“Most of the people I know have lived here a long time and bought a long time ago. The prices are sky-high because a few rich people have bought and pushed the average prices up.”

“Well in my neighbourhood, Point Grey, I would say that most of the people I know have lived here a long time and bought a long time ago. So in a sense the prices are sky high because a few rich people, HAM, overextended hopefuls, very cheap money and what have you have pushed the average prices up. These people around me are NOT millionaires by income, they just happen to now own a home that is worth millions that they bought for a fraction of the cost back when. So what I’m saying is that the percentage of household income it takes to buy a property now is just the metric used. What is the % of all properties in Vancouver that is sold every year? 2-3%? I don’t know the exact numbers but there are a lot of houses that are not being bought and sold, they have been lived in for years and bought on the cheap years ago.”
DaMann at vancouvercondo.info 22 Aug 2011 8:43pm

This is a crucial point that is obvious to some but lost on many: ‘Prices are set at margin’.
It only takes a relatively small number of ‘rich’ sales to pump a market up, and it only takes for a relatively small swing down in the availability of those ‘rich’ buyers for a market to plummet.
– vreaa

31 responses to ““Most of the people I know have lived here a long time and bought a long time ago. The prices are sky-high because a few rich people have bought and pushed the average prices up.”

  1. “Prices are set at margin”

    The road to salvation is paved with the bodies of renters who couldn’t wait any longer. Vancouver: wettest. desert. ever.

    • Wonderful apocalyptic imagery, jesse.

      The market tops when the last bear who is destined to capitulate throws themselves into the flames of the pyre.

  2. here’s a disconcerted stat if you’re a bear hoping for a fire sale on a detached home in Vancouver…according to 2006 census there are 253K private dwellings (not rental) in Vancouver, only 19.1% are single detached houses. Compare that nationally where 55.3% of Canadians live in detached dwellings.
    (I’ve heard renter suggest there’s no land shortage here – these stats certainly don’t support this claim).
    The result is that If you’re going to get a slice of that pie you’re going to have to fight like hell for it.

    • If I am not mistaken, the City of Vancouver only has around 65,000 detached homes, but this number is trending down due to rezonings. For a population of around 600,000, that’s pretty low I think. Anyone have comparable metrics?

    • rusty -> So we’re “running out of land” and if one doesn’t hurry up and buy you’ll be “priced out forever”?

    • “19.1% are single detached houses”

      It’s waaaaay lower than that. How suite it is to be a homeowner.

      • Click to access dec09secsuitesstudy.pdf

        “Overall, Metro estimated there to be about 72,000 secondary suites in the region in 2006. The city was estimated to have 27,500 units – just over a third of the region’s stock”

        Let’s say 80% have 1 suite 20% have 2 suites, making about 25K of the 48K single detached dwellings. Or 9% of the housing stock are single detached homes that do NOT have active suites in them. At least according to the statistics, for what they are.

        Given those numbers one wonders why certain neighbourhood organizations can wield so much influence…

  3. I think what rusty is saying is that we’re overbuilt condos, bigtime, and that concrete boxes in the sky with no land are the first to tank. Speculators have flocked to them and they are ready for their rude awakening.

    • that’s part of it Ray.
      The distressing part of this if you don’t own the coveted detached home you’re going to be battling those 81% hopeful condo, townhouse, duplex owners who would like to move up. Oh, and I forgot to add the immigrants who are making this competition very stiff indeed.
      The detached segment is a very exclusive and coveting prize. It represents 19% of the highest earning/wealth residents in Vancouver. This segment is obviously not for the avg income earner.

      • When a market crashes, almost all move up activity stops dead.
        That’s why all levels of the market will ultimately plummet; without FTB’s the condos are dead; without condo’s the townhomes are dead; without townhomes/condo’s move-uppers disappear and detached sits unsold.

      • rusty -> “The detached segment is a very exclusive and coveting prize. It represents 19% of the highest earning/wealth residents in Vancouver.”

        No, it represents 19% (or something like that) of all the residents of Vancouver… whose earnings are not that high at all.
        That’s the point.

      • On this note, what does a Vancouver household income have to be to be in the top 20% of households by income (top quintile)?
        Anybody know?

        Like all income figures out of our city, we’d guess it’s lower than one would expect. Anybody?
        for instance (but not the exact answer):
        http://www40.statcan.ca/l01/cst01/famil105k-eng.htm

      • VREAA – my stats are a few years old (I can look for more recent ones later today) – but in 2006, in Metro Vancouver, 18% of households earned $100K or more. Based on that, I would hypothesize the top quintile today is somewhere around that mark, plus or minus 10K.

      • Thanks, Absinthe, seems about what one would estimate, too.

      • Jeff Murdock

        Vancouver average 2005 household pre-tax income: $73,258
        Standard deviation: $285
        http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/tbt/Rp-eng.cfm?TABID=1&LANG=E&APATH=3&DETAIL=0&DIM=0&FL=A&FREE=0&GC=0&GK=0&GRP=1&PID=94593&PRID=0&PTYPE=88971,97154&S=0&SHOWALL=0&SUB=814&Temporal=2006&THEME=81&VID=0&VNAMEE=&VNAMEF=

        We want to find a threshold such that at most 20% (i.e. 1/5) of the households have income at least that threshold. By Chebyshev’s inequality, the fraction of families with income > $73,258 + x is at most ($285/x)^2. We want ($285/x)^2 <= 1/5, so we can set x = $637.3.
        http://en.wikipedia.org/wiki/Chebyshev's_inequality

        So, at most 20% of the households have income greater than $73895.3. It looks like the StatsCan data for "Vancouver" means Metro Vancouver, excluding Abbotsford, Chilliwack, etc.

      • Jeff Murdock

        By the way, you might be bothered that data for incomes in Metro Vancouver might be quite different from incomes in the City of Vancouver.

        So, let’s consider the extreme situation where the highest income earners in Metro Vancouver all live in the City of Vancouver. The City of Vancouver has a population of about 600k and Metro Vancouver has a population of about 2.1m. So, roughly, the fraction of households in MV that are in CoV is about 600k/2.1m ~= 28%.

        We want to find a find a threshold T such that at most 20% of households in the CoV have salary above T. We can obtain such a T if we show that .20*.28~=.05 fraction of the of the households in MV have salary above T. As in our previous calculation, we can set T = $73,258 + 285/sqrt(.05) = $74533.

        So, as of 2005, at most 20% of CoV households have pre-tax income above $74533.

        And, sorry, the previous StatsCan link doesn’t work. You should be able to use this link:
        http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/tbt/Rp-eng.cfm?LANG=E&APATH=3&DETAIL=0&DIM=0&FL=A&FREE=0&GC=0&GID=0&GK=0&GRP=1&PID=94593&PRID=0&PTYPE=88971,97154&S=0&SHOWALL=0&SUB=814&Temporal=2006&THEME=81&VID=0&VNAMEE=&VNAMEF=
        Change the Geography to “Vancouver”.

      • Jeff -> Thanks for all this.
        Checking the statscan page (thanks for the link) we see that the $285 is standard error not standard deviation (which makes sense… we’d expect a bigger range for income).
        Thus, the top-quintile cut-off is going to be higher than you calculate… but how high? ($100K +- $10K, we’d guesstimate).

      • Rusty = eyesthebye

        Jeff, this is great, but rusty/eyesthebye does not like actual data. Also, he will tell us that incomes don’t matter because existing owners have equity. They will all just keep trading up with one another until the average price of a SFH near an East Van trucking route approaches $1 billion. Right, eyesthebye?

      • Jeff Murdock

        Ah, you are correct. Thanks for pointing out the distinction between standard deviation and standard error. Hmm…. I wonder if we can figure out the standard deviation from their data. Perhaps we would need to know their sample size…

      • Jeff Murdock

        Hmm, the title of the table says “20% Sample Data”. Since there are 817,225 households, that would mean the sample size is 163,445. Since the (standard error) = (standard deviation) / sqrt(sample size), and standard error = $285, that means the standard deviation would be $115,220, which seems too big.

      • Jeff Murdock

        OK, looking at the “Individuals by total income level, BC” StatsCan data that Vreaa posted above (http://www40.statcan.ca/l01/cst01/famil105k-eng.htm) I compute that the standard deviation of incomes across BC is at least $31k.

        One would imagine that the standard deviation is higher in Metro Vancouver since the population is smaller but most of the rich people live here. So, as a ballpark guess, a standard deviation of $50k seems reasonable to me.

        Double-checking against the StatsCan data that I posted above, and looking at the one-person households data, with 20% sampling there would be 46427 sampled households. The standard error is $259, so the standard deviation would be $259 * sqrt(46427) = $55806.

        Assuming most households have two income earners, I’m willing to believe that the standard deviation for two-person households would be around $100k. This is quite interesting, because the standard deviation is larger than the average!

        So, using the one-sided variant of Chebyshev’s inequality and the standard deviation of $115,220 that I computed above, we get that at most 20% of households have income greater than the mean plus 2 standard deviations, which is $73258 + 2*$115,220 = $303,698.

        On the other hand, as Vreaa pointed out above, using the “Individuals by total income level, BC” data, one gets that only 20% of the households have income above $100k.

        So, why the big discrepancy?

        Reason #1: we’d expect to see more high-income households in Metro Vancouver. So, because Vreaa’s $100k figure is BC-wide, it’s probably an underestimate.

        Reason #2: the distribution of salaries is quite heavy tailed, so most of the contribution to the standard deviation comes from the few very-high income earners. In which case, Chebyshev’s inequality is not very accurate for bounding just a few standard deviations away from the mean. So one would expect that the $303k figure is a significant overestimate.

        We would probably get better estimate by looking at much larger deviations. For example, by a similar Chebyshev calculation, we could conclude that at most 1% of the households have household income above $1.2m. Does it seem reasonable that 1% of Vancouver households are raking in $1.2m?

      • Thanks for trying to wrestle this down, Jeff.
        Yeah, $300K seems way too high for top 20% individual cut off.
        I wonder if the numbers aren’t out there somewhere, making it unnecessary to extrapolate. We’ll look around.

  4. In terms of land around B.C. – just how many mountians are to the north of you? On google view it looks like North Vancouver stops and trees start.

    Is that a national forest?

    In terms of running out of land, what about high speed trains? There’s a lot of land in B.C. — if you truly don’t have the land to support your population (see NYC), there are solutions.

    • Yes, Mostly parks, plus what isnt is just too high up or unsuitable to build in, which is why there has been the mad expansion east into the fraser valley ( Langley Maple Ridge, Abbotsford, etc )

      We have a commuter rail called the west coast express that goes from downtown to port moody, coquitlam, then maple ridge and mission. I’ve never used it and don’t know anybody that uses it regularly.

      http://www.westcoastexpress.com

  5. “Overall, Metro estimated there to be about 72,000 secondary suites in the region in 2006. The city was estimated to have 27,500 units – just over a third of the region’s stock”

    I’d like to see every single one of these secondary suites taken away/deemed illegal for use. Let’s see how affordable rents are then

    • rusty -> You do, of course, realize that such an action would completely crash the whole RE market?
      Without rental income, how many homeowners on the margin would have to sell?; how many buyers would be even further priced out?

      The market is going to crash, regardless, but there are now many possible triggers to help it along: you’ve discovered another.

    • Then you know how to vote. Oh no wait the City doesn’t even acknowledge there’s a problem with illegal suites in any substantive way. It’s like they’re stepping over the termite mounds on the way to the kitchen, as if they aren’t even there.

      Not that suites are akin to termites. I agree with rusty, actually, and this is NOT the first time I’ve stated that. Suites are a horrible way of densifying as it creates amateur landlords who need to devote their time to managing tenant issues when they should be out enjoying and contributing to the city in more meaningful ways.

      In my view the City should put a moratorium on all separate-entry suites and instead rezone detached for denser family-oriented accommodations, preferably non-strata, something the City needs to enable use and support of its dwindling and ever more costly education and family-oriented infrastructure.

      Is this ever going to happen? Not in at least the next 5 years, though as I already mentioned the concept of a detached dwelling in Vancouver is becoming a rarer and rarer breed and politicians will eventually figure this out.

  6. One thing about the stats. Does anyone know if the “duplex” designation might also include detached dwellings with suites? Just wondering because that would change the numbers a bit. The number of “detached duplex” units seems rather high…

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