    
    As much as they might want to I’m guessing they’ll stay with ZIRP until at least Q4. But as William Goldman once famously opined, ‘Nobody knows anything’. Accordingly, I guess we’ll just have to wait and see.
    
    It’s a ‘delicate’ question though, isn’t it?!? Nash Equilibrium[s]/Keynsian Beauty Contests abound.
    
    😉
  - Michael | 6 March 2011 at 11:03 am |
    
    By the way, the ECB will raise its rates soon. A movement followed by BOC?
    
    I am pretty sure Carney is itching for it, the problem is that he can’t really do it right now without coming off as a complete ass to most people, not to mention I am sure has an eye on Harper and his coming election and doesn’t want to compromise the Glorious Leaders(TM) chances.
    
    Though the longer he delays the more I am worried about what is “get out of jail free” card is going to be. He can’t really lower the rates much, unless he wants to go into the negative, so that leaves what? Printing Money? They’ve done it once already and hidden that rather well but how’d he pull this a second time one wonders?
  - Nemesis | 10 March 2011 at 5:34 am |
    
    Surprise? Not.
    
    [FT] – Bank leaves rates and QE unchanged
    
    “Britain’s interest-rate-setting body has voted as expected to hold rates at their record low of half a percentage point and to leave the Bank of England’s £200bn gilts purchasing programme, known as quantitative easing, unchanged.”
    
    http://tinyurl.com/48g2bap
    
    [FT] – Moody’s downgrades Spain credit ratings
    
    “Moody’s, the credit rating agency, on Thursday downgraded Spain’s sovereign debt, shaking financial markets already unsettled by the turmoil in Libya and by debt crises in other eurozone economies”…
    
    http://tinyurl.com/5uhcmsq
Nemesis | 4 March 2011 at 10:40 am | Reply

” Food from supermarkets is actually cheaper.” – Jesse

Blighty’s lower food prices are essentially a beneficial (from a consumer point of view) side effect of the EU’s Common Agricultural Policy/producer subsidies… And best of all – as in Quebec – one stop shopping for all your favourite libations… Additionally, packaged foods containing GMOs [aka ‘FrankenFoods’]/ingredients are identified as such.

As for property? Well, let’s just say that if you’re shopping for something prime in central London it would help if you’re a Russian Oligarch/Saudi Sheik/or SelectCityBoy/Girl (astronomically expensive – even by YVR bubble standards). Call it the cultural premium (scrunching up your nose like Kenneth Williams when you say that will achieve the desired effect)…

“Oh, Matron! Take them away!”….

http://tinyurl.com/d4c2wt
- William Wallace | 7 March 2011 at 10:16 am | Reply
  
  This is truly comical – there is no comparison between London & Vancouver and to try and perpetuate this myth is embarrasing.
  
  London is one of 2 financial world centres, the world’s largest insurance exchange, Gold & precious metal exchanges are domicilied, it has a population of 8m within the City & 25m all within 1 hour train ride, is close to major European conurbations of Paris,Brussels,Amsterdam etc, worlds busiest airport etc.
  
  Vancouver is not on the same book shelf never mind page. If you are going to make comparisons with cities please at least do it sensibly.
  - Nemesis | 7 March 2011 at 12:02 pm |
    
    “… there is no comparison”…
    
    Taken as a given, WW – from a former, non-dom habitué of the Big Smoke… 😉
groundzeropat | 4 March 2011 at 8:45 pm | Reply

Neighbour across the street is selling. There was an open house so I decided to watch for the 2 hours. 15 groups showed up and 2 were asian. Don’t belive the liars that say the asians are the only people with money. Lots of other ethnics that have money/credit. Only an idiot would believe that one ethnic group buying in 2 municpalities is enough to propel an entire real estate market upwards.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10408773&PidKey=-824678251
Fred | 5 March 2011 at 9:38 am | Reply

what is a “reasonable lump sum of finance”? is it enough for a few month rents or a pillowcase stuffed with cash.
matt | 5 March 2011 at 6:26 pm | Reply

Are you fucking serious? Over a million for a house in Steveston.
- Michael | 6 March 2011 at 11:04 am | Reply
  
  How much for one of those old fishing vessels that will go unused from here on in?
Jean Scott | 6 March 2011 at 11:37 am | Reply

The original post asks an interesting question: “does anyone know whether there are any restrictions in doing this? Surely you cannot buy any untold amount of properties in Canada (while residing in another country and having no intention of ever living here) to use purely as an investment tool?”
The quick answer appears to be: no, in Canada there are no restrictions on foreign investment in residential property. A bit of research shows that Australia has strict regulations (only can invest in residential if it adds to the new housing stock, temporary residents have to sell their house when they leave, students can buy a modest house but can’t rent any rooms and have to sell when they leave) as well as Singapore, Japan and of course, China. I don’t know about UK or Europe. USA has tax implications for foreigners I believe. New Zealand has restrictions on the sale of large properties and sensitive properties. What is interesting about the Australian regulations is that they were recently (April 2010) strengthened due to the same concern we are facing; the housing prices were getting beyond the ability of the residents to buy and this was seen to lead to instability.

Correct me if I am wrong and please add to the list.
- Michael | 6 March 2011 at 12:51 pm | Reply
  
  What is interesting about the Australian regulations is that they were recently (April 2010) strengthened due to the same concern we are facing; the housing prices were getting beyond the ability of the residents to buy and this was seen to lead to instability.
  
  Two thoughts come to mind on that one:
  
  1. There will always be a way to get around it.
  2. Their biggest problem is the “open auction” process. Essentially you go into the property and they literally auction it off, including shouting and gavel swinging. This does much more to increase the average home price than any imaginary or real foreign investor could.
  
  BTW, I call BS on the idea that foreign investors come in to swoop up SFHs as an investment vehicle. SFHs are horrible for that. If you ar ea foreign investor you either buy:
  
  1. MDUs (aka Apartment buldings)
  2. Land (for development purposes).
  3. Commercial Real Estate.
  
  No business investor will bother buying individual SFHs. It’s just way too much of a headache.