The New Yorker explains Vancouver real estate is all about rich people parking cash

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.”

What’s happening isn’t a result of Mayor Gregor Robertson keeping HootSuite's office north of the border, and has has nothing to do with Premier Christy Clark’s promises on LNG.

“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.

Comments (28) Add New Comment
bobo
The rich Chinese park their money here so it won't be in China when the sh*t hits the fan. And it will!! In the meantime, we pay the price.
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Rating: +33
Forest
Why do we always only listen to what is under everyone's nose when it comes from somewhere else? And as usual the Yanks have got it half-wrong: housing is far more expensive than Surowiecki states. They're called "holding properties" for a reason: because this is where the Chinese princelings park their money that they don't want China (or Canada) to have. My landlord is a gangster (the father of a princeling). He paid $2.5 million of this 1930's vintage stucco bung in West Point Grey in 2012. He sat on it for a two years without heat or lights, until it slowly began to deteriorate. He now rents it to me, but insists I pay him every month in cash. There are countless empty houses in this neighbourhood, all owned by the same people. They are slowly rotting banks.
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Disgusted
An excellent article on our obvious affordability problem.

That no one at City hall wants to address. Since they've been at th forefront of ensuring we are not affordable...
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Meathead
Nice try by Mr. Surowiecki in writing for the New Yorker but...

I detect some typical good-old fashioned American fear mongering behind the article. Yes there is questionable real estate investment in Vancouver. But for the most part, it's only because this is the Best Place on Earth.
Rating: -108
Sunny Day Real Estate
Boring! The New Yorker article is basically a re hash of what most people already know. C'mon New Yorker, please write about something we don't already know!
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Gromit
Another idea is to charge foreign buyers a premium, and “get used to being tenants”.

Or another is to move to another area that is affordable and buy. An option i have seen many friends and acquaintances take. Governments and officials are seriously deluded if they don't think this bubble will have significant impacts down the road as youth and talent moves out to more affordable regions. What you will be left with is a bunch of people who either have no community 'roots' or are simply vacant. The implications for community building and the decisions that are made will be for the benefit of a select few at the expense of the many. I expect to see Vancouver quickly lose its desirability as get rich quick opportunists take over.
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R Smith
All desirable cities are expensive and well beyond the means of the average worker. Nothing new here. Vancouver is not that different than any other city where people want to live. Unlike many cities, what makes Vancouver expensive is permanent - mild climate, mountains, skiing, beaches, coast, proximity to the US and Asia and abundant natural resources. Plus stable and good quality education and health care systems. Ever been to Mumbai? property prices through the roof and massive poverty. The argument about average wages is irrelevant - you don't need much demand to sustain the market. Even during the recent financial crisis prices didn't drop that much and came right back. Keep in mind Canada was built on immigration and that is not going to change anytime soon - the global demand for Vancouver exceeds the supply and the city is land locked on three sides (border, coast send mountains). It would take something very extreme to change what is basically a permanent feature of this city.
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Rating: -26
"Globalization of the real estate market" worth remembering
Thanks for covering this. Surowiecki says things that local real estate moguls avoid (see for example Smith's current article on Rennie on this website). International capital invests in Vancouver real estate for the same reason that it invests in other speculative tools, it has been relatively safe and offers a significant profit over a relatively short period of time. Pity that some of us poor bastards actually have to live here and somehow turn our $70 000 a year into a $600 000 condo. This is Vision Vancouver's real legacy, for which it will be remembered. Any legitimate government would regulate this, by for example charging a surtax for non-residents on their property taxes, or in many other ways. China does not allow foreign speculation in its real estate market, which I agree with.
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Expo 86
And they say americans are a bit slow. This place was sold at expo 86 to the highest bidders and now the repercussions are being felt.


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Bruce
As much as we want to believe Vancouver is a special snowflake, the reality is that Hot Asian Money, while a real influence, is not the main thing going on.

Housing prices are inflated in most Canadian cities. The graphs of the price ramps ups are eerily similar.

http://2.bp.blogspot.com/-iMbnDG0IL5g/Up1Vzcp4sUI/AAAAAAAABAc/ToF52_yOzo...

Now, compare Canadian housing price trends to the USA:

http://1.bp.blogspot.com/-4DV1BVSk8wc/Uv97PFTqxiI/AAAAAAAAZ2E/g9T6gf1_Uj...

All of Canada is in a bubble. Everybody has their own special local explanation. But it's macroeconomic. The federal government openly conspires with the real estate and development industries to prop up the Canadian economy using credit. The risk of losses to the banks are taken up by the government through the CMHC.

Local and provincial governments get into bed with characters like our local "condo king" and a small number of condo developers that control the market so they can get their share of the action.

And this is massively risky. It's more than risky - living on house-porn and credit instead of developing a real economic base will (100% probability) crash the finances of the middle class at some point. It happened in the USA, it happened in Japan, it happened in Spain, and it will happen here.
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Lazy Canadians
The conclusion is simple. You want to buy property in Vancouver? Work non-stop until you can afford it. That's how the Chinese got rich. Work, work, work, work, work, to the exclusion of everything else including family. Very few Canadians are prepared to live this way.
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Hip Hip Hooray!
For Foreign investment!! Since they know shit will hit the fan in their own country, let's come to Canada since we're so gullible and easy to manipulate. OMG we are so weak, i really wish we had American regulations here. Sigh @ Vancouver and our politics...
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Hindsight 20/20
Jim Pattison had the money & opportunity to buy the Expo 86 land but obviously he underestimated it's potential market value.
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Thomas
Vision Vancouver held a 'affordability conference' recently. But how come they won't research the Vancouver market to find out how many offshore owners are driving up prices? They researched it in Australia, and then they actually did something about it. They taxed offshore buyers. They also did it in London. And Hong Kong. But Vision will never talk about this. At least not as long as Bob Rennie is hosting $25K/table fundraisers for them....
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Bruce
@Thomas

I think the relationship between Vancouver's civic parties and their financial support, whether in the real estate industry or a certain culty che-guvera lawyer, is explained well in a song by Geoff Berner:

"
Don't you know that the twenty dollar whores
Look down their noses at
The ten dollar whores
Look down their noses at
The five dollar whores
Who look down on the volunteers
Cause they ain't got careers...
"
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25K Brunch
This is all old news to anyone who's read the Tyee, Rabble, or numerous civic-issues blogs in the past decade. Yan and numerous other analysts have been all over this for years. Vancouver has become a Club Med for obscene -- and in many cases, openly criminal -- wealth. (What, you thought overseas union-busters, slavers, megacorp collusionists and corrupt Party bureaucrats were making their fat stacks through good ole' hard work? Tell that to the 14-year-old girl who just jumped off the Foxconn factory roof!)

This has all been pretty obvious to anyone who cares enough to look, but you'll never hear a peep from Vision or their puppet-masters about any of these issues. I'm surprised enough to hear it on the Straight, but good show.
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Profiteering
Sadly every group that has the ability to manipulate the governing party of the city are opposed to forcing residency requirements and restricting ownership for narrow minded ideological reasons that cross the spectrum. One can be opposed to non-resident ownership and be labelled a fascist and a communist by frothing mouthed "activists."
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Gregg
Our corrupt politicians and bureaucrats sold Canadians out...and we let them! Ban foreign ownership now!
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why do we
Have to cite the newyorker. Every rag in the city has reprinted this article today. Why didnt they have this story first? Vancouver is full of itself and so are the "critical thinkers" here. City has become a joke, everyone running a rat race they can't afford to pretend they "live" somewhere better therefore are better than others. This city has a deep rooted sickness that is evident in the day to day behaviour of its inhabitants. If mommy and daddy aren't rich, stop pretending and get out while you can and build a future for youself. This place is about to pop
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AC
Politicians burned substantial tax dollars to finance Expo 86 and 2010 Olympics promising this "investment" would make our lives better. But these were only parties to secure their legacies and a convenient real estate ad for foreign criminals and the filthy rich to snap up Vancouver. Adding insult to injury, now they're tolling bridges to those relegated to commuting from outskirts of the city and least able to make ends meet.
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Rating: -1

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