Vancouver’s Too Expensive For Entrepreneurs – “Last night during a meeting we realized that of five, only two of us aren’t thinking about leaving the city in the next year or two.”

“Over the past year I began working with a loose group of consultants; there are five of us who work together in complementary ways. We’ve taken steps towards forming a more formal business together, but last night during a meeting realized that of five, only two aren’t thinking about leaving the city in the next year or two. Vancouver’s too expensive to be an entrepreneur and have a family, and we all want other things – like retirement funds, or the ability to travel and take vacations, etc.”
Absinthe at VREAA 20 Feb 2012 11:37am

58 responses to “Vancouver’s Too Expensive For Entrepreneurs – “Last night during a meeting we realized that of five, only two of us aren’t thinking about leaving the city in the next year or two.”

  1. Why not give these guys $10K each?

    • You mean give them 10k to invest in the productive economy? That would be helpful. Yesterday, Renters Revenge put up one of the most amazing charts I have seen all month. It shows in essence how the housing boom has hurt productivity in this country (not exactly but close enough). The incredible divergence at the end of the chart is startling. Here it is again:

      Now what does that picture tell us about the misallocation of resources into housing? I mean, the timing on the chart roughly parallels our real estate boom beginning back in 98-99. It makes perfect sense that an entrepreneurial class of folks would recognize that there is no opportunity for them in an environment so skewed towards one single asset class. All other initiative and innovation has been squeezed out of a system that is almost completely dominated by real estate investments.

      I applaud those who reject what is taking place and set out for greener pastures. The country still has hope as long as young folks with initiative are still trying.

      • The country still has hope as long as young folks with initiative are still trying.

        Government spin – The country still has hope as long as young folks with initiative are still *buying*.

      • Renters Revenge

        Thanks for reposting. Pretty amazing isn’t it.
        Canada = oil & houses.

      • Indeed it is RR. Makes me wonder what the other charts in that series indicated. I love charts though. You don’t even need words to express how distorted our economy has become. The pictures say it all and this picture is about as bad as it gets.

      • @RR
        Canada=oil & houses & DEBT

  2. Got an interesting conversation with a friend of mine yesterday. They are both in their mid-thirties, both university educated with good jobs (probably make $150K combined).
    The wife posted a message asking for contacts to “a good mortgage broker” (this must be a rare specie!).
    I took the time to write a long email to explain that it might be the best time to buy…

    Here are the response:
    “We really struggled with the decision for the past few years. At this point, we need a bigger place to live and our rent is going up. I know it is still cheaper than buying. but can’t help to think 1600(ish) every month is going into a hole for the past 7 years.”
    “btw, I am sending these articles to my mom and dad. They are Chinese. So they love to buy properties! and are big time pushing us to buy! I actually have been sitting on the fence. Parents can be so pervasive sometimes…”

    I always wondered how her parents got so wealthy… now I know! Speculation on local RE. Btw, they are of Chinese origins but are now all Canadians. They immigrated about 20 years ago without much money. They are also hard working, respectable people.

    • erratum: I obviously meant “I took the time to write a long email to explain that it might NOT be the best time to buy…”

  3. Thinking of Moving Shop.

    It isn’t just the tangible economic pressures that cause misallocation of resources. I run a small tech startup, employing several people and making a decent but not yet huge income for several years now.

    Yet pressure from local family is intense to buy; they see running a business that produces real goods of value as a foolish investment of effort, when “everybody knows” real estate, the lululemon cult (literally a cult, look up the founder), multi-level marketing, and inheritance (of RE!) are where it’s at.

    Speculative bubbles and “free” credit do more than harm the economy; they bring about a rise in literal magical thinking (“law of attraction” etc) that pumpers, cranks, and cons of all sorts have promoted and relied on for centuries.

    When this falls down, and my that I also mean the commodities rush driven by China’s bubble, with our hollowed-out economy and trashed renewable resources, Canada is SCREWED. And we won’t just have lost our credit ratings, individually and nationally. We’ll have lost our rationality and work ethic. We are being converted into a nation of narcissistic magical-thinking fools with misplaced sense of entitlement.

  4. This together with the 10k new home tax credit ilustrates where the “elites” have their priorities.

    I am against any kind of taxpayer funded “bonuses”. It’s wrong for new homes and it would be wrong for new entrepreneurs. You can’t fix a systemic problems with these little patches.

    • Use it for education then. Plenty of talent is wasted because they couldn’t afford proper education. They love to call (other) people Resources or Human Capital and then completely mismanage “it”.

      • It’s not free money. I am against any handouts from the taxpayers, except for stuff like social assistance.

    • Pleased to see this topic. No more joking around. I’m in manufacturing/seasonal goods and we recently ended our lease (Oct 11). We did not renew and negotiated a month to month rent until we move our production to another area. I’m looking at Merritt or Washington St. I’ve offered relocation allowance to 3 employees if we stay in BC and gave them six months notice. We price to what the market will bear and make our margins on efficiency, that means lowering our costs through volume purchases, space for production, and better equipment. We’re projecting a six percent annual sales increase, but costs have increased 10% and retail pricing is flat. Essentially, we’ve been priced out the market due to building cost. We can’t afford rent on a commercial building with the right systems in place, ventilation, partitioning, warehousing. We are a fledgling design and build outfit and were recently featured in the Tri-City news business section. Now that we have market growth, I’m at a crossroads. Do I continue to manufacture here; do I contract production elsewhere and deal with import and shipping? My wife is an importer and she is also seeing sales growth, however she is complaining that monitoring production overseas is growing difficult due to deteriorating production standards. They just sent their QC rep for 90 days to oversee factories.
      In 2010, we sold our stake in another facility and the owner moved the business and equipment to Houston where the owner was able to raise capital, file an ipo and expand production. Rather buy a building locally and carry the debt in a downturn, we’ll let someone else do that and might pick it up again at a reduced cost. Part of the reason why I sought out this website, was because I was frustrated with commercial RE costs in the lower mainland. Yes I can reduce my tax burden by paying myself a stipend (about half of what my employees make) and reinvest into the company. However with land costs as they are currently, I just can’t do it in the lower mainland and survive on our margins. I’m not looking for a tax break, I have that already. I just want to lower costs so I can maintain our margin.

      • This should be headlined. I don’t see any solution to this problem. Very sorry to hear this. Losing a profitable and growing business to inflationary pressures is simply long term damage due to piss poor economic policies. Responsible households are suffering too. Good luck.

      • “This should be headlined.” – rp1

        Nah, don’t. The anecdote reads more morose than it is. The outlook has potential for us. It means more work to set up a wholesale gig with a person here. I guess the emphasis should be that local retail is watching sales very closely, considering discretionary income of customers and stores have to take a chance with us on floorspace. A retailer told me one customer is just waiting for his visa to clear then he’s buying. Those anecdotes make me a bit nervous, but hey, thanks for your consideration rp1. All is a pleasurable challenge. I don’t think I would have taken the risk if I had a mortgage though.

      • “We’re projecting a six percent annual sales increase, but costs have increased 10% and retail pricing is flat”. ~~Debtless

        I feel for you. With land values going up so rapidly it is not easy taking a lease either where the property owner might want escalations to account for the fast rise in values. Gone are the days when you could sign on for a multi year lease at a fixed price. What I hear you saying though is that many costs are increasing, not just rents. Business really gets slammed by bubbles and this comes out in every aspect of operating from parking meters to taxation to regulatory hurdles to civic fees. Seems everyone needs a piece of you and as costs spiral up for the city the burden gets downloaded onto business and therefore indirectly to customers. Yes, you can get priced out of your own sales market by factors having nothing to do with your regular operations.

        The consumption economy is set to come under real pressure in the meantime. Are you ready for that? As usual we only need to look South to the US to understand how big an impact sudden drops in consumption can have on the retail climate. It is a worry if unemployment rises too quickly and stressed home -owners clamp down on spending out of fear.

        I would love to read the Tri City article if you felt like putting it up, Debtless. Not prying though. Everyone is entitled to their personal privacy on these public blogs. I agree though, this is an important topic and it is one that rarely gets discussed as the issues of private home owners takes center stage most of the time.

      • debtless -> Agree with rp1, would normally have headlined this; an important story for those of us concerned about the economic health/composition of the region.
        Thanks for the account regardless. Let us know if it’s actually okay to headline it.

      • “Yes, you can get priced out of your own sales market by factors having nothing to do with your regular operations.” – Farmer
        Quote of the day. Yep. Humidity.
        Tri-city news coq, search prairie bench

        VREAA, maybe hold off and I’ll let you know how orders go over March. Then I’ll have better insight from retailers.

      • A great article and a terrific product idea. Thanks for letting us have a look. I wish you best of luck, man. There are gardens all over town and in every back yard where your benches would be a great fit. Especially as we all age. What else will we really want to do?….. Garden, then sit and enjoy the view and feed the squirrels of course! Your idea is a very good one and the market is wide open even during a slowdown. Salvage material and barn wood is the way to go to keep costs in line. Honestly, that is the kind of business that I would buy into because it suits the demographic as it changes, the local environment and the philosophy of so many to tune back into nature and commune with the earth. I think you have a real hit on your hands.

      • Thank you, that’s really cool what you wrote. Bit by bit.

  5. Here’s a lovely little tale:

    The unit at # 205 28 POWELL ST, MLS listing V917709, was listed on Craigslist as being for rentfor $1,800 a month (I think they’ve managed to rent it out now as MLS lists it as “Tenanted”). Here is the e-mail one would receive back upon contacting the rental agent (excerpting the relevant part to avoid spamming the thread):

    “Full Disclosure: I am a rental agent acting on behalf of the owner, no fees will be charged to you. The owner has the property listed for sale. It has currently been on the market for 13 months with no buyers. The owners due to circumstances are not able to come down on the price and the unit will likely remain on sale. The realator will meet with you after you move in to discuss how you would like to handle any showings (there have been 6 in the last year). We will offer any renters a month to month contract. In the event of a sale you will be given two months notice, as well as the standard one month of free rent (If you are in the unit or not). The owners will also pay for movers and moving related expenses (move in fee etc..) to help make your transition easier.”

    $488,000, listed for 13 months, unable to come down in price at all due to “circumstances”. A mortgage on that unit, 5% for 25 years, would cost just under $3,000 a month, before strata and taxes and all that.

    Or you could rent it for $1,800 from the sucker who owns it….

    • Why would anyone rent that place for $1,800/month is beyond me.

      • I actually like it (and it’s well within my budget), but that’s neither here nor there…

      • because not all renters want to live in crappy basements… A lot of renters, like me, can afford to buy a place like, but chose to rent it instead. Nothing wrong with that, I’ll still be ahead while not compromising on my lifestyle. Life is short!

      • Because not all renters want to live in crappy basement? Huh? There are tons of better deals out there in better areas. You can rent a nice 2 bedroom in West End for the price of this large one bedroom in an area full of crackies.
        This has nothing to do with affordability. It’s about value. And $1800/mo for a 1br in Cracktown is not a good value.

      • @ bubbly, I have to apologize… I didn’t read your message correctly. I thought you wrote: “Why would anyone rent [a] place for $1,800/month is beyond me.”

      • Makaya, np.

    • Well, he IS coming down in price — by his carrying costs and inflation losses, every month, plus how much he’ll likely lose showing a not-pristine, tenanted unit versus a staged, vacant one, and another differential, call it the “idiot tax,” for letting his unit rot on the market for over a year, thus signalling to most buyers that he isn’t really interested in a reasonably quick sale at a reasonable price. And he’s likely renting for less than market because of his refusal to offer a 1 year lease.

      So the question is, is this person just psychologically unwilling to cut the price, or is he actually running out of cash, eventually causing the unit to reappear on the MLS as a tenanted foreclosure?

    • Damn fools eh. They can’t come down now while the market is still active but it is certain the price will fall later. Regardless of how much they “think” it is worth. Will they reduce then or just bankrupt.

      Anyone who wants out now before it is too late need only tell the realtor three little magic words.

      Price it to SELL!.

  6. Well – VCI is not really back working again so I thought I would post some stats here. I’ll do a bit more detail later but here are some highlights regardign Van-West Detached. I previously talked about Richmond.

    Van-West gives the impression that inventories are high. Now they are definitely seasonally high right now but when you get into the details, it tells an interesting picture. To do the analysis, I took all sales going back in time such that the total sales was the same as current inventory (approx 800 units). To get 800 sales we have had 225 days of activity and takes us back to mid-July. That’s not a great stat. However what’s more telling is how the cycle of buy / tear-down / build / sell is not completing. There are really no sales of new-builds. One may say this is HST and that is possibly some impact. However, It is very dramatic such that you would not expect it to be so significant.

    For “new” properties, there are 17 months of inventory. Compared with a 7.5 average for the whole market. When breaking all properties by price, there is a very strong drop off in sales above teh $2.8 million level. I know it’s not a bargain but I’m just telling the facts. For properties under that level, MOI is only really about 4 months – which would indicate quite tight supply. However, above that value, it immediately jumps over 10 and reaches 24 months at the 4 million level. this would not normally mean much as these units take a long time to normally sell but there are not normally 450 units for sale over 2.8 million. That is a crazy amount. you have to wonder how many are spec builders who will eventually have to bail. Or builders who will now have their capital tied up in these projects such that they can not buy a new tear-down. Or is it flip investors who suddenly will realize the game is over.

    Volumes for the month are not great but not bad. I wuold say for Van-West they are above the 10-year average (unlike most other regions). However, are these now the last suckers who want to make some money and now who will be left with large losses? It appears that the cracks are showing.

    How did the US housing market start it’s fall? Something about new home sales coming to a stop? The stats are interesting. Next analysis at month end will be on the Vancouver condo market. This is now showing signs of cracks – sales are really low, inventory is starting to really increase.

    • There are new condo towers starting to be built all over downtown + cranes everywhere. Wonder who they will sell them to … with rising inventories.

      Telephone companies (downtown) & Supermarket chains (Broadway, Granville/70) entering RE instead of focusing on their market ? Something has to give …

      • I KNEW IT. So the lure of R/E is more than the typical business can resist. Property prices are just too alluring, the profit too juicy. And so goes the jobs these business’s once supported. Out the damn window right along with loyalty to long time employees and customers. The case for renting in other cases is overwhelming….even for business’s. This is one of the aspects of a bubble economy that rarely ever gets talked about.

        So are they tearing down the Safeway’s to build condos by any chance?

      • There are new condo towers starting to be built all over downtown

        They found new land?

      • Aldus Huxtable

        Bubbly, no. However, they’ve found things to knock down. See the 120+ residential they’re going to slam in where Commercial Electronics used to reside a mere block from the Burrard St bridge on the North side. You can even see the rezoning permit across the road beside Jim Pattison Toyota from there.

      • West Coast Woman

        Don’t forget TELUS and Jim Pattison as well!

      • West Coast Woman

        Farmer –
        They’re building condos in the Safeway parking lots and on top of the new Safeway buildings. All parking will be underground, which is why I will now rarely shop at Safeway even though there’s one close to my home. In the future I’ll just drive to wherever I can park above ground. Since I know many other women and elderly people who won’t use underground parking, I think their decision to use their properties for condo development, rather than for customer convenience, will ultimately cost them a lot of customers.

      • Big capital in trains, bridges and highways are committed, sideline density projects were multi year out and financed in phases.

        Are we facing mismanagement by having massive debt funding 25% of our productivity at market peak? It’s nobody’s fault, other industries were going through stress so they propped it up with residential. It’s just the province debt, bad timing. That means serfdom at high interest. We pay for the services. It’s okay, we are backstopped by gambling.

        It’s a good thing we are parking some cash in infrastructure. The US missed that boat.

      • Bubbly, no. However, they’ve found things to knock down.

        Aldus, I was being sarcastic. Yes, there are still plenty of old low rise buildings that could be knocked down and replaced by high-rises. The “we are running out of land” crowd completely ignores this.

      • Building condos in parking lots? I think Joni Mitchell is going to have to totally rewrite Big Yellow Taxi. What the hell is the world coming too? First they cut all the trees and put em in a tree museum, then…….(well, you know the rest…….

        “They paved paradise and put up a parking lot
        With a pink hotel, a boutique and a swinging hot spot”.
        (and now condos, phase one pre-selling…hurry folks!)

        “Don’t it always seem to go
        That you don’t know what you’ve got til it’s gone
        They paved paradise and put up a parking lot”

      • I’m sure somebody is eyeballing Granville street, thinking of replacing all those low-rises with new tall, green, eco-friendly condo towers. But it has to be in this order for max. profit: start from Pacific st., sell the view at a premium, then build the next tower blocking the view of the old one. Continue until you reach Pender.

      • This is safeway’s new project: … did they have to use that name ? … pastoral lands .. riding horses, that’s a new one …

        Also, they closed a big warehouse, logistics and distribution center and sold it for condos, eliminating 400+ jobs:

        It was newly retrofited and served 70 Safeways:

        This is the replacement:

        I wonder where all people that buy those condos will end up working … brochures only tell about entertainment, shopping, education …

    • Richmond is screwed big time! As of yesterday for the month of Feb, 937 sfh total listings, 32 sold. West Van sfh total listings 434, sold 34.

    • @ZRH2YVR – Thanks for this valuable information and so many other helpful posts you’ve made.

      I’m fascinated to see, via what you’ve revealed, that what I thought I was observing here with my own eyes really is supported by statistics (new homes are not selling. This is also what the speculator I spoke to who was considering a bid on 6225 Balsam said).

    • Vancouver still appears to be nuts, the rest of the province should be causing mega concern for politicians. If prices start cratering another 10-20% that’s going to cause significantly more distress than the previous 10-20%.

      Something to watch; they need to do everything they can to prop up the interior for another year or it won’t be fun at the polls.

    • West Coast Woman

      Your analysis re west side housing is spot on. Quilchena has many new homes for sale but only the original houses are now selling at even higher prices than last year. Hopefully these aren’t being purchased as tear-downs.

      Maybe, just maybe, buyers have caught on that these new particle board McMansions aren’t so great after all. Does anyone really need 7-8 bedrooms and 7-8 bathrooms in a SFH? As well, it’s very costly to maintain these huge houses!

      • Looking at the areas most affected by the fact that high prices are not moving are that the following areas have the highest percentage of homes over 2.8M.
        Shaugnnesey (94% – MOI 18 months)
        South Granville (78% – MOI 12 months)
        South Cambie – (68% – MOI 15 months)
        Quilchena – (61% – MOI only 5.4 months)
        On the other end of the spectrum is:
        Marpole – (11% – MOI 9.3 months)
        Kits – (15% – MOI 3.4 months – This is lowest MOI in all areas).
        Dunbar (40% – MOI 6.2 months)

        Next analysis will be attached.

  7. I don’t have access to full article here, but the headlines are interesting:

    Business in Vancouver Magazine
    Business in Vancouver February 21-27, 2012; issue 1165

    Hotel condo prices plummet – Page: 1
    Developers must find a fresh financing formula as prices for shared hotel units in British Columbia prove a fiscal bust for investors

    Shale supply glut slashes B.C.’s gas revenue – Page: 1
    Value of province’s oil and gas rights sales dropped 74% in 2011 amid suffering prices

    City developers gain at drivers’ expense – Page: 3
    New downtown buildings include less parking per square foot than a generation ago; free parking becomes metered and metered is eliminated

    • The hotel/condo pricing article is completely correct. Prices at shangri la have been dropping 20-30 percent in the last year and now 2 units on the 2nd to top floor just came on the market at way under what anyone else in the building was asking and now other people have to lower their units at least 1 million to even be competitive.

  8. Talked to a neighbour today and he had asked “why would anyone come from vancouver?” He referred to it as fairy land. He said probably people will be more inclined to come from Toronto to Calgary rather than Vancouver to Calgary. He felt Vancouver was too nice a place to want to leave….he knew there was lots of Asian buying/investment etc.

    • If you don’t have a job or income in Vancouver sometimes one’s hand is forced.

    • It is fairy land. My wife and I moved from Vancouver to Calgary for opportunity. We found it, but came back for family. Calgary was good to us, as was Alberta generally. We liked the dry weather, the open sky, and there was a lot less bullshit. Calgary is a very good city, but it was even better without truck nuts 🙂

    • Totally fairyland – probably why I keep running into Vancouver residents digging around for contract work and investments here in Calgary. Can’t these richies just stay home and keep buying and selling houses between themselves instead of doing real work!

  9. I over heard someone today talking about some media report on Squamish RE. I think it was by Sarah Daniels (is she with Global?) Did anyone see, hear, read it? I’ve been trying to find it but I can’t seem to find a link to it. Thanks

  10. @ZRH2YVR — fascinating to see these MOI stats broken down by neighbourhood.

    I’m curious about Kerrisdale and Point Grey – do you have data for that, and if so would you have the time to post it? Kerrisdale seems to be an epicenter for teardowns and new building, and I’m wondering about forwarding Point Grey stats to the Housing Action Plan folks at UBC.

    Thanks for keeping us up to date with the apocalypse….

  11. to “bailing in B.C.” Sarah Daniels? Is she the one that does the HGTV show Urban-Surburban? Maybe that was it as they often do something like that – buy a house in squamish and commute or buy a condo downtown.

    • Is she cute? I can’t be bothered listening to the ugly ones. They all have the same news anyway. All of it is crap. Give me cute if I have to bear the effort of paying attention to a steaming pile of BS. I can still turn the volume down.

  12. Pingback: Sticky Priced Seller Shoots Self In Foot, Slowly – “$488K, listed for 13 months, negative cash flow, unable to come down in price at all due to “circumstances”.” | Vancouver Real Estate Anecdote Archive

  13. Since “MOI” isn’t defined anywhere else but on this thread, I take it to mean “Most Obvious Index”

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