Older people in Greater Vancouver are sitting on phenomenal housing wealth—and this will transform the residential real-estate market in the coming years.
That was one of the key messages delivered by Vancouver condo king Bob Rennie in an hourlong address to the Urban Development Institute on Thursday (May 15).
"The pattern that we should all be watching is the movement of this wealth by the living, which may be more important than the transfer of wealth by the dead,” Rennie told an audience of about 1,000 people at the Hyatt Regency Hotel. “We really do not have a precedent to fully understand this aging and prosperous demographic."
He said that research by Andy Ramlo and Ryan Berlin at the Urban Futures Institute has revealed there are more than 284,000 households in the region with people between 55 to 74 years old.
Within this cohort, 128,000 have clear title on their homes. The value of this "clear-title" equity is $113.4 billion.
Meanwhile, seniors 75 years and older have clear title to homes worth more than $50 billion. Their numbers are expected to increase by 85 percent in the next 15 years.
"What will be the impact of $163.4 billion in equity in the hands of an aging population in our marketplace?" Rennie asked.
In addition, he said there are another 88,000 people between 55 and 74 who have their name on the title of a family home.
In light of this research, Rennie questioned the prevailing notion that incomes are the only thing to consider in assessing the state of Greater Vancouver's housing market.
Equity is driving purchases
He suggested that not nearly enough attention is being paid to equity, pointing out that 69 percent of all sales are to existing homeowners.
Among first-time buyers from his company, he noted, 40 percent are receiving help from parents and grandparents when paying a deposit and a down payment.
Remarkably, 60 percent of first-time buyers were living with their family before buying, and 72 percent were between 20 and 34 years old.
Rennie said that his company’s surveys have also revealed that “location” is the top-ranked consideration for people buying a home, followed by “price”, “transit”, “building amenities”, and “green elements”.
“Surprisingly, even those who do not own vehicles ranked green as last,” he said. “First-time buyers are not philanthropists out to save the planet the day they are buying a home.”
Home ownership isn’t as elusive to younger people as many might think. According to Rennie, 43 percent of people from 25 to 34 own a home in the Lower Mainland. In Richmond, 64 percent of 25- to 34-year-olds own homes.
That compares to just 34 percent of this age group in Toronto.
Statistics tell a misleading story
Rennie said that if the 20 percent of highest-priced condos were removed from the statistics, the average price falls from $442,086 to $313,000. There were 12,674 sales at this level.
In his view, this would enable a person with an annual household income of $30,000 to enter the market with a 25 percent down payment. With a 10 percent down payment, it would require an annual household income of $31,300.
Taking away the top 20 percent of single-family sales, the average fell from more than $900,000 to $668,000.
"Try and find 12,674 of anything averaging $313,000 in San Francisco, New York, London, Paris—$313,000 average for a condo and $668,000 average for a single-family home is not only in line with local incomes, it takes us out of the most-expensive place race."
Rennie mentioned that at Strathcona Village, his company is marketing a project with 200 homes below $300,000. The starting price is $199,000.
However, he also noted that there are far fewer condos being completed downtown nowadays as opposed to a decade ago. There are just 563 this year and 546 next year in downtown, compared to 2,900 completions in 2005 and 2,800 completions in 2006.
In East Vancouver, there were 749 condos completed last year, and only eight remain unsold.
“There will be 900 completions in Vancouver East for 2014 and 2015 in 19 developments,” Rennie said. “And what is really interesting is that 15 of the 19 developments have less than 60 condominiums.”
Contrast that with an expected annual population increase in the region of 39,000 per year for each of the next 15 years.
Multiple bedrooms sought
He also said that as more families are moving into condominium towers, there's an emerging market for affordable units with small second and third bedrooms.
One of his company surveys revealed that 42 percent said they would rather own a 1,250-square foot condo costing $600,000 in Burnaby than a 1,000 square-foot condo in downtown Vancouver costing $750,000.
"The pattern has previously been that the young family was the anomaly in a condo high-rise,” he said.
Similarly, empty nesters who want to sell their single-family homes are often look for more than one bedroom in new condo developments.
At Wall Financial Corporation's Binning project at UBC, he revealed, most of the one-bedroom units were amalgamated with two-bedroom suites to create 1,700-square-foot three-bedroom apartments with a family room and huge outdoor space.
Rennie also said that Intergulf's Empire project at Cambie Street and West 29th was redesigned to include larger units when the one-bedroom condos weren't selling. The first 16 sales had an average purchase price of $900,000.
He said that there were 101,000 apartments and condominiums in Vancouver in 1991; today, there are more than 160,000.
The number of single-family homes has fallen by 30 percent over the same period.
Meanwhile, the aging of the baby boomers has meant there's a growing number of empty bedrooms. That’s because of the increasing population of older people whose children have moved out.
Rennie said that there are 395,000 empty bedrooms in the region, and the number is growing at a faster rate than the growth of new housing stock.
"Empty bedrooms increased by 26 percent over the past decade while housing-stock growth was only 17 percent," he stated.
In addition, he raised concerns that there's not enough information available about condo sales in the multiple-listing service. That's because the majority of new towers are either not placed on MLS or there's only a sample from a building included in the service.
"If MLS is the trusted voice and the reliable source to media, banks, appraisers, and economists, then home buyers and realtors are entitled to the most recent price per square foot and absorption figures available."
Rennie criticizes David Suzuki
In part of his speech, Rennie took exception to what he called "sensational headlines" in newspapers that are "bordering on racism".
He cited one article under the headline “Is Vancouver ready for 52,000 more wealthy new immigrants?”
He noted in his speech that between 2006 and 2011, there were 42,225 immigrants to the Lower Mainland annually, with approximately 7,000 of those arriving in Vancouver each year.
Three-quarters were from Asia, 11 percent were from Europe, and another 10 percent were from North and South America.
He added that about 2,400 per year came from China, "not quite as sensational as the headlines".
"I believe that we have to start admitting that we no longer live in Vancouver, we live on the planet."
Rennie also took aim David Suzuki after he was quoted in a newspaper saying that "Canada is full". Rennie suggested that shutting off immigration would keep families separated, just as during the period of Chinese exclusion from Canada between 1923 and 1947.
"David Suzuki is a regional hero, a voice that carries way beyond our borders," Rennie said.
To further quell concerns about foreign ownership, Rennie cited a company survey, which showed only 233 of 3,515 condo assessments were sent overseas. For example, at Two Harbour Green by Coal Harbour, 79 percent of assessments were sent to the residents’ address, and only three had their assessments sent overseas.
Rennie pointed out that assessments are not sent to renters.
In one section of the speech, Rennie cited research by UBC geographer Dan Hiebert, who has broken regional census data down into 3,400 small communities of 650 people each.
There was an average of 24 ethnic groups within these communities, highlighting the great diversity that already exists in the region.
"In areas like Richmond, where you would expect less diversity, there were still 17 ethnic groups within each community of 650," Rennie said.
In summing up, Rennie claimed that as the economy slows in China or anywhere else there is unrest, "Vancouver becomes even more sought after—not for speculation but for schools, clean air, our water, our diversity, freedom of speech, and a very safe place to invest."