The New Yorker has offered a few thoughts on our little West Coast city’s oft-discussed housing crunch.
According to a May 26 article published by Manhattan’s monocled weekly, Vancouver is “at the heart of one of the biggest trends of the past two decades—the rise of a truly global market in real estate.”
That means we’re lucky enough to lay our heads in the most expensive housing market in North America, notes author James Surowiecki.
“By all accounts, it is a wonderful place to live,” he writes about Vancouver. “But nothing about its economy explains why—in a city where the median income is only around seventy grand—single-family houses now sell for close to a million dollars apiece and ordinary condos go for five or six hundred thousand dollars.”
“Vancouver isn’t an obvious superstar,” Surowiecki notes. “It’s not home to a major industry—as New York and London are to finance, or San Francisco to tech—and it doesn’t have the cultural cachet of Paris or Milan. Instead, Vancouver’s appeal consists of comfort and security, making it what [Bing Thom Architects’] Andy Yan calls a 'hedge city.'”
Basically, rich and famous people from cities not quite as stable as Vancouver are stashing cash here in condos for safe keeping.
For middle-class locals, this isn’t such a great thing. (This is the New Yorker, so we’ll follow their lead and forget that low-income earners even exist.)
“The globalization of real estate upends some of our basic assumptions about housing prices,” Surowiecki writes. “We expect them to reflect local fundamentals—above all, how much people earn. In a truly global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there. So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home.”
What does this mean for millennials entering the market? Exactly what you think it does.
“The challenge for Vancouver and cities like it is that foreign investment isn’t an unalloyed good. It’s great for existing homeowners, who see the value of their homes rise, and for the city’s tax revenues. But it also makes owning a home impossible for much of the city’s population.”
A couple of options are discussed for how Vancouver might try to reign in oil barons' impact on real estate. Politicians could restrict “foreign” ownership, though that might not be realistic, Surowiecki notes.
Another idea is to charge foreign buyers a premium, and “get used to being tenants”.
Read the article in its entirety at NewYorker.com.