The rich have become wealthier during the pandemic.
And going by record sales of luxury homes, they’re also living like royalty.
Mostly economic reasons are cited to explain the hot market for premium real estate.
One is low supply.
Another is that Canadian households have accumulated a record amount of savings during the pandemic.
But as Vancouver realtor Randy Rinaldo notes, there may be an added explanation behind the acquisition of more material wealth in the face of COVID-19.
Rinaldo believes that it’s a human response to and attempt to cope with an increased awareness of one’s mortality, especially in the time of a pandemic.
“In the Bible there’s a verse that says we’re a vapour in the wind,” Rinaldo told the Straight in a phone interview on January 13.
“That’s all we are,” the Rennie and Associates Realty agent continued. “And yeah, absolutely, live everyday to your fullest because you do not know if you’re going to be here tomorrow.”
Rinaldo made the comments a day after the release of two reports regarding the 2021 luxury home market in Canada.
On January 12, Engel & Völkers reported in a media release that Canada’s premium real estate market is “experiencing precariously low supply due to unparalleled local demand”.
In Vancouver, sales of homes in the $8 million-plus category increased by 115 per cent year-over-year in 2021.
“This unparalleled demand for luxury inventory is driven largely by local homebuyers and investors, many recognizing real estate as a stable and practical investment,” Engel & Völkers stated in the release.
In the same release, Anthony Hitt, president and CEO of Engel & Völkers Americas, indicated that the “supply crunch in Canada’s major cities will characterize the market in 2022”.
“Based on our research, Engel & Völkers estimates that more than 80 per cent of luxury home sellers this year will be Gen Xers and millennials. 2022 will be a year to watch closely, especially when international migration returns to regular levels,” Hitt said.
Sotheby’s International Realty Canada released a separate report on January 12.
“The country’s major metropolitan luxury real estate markets broke consecutive records throughout 2021 as Canadians’ urgent, pandemic-influenced demand for housing mobility and strengthening confidence in the country’s economic recovery drove price gains, eroded inventory and propelled markets to historic highs,” Sotheby’s stated in a media release.
The Vancouver market posted annual gains of 171 percent in sales of homes priced over $4 million.
In addition, sales of homes over $10 million saw the highest annual percentage gain at 240 percent.
Sotheby’s president Don Kottick noted that the real-estate market was “redefined in 2021”.
“There has been a transformative change in Canadians’ perceptions of the importance of their homes as an investment in lifestyle and pleasure, physical sanctuary and security, as well as financial stability and generational wealth,” Kottick said.
In the interview, Rinaldo recalled that Christy Clark noted during her time as B.C. premier that the province’s “greatest export is certainty”.
“Well now, there is no certainty in B.C. or anywhere,” Rinaldo said, in reference to the ongoing COVID-19 pandemic.
“We don’t know what to expect next, and yeah, people are spending a little bit more money,” he added.
Rinaldo’s views echo the subject of a 2004 paper by Jamie Arndt (University of Missouri, Columbia), Sheldon Solomon (Skidmore College), Tim Kasser (Knox College), and Kennon M. Sheldon (University of Missouri, Columbia).
An SFU marketing professor had pointed the Straight to this paper titled “The Urge to Splurge: A Terror Management Account”.
The document explores the so-called terror management theory or TMT, and how human awareness of death drives materialistic consumption.
“How then do people manage to function with a modicum of psychological equanimity in the face of such daunting dread?” the paper asked.
TMT explained that “humans cope by employing the same cognitive capacities for abstract and symbolic thought that led to awareness of death in the first place”.
“That is, we develop and maintain a solution to the problem of death by creating culture and putting faith in cultural worldviews,” the paper noted.
Materialistic consumption could have been woven in a particular cultural worldview, and that explains why people accumulate possessions to deal with their “existential anxieties”.
“Much has been written regarding the cultural and economic factors that have created and work to sustain a cultural worldview that communicates that the procurement of wealth and possessions will lead to a meaningful, happy life,” the paper stated.
It continued, “According to TMT, this is a vital message that people are especially prone to buy into because doing so offers a culturally embraced means of protection from basic existential fears.”
Moreover, “To the extent that fear of death engenders identification with a cultural worldview in which individuals purchase symbolic dressings that reflect one’s value, and to the extent that the widespread cultural message of consumption and materialism becomes internalized at the individual level, we can understand the ‘urge to splurge’ as an exemplification of peoples’ trenchant need to overcome the existential insecurity evoked by awareness of mortality and given direction by these cultural prescriptions.”
Vancouver realtor Rinaldo understands this human response.
“I think you’re asking the right guy,” Rinaldo told the Straight at the start of the phone interview on Janaury 13. “I’m a bit of a stop-to-smell-the-roses type of person.”
“I know it’s nice to have a big number in that bank account,” he said.
“But sometimes it’s better to get out and enjoy it.”