High-end house rents in Vancouver plunge up to 20% as inventory spikes: experts
vancourier.com
vancourier.com
”What we’re seeing is that rental rates have decreased up to 20 per cent from the spring of 2017, and it’s getting even worse.”
They also say they’ve never seen anything like this in their TEN whole years of property management!!
Rents might be dropping by this much, or even more, but this is hardly even evidence of that, let alone data from “experts”.
Better title: “One property manager estimates that some luxury property rents in Vancouver have declined by up to 20% over the past year.”
Also the entire purpose of laws an regulations like Dodd Frank is to prevent debt bubbles.
Whenever someone says that we are "Due" for a correction they are falling for the gambler's fallacy.
I read real estate press almost every day, and this is pretty much a universal constant. For every bull, there is a bear. For every person predicting a market crash, there is a person predicting things will get even better. Even articles that should be straight forward statistical pieces are usually based on data from some startup web site nobody's every heard of that pushed out an infographic to get clicks.
The more I observe the real estate industry, the more I'm convinced that it's mostly made up of people too damaged to sell used cars anymore.
Whatever you think of the issue, this particular article isn’t “about” the issue so much as it is a precisely-timed propaganda piece aimed at influencing the election.
A speculation and/or vacancy tax makes sense in cities with a high number of foreign buyers like Vancouver and New York but in other cities it seems like the biggest road block is simply zoning restrictions that prevent supply to meet demand. There are second order effects that need to go w/ more building, such as adequate transportation, parking and services. But if your goal is simply to get the average down can you do better than simply building more? Rent control seems more like a band-aid for a small number of folks rather than a real solution.
There are much more money available to speculate than available surface area.
Leverage was cheap (through housing) so everyone played that asset class on margin here. Now that the interest rates are going up, it will sort itself out.
I didn't take the time to find numbers that are perfectly apples-to-apples, but it definitely doesn't seem like Toronto's median income is materially lower than Chicago's.
[0] https://www.toronto.ca/wp-content/uploads/2017/10/8f41-2016-...
[1] https://data.oecd.org/conversion/purchasing-power-parities-p...
[2] https://www.census.gov/quickfacts/fact/table/chicagocityilli...
In my city in Australia it’s common to see a single elderly retiree living in a rundown home on a large block, where the land alone could be worth close to a million dollars. When the property is sold it can often be split into two, and house two families in detached homes.
It feels cold hearted to say elderly should be pushed out of homes they have lived in for 50 years. But it does make it harder for cities to grow - the carrot of higher prices doesn’t seem to work for people who just want to live out their days in the community and home they know.
The same sized property next door has a full sized home and three townhomes. So potentially one person living in the same space that is housing a dozen next door.
More or less cold hearted than forcing three new dads to spend 15% of their waking hours getting back and forth to work, which means they only sees their kids when they are sleeping?
Doubtful, some of the biggest cities on earth have tiny geographic areas.
Build more and let them keep buying, a clear government policy that targets rezoning to keep price rises in-step with inflation would certainly make empty home investors think twice.
Real estate speculation is a gamble that governments won't accommodate growing populations and politically benefit from rising house prices. In many places on Earth they are likely right.
This is not even remotely true. Much of the city is still zoned exclusively for single-family housing, although that may be (very slowly—too slowly) changing: https://www.sightline.org/2018/08/14/vancouver-housing-of-al....
About two-thirds of Seattle is also single-family only: https://www.seattletimes.com/business/real-estate/amid-seatt....
Those factors alone likely explain much of the housing shortage. Make it legal to build the housing that people want to live in, and the housing will be built.
The numbers of multi-unit under development in Metro Van at the moment is unprecedented.
A proper speculation/vacancy tax that disincentivized empty properties in SF, Vancouver, NY and other major cities that have that issue would probably result in a noticeable rippling effect to reducing values in smaller cities.
Regardless, an economy where many people are working just to pay exorbitant rent is not a healthy economy.
$5k/mo for a $3M home is a cap rate of just 2%. That's pretty terrible in itself. Now it's $4k/mo or 1.6%? How on earth is that financially sustainable at either amount?
Once safely outside of the PRC's reach, it's trivial to move the wealth around using corporate entity ownership (among other methods).
It's not trivial to move capital around using foreign corporate entities, when they track all of your communication within China. If they even so much as get a hint of that going on, and it bothers them in the least, they can do anything they like to you at that point. The hint of suspicion is more than enough, if it suits them. Being able to move capital around is meaningless, if you're not entirely physically free yourself as well.
Your scenario is only a sure thing, if you've escaped your capital and everyone you care about.
Think in terms of nobility: what’s more important, your head or your dynasty?
The house where I rent is owned by a woman in China who phoned up a local real estate management company, bought the first 20 houses on their list, and wired them the money.
It's probably more complicated than that, but that's the short form story the management company told me. The company also said it's very common.
If this article is remotely true and this is the start of a trend set off by having no rules whatsoever and then suddenly a whole bunch of not terribly well thought out rules, it's going to be interesting to see how this all plays out, especially when good old "fear is stronger than greed" investor psychology kicks in, all in an environment of steadily increasing interest rates.
I don’t know about Canada, but forming as domestic shell company to make your real estate holdings look local is pretty easy in the United States, and can be done online.
Also, what's not mentioned in that report is the percentage of purchases by foreign-owners last year or the year before. The 4.8% number is total Vancouver residential foreign-ownership - it's just a snapshot.
The linked CMHC numbers are surveys of people's perceptions of the impact of foreign money, which is a hilariously useless metric.
Stats Canada is pretty careful about the wording they use, I imagine they run everything by the legal department before release to make sure they're not technically lying, they leave that up to the newspapers and TV to accidentally misreport repeatedly, until it becomes common knowledge.
When non-residents own 5% of a market that typically only has 1-2% listed at any time, prices quadruple like in Vancouver.
Now that there's a tax on empty housing and an upcoming speculation tax persons the carrying costs on empty homes is high enough that some are clearly looking to get out of their investment.
It’s far cheaper to rent in Vancouver than to buy.
I understand it doesn't scale linearly and these are mostly foreign investors moving money out of their country, but still... I have a hard time believing you can rent a $3M mansion for just $5K a month anywhere near Vancouver.
I rent a 1500sqft condo in this building for 3k a month (listed at 2M) https://bccondos.net/1238-richards
BUT it makes sense if you have 40 such homes bought with drug or corruption money (hello China!) Who cares if you lose 4% a year (maybe rising values make up for it, maybe not) at least you have something in a relatively safe place and out of China /Russia.
Plus, it's not like the saved for 20 years to buy them...easy money.
This article should be flagged.
Your claim seems plausible, even if missing the word 'vote,' but I can't evaluate without more evidence.
It has had a real effect on employment, especially in tech. A friend of mine at hootsuite laments that sometimes they miss on great hires because even though the salary is competitive, there is literally nowhere within an hour of the office for the candidate to afford to live.
You do not recall correctly. https://www.reuters.com/article/canada-housing-vancouver/nea...
1% vacancy
5% unoccupied but not open to rent
So of the houses that are unoccupied, only 20% are vacant?
(I actually read it as 1/6th but the point is where the confusion may have come from)
In 2011, I did an occupancy survey for a college group study, and yes we counted 31% vacancy in Coal Harbour
The City of Vancouver implemented an empty homes tax, which has similar impacts on demand, but they had to ask the province for new powers in order to levy that.
The spike in affordability in Vancouver wasn't caused directly due to a shortage in housing stock and an influx of residents. It was caused by rampant speculation from people essentially using Vancouver as a safety net to park wealth.
I can't overstate how detrimental this is to a city. What you end up with are entire neighbourhoods which are occupied at 50% or less, and yet with the value of the homes exceeding $2-$4 million. It causes stores in those local neighbourhoods to close because there aren't enough customers. It taxes the fire department because no one is there to call 911 when a fire starts. It guts schools because there aren't enough kids to fill classrooms.
And with all of this going on, former local residents and young people are pushed further and further out of the urban core due to affordability. Vancouverites make less than half of what an average tech salary pays in the SF Bay Area, and the jobs are much harder to come by.
That said, yes, Airbnb and other vacation rentals were exacerbating the problem, and causing Vancouver to turn further into a vacation/tourism destination instead of a real working city. San Francisco suffers from this to a certain extent, however, its real problem is that it has a massive influx of workers due to a booming tech economy, and not enough housing stock to accommodate all of those workers.
That one doesn’t sound bad at all. Every other school district complains about the reviser, too many kids and not enough teachers / tax dollars.
So I think the problem kind of goes both ways.
And on top of that, there were lots of real estate investors who weren't even trying to keep their places occupied?
Isn't that super irresponsible investing?
It’s not less irresponsible than buying Tesla stock.
https://vancouver.ca/home-property-development/empty-homes-t...
I've read that this is the case in London, as well. And probably lots of other cities with names that are well known in China and Russia.
1. So was the theory that the housing price spike was driven by foreign buyers who didn’t occupy their homes accurate?
2. So did the speculation tax work?
New buyer now have to qualify for a mortgage at the Bank of Canada rate plus 2%, which is close to to 6% now. Even though mortgages can be had for a little over 4%.
That shutdown a lot of buyers very quickly.
Basically the number of uninsured mortgages had been climbing rapidly, so this instituted so that even with a fall in housing prices, loans are less likely to default.
Good I think from a banking risk mentality, but not so good for homeowners looking to buy.
I remember reading that a couple making $100k and 20% down could have bought an $850k home before the stress test. Now it’s my more like $650k.
$100k after taxes is $65? Maybe less?
$650 after 20% does is $520 to pay off?
I know there is no magical answer but that feels right to me if I were a homeowner.
Empty-homes tax prompts sale of Vancouver condo
https://www.theglobeandmail.com/real-estate/vancouver/articl...
Housing prices are coming down in Toronto as well, and people who bought homes still under construction are finding out that that the prices are now lower than what they paid.[1]
Canada is generally has recourse laws, which means you can’t walk away from an underwater mortgage.
[1]https://www.thestar.com/business/real_estate/2018/01/29/how-...
No source, just something I heard from a guy trying to sell.
As one anecdote, my neighbor had arguably one of the nicest homes in one of the more sought after neighborhoods in Seattle. They sold their home in September after it "sat" on the market for 12 days and sold exactly for ask. The price was 16% less than they were estimated at in July, which is what probably triggered them to sell I guess.
Depending on which real estate agent you ask, Seattle was absolutely insane before and now it's getting back to slightly above normal levels and will stay there for a while. Others will say if this continues for a few months it's a sure sign of the bubble popping. Inventory will probably go down a little bit in the next few months mostly due to eager profiters taking a break during the usually slow winter months. Buyers will probably decrease a little bit too due to interest rate hikes. Next spring will be the real test.
Condos and rental prices don't seem affected yet, but those tend to lag homes in my experience. Seattle does have horrible density so maybe condos will stay strong at their ridiculous $550k median price.
PS: IIRC it was the may 2018 sales and inventory data that deviated from the recent trend lines. Slightly earlier than June.
That's how it went down 10 years ago, it will be same this time - come spring and the "for sale" signs will pop up on every single corner. You can just count those signs to tell if it's the buyers or the sellers market.
However there are differences too. 10 years ago we were facing a catastrophic recession, including an unprecedented level of banking shenanigans (undermining business financing) and a huge hit on the employment (undermining consumption), but this time it seems pretty stable. So that's a bull development. On the bear side, strong overall economy might embolden the Fed to keep increasing the interest rates, decreasing housing affordability and pushing the prices further down. Also Seattle has seen a huge amount of construction recently, a lot of old properties on the Capitol Hill were torn down and rebuilt in the last 3-5 years (at this point we are talking not just a number of affected properties but a percentages of the entire inventory in the Madison-Aloha area), the downtown sees a large number of constructions and SLU has been a giant construction site since like 2010. Also notably there is no shortage of rental properties downtown and Capitol Hill at stable prices. The rental market was positively nuts in the run-up to the 2008 implosion which was somewhat distressing to me personally.
Fun times!
Are you looking for a place to settle down?
If there is a major housing market correction in the next few years I wouldnt mind "upgrading" or taking a flyer on a vacation/hobby property. On my infinite "todo" list to pay more attention to commercial/industrial space.
Slowdown of detached home sales, speculation-tax avoidance, Airbnb rules bring flood of high-end houses onto rental market, creating “desperation” as owners slash rents
Unfortunately, it appears that we can't downvote our own comments here.
Essentially the tax targets secondary home ownership in certain non-tourism related hot housing markets of the province. A British Columbian that has a cabin in the woods somewhere is not terribly likely to be impacted.
There has been criticism from people saying "but I'm not 'speculating' I have a second home in Vancouver because (whatever reason)", but the tax seems generally popular so far. When so many don't own a single home, and with homelessness such a significant issue in Vancouver, I don't think there's much empathy for people upset that they'll be taxed on their second home.