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What do you think is the right price to pay for a home in Vancouver?

May 30th, 2011 · 60 Comments

Lots of howling about the story I wrote on Bob Rennie’s recent analysis, saying that prices paid for the top homes were skewing people’s perception of average housing affordability.

Many people assumed he was spouting that off the top of his head, for nefarious reasons of his own and questioned my journalistic credibility for quoting him. It was Urban Futures that did the research for that, I’m told, and there are others looking at those numbers are coming to similar conclusions. (Also, for those who apparently didn’t notice, I also quoted Dale McClanaghan, a guy who is routinely commissioned by municipalities to take a close statistical look at their housing affordability problems, who agreed with the Rennie conclusions.)

I should point out, though, that the research appears to be focused on the unusual market of just the last year, where prices went up dramatically in Richmond and west-side Vancouver but stayed flat or even went down in other parts of the region. However, the average makes it look as though housing prices everywhere are shooting up in the past year.

Okay, all that aside, there was much vociferous response to that post, but I didn’t get a clear answer to one thing I was really wondering about: What would be a fair price to pay for a house/duplex/condo in west-side Vancouver, east-side Vancouver, Burnaby, Surrey, Coquitlam, etc.

As I said in the previous post, sometimes I feel as though we delusionally imagine we can live in Vancouver but have Saskatoon housing prices. I know that I personally feel that the right price to pay for a nice house on the east side (single-family, standard lot) should be, oh, $350,000 at the most. For the west side, hmm, maybe $650,000. (For the record, I also feel that I should be able to get a really great pair of shoes for no more than $50, have a nice meal out at a top-notch restaurant for $90, and fly to Europe for $600 round trip.)

Clearly, every day is a disappointment to me since 1984 is long gone. But what are prices that people think would be appropriate for a city of 2.3 million and growing, where it doesn’t snow in the winter?

Categories: Uncategorized

  • A better question is, let’s say you’re a property investor; how much would you pay for a downtown condo that currently rents for $2000 per month?

    It turns out that the answer is different depending upon what city’s downtown you invest in. So do investors in downtown Vancouver condos know something that makes them want to accept a lower yield than another city? Is there a pride in landlordship, or do they plan on selling to someone else at an even lower yield?

  • What do you think is the right price to pay for a home in Vancouver?

    Frances, the reasonable answer is: What the buyer is willing to pay for it.

  • “What the buyer is willing to pay for it”

    This statement is a cop out.

  • Michelle

    Tell you what.
    in this city there are too many rich people, too much money too many criminals. What’s missing is a real, fair, just communist society. That would take the pressure off both buyers, sellers, speculators and foreigners just like that. That’s why next time when you vote Vision and comrade Gregor, we are closer to that society, they liked China, a lot. So to answer the question, a fair price would be …Free! 🙂 The Party would make any Shaughnessy 5600 sqft mansion into five duplexes and I’ll get the one facing the alley. Not picky. Vegetable garden in front, chicken coop in the back, beehives on the roof. Self contained, no worries.

  • Corey

    Michelle you should study the history of real property in the USSR or China under the communist regimes. State ownership is not a pretty thing for buildings.

  • Last year, Concert Properties presented a chart that compared the economics of building and renting new apartments in Toronto and Vancouver. The company knows what it is talking about since it is active in both markets.

    The comparison looked at land costs, construction costs, related ‘soft costs’ and then market rents. What was interesting to many of us at the time was that the Vancouver land prices were approximately three times the price in Toronto. Moreover the construction costs were higher too. The higher land and construction costs resulted in higher ‘soft costs’ (interest, consultant fees, since they are often calculated as a percentage of cost…insurance, permit fees, etc.)

    As for the rents, there was not a significant difference between the two markets.

    I share this since I think one way to approach determining the appropriate price of housing is to look at the costs associated with its creation.

    What is the fair cost of land?

    Well as many will say, it’s what the market will pay for it…but it’s also a function of supply and demand, and the municipal fees that are charged to develop it.

    As more land is zoned for multi-family housing, the price will come down. But it will not come down below the value of a single family lot. Indeed, I am told that notwithstanding the city’s desire to see the Cambie Corridor redeveloped with mid-rise and high rise apartments, some people are still planning to build new single family homes because given all the uncertainties with the city’s rezoning policies, and determination of ‘land lifts’ and Community Amenity Contributions, they think it might still be better just to build a nice new home. Especially since many new buyers like to be in a prominent location on a major street.

    As for the difference in construction costs across the country, a door is a door is a door. But labour costs and labour efficiency vary, and these seem to be important variables. Also, Building Codes can influence the cost of construction. For example, very few locations, other than Vancouver require sprinklers in new single family houses.

    So I cannot answer the question by saying an apartment should not cost more than $550 a square foot or whatever, I don’t know the answer…but I do think we can start to zero in on some answers by looking at each of the cost components and trying to determine what they should and could be, by comparing our costs with those of other places.

    Finally, I want to reiterate my objection to the policy of the City of Vancouver, (which is slowly attracting attention from other cities in North America) to ‘finance growth’ by seeking Community Amenity Contributions calculated as say 75% of the ‘lift’ in land values resulting from a rezoning. The effect of this is to increase the cost and price of housing.

    Some will say….oh no….the price is not connected to cost. It’s what the market will bear. This is true, especially for older homes. However, for new construction, in most instances…the price is very much tied to costs,

    And if one has to pay the City $25,000 or $50,000 a unit more to rezone a parking lot for new housing, this will eventually find its way into the price of the housing built on that parking lot.

    The answer? Establish a pre-determined levy to be paid to offset the cost of providing new community amenities, that is reflective of the cost of providing the amenities…not the increased value of the land.

    And don’t try to get the money all at once…recognize that new homes will pay property taxes too, and if necessary….adjust property taxes to fairly represent the cost of providing the services and amenities.

    As an aside, how many new daycare centres have been built in Vancouver that were not financed by developers as part of a new building or community development? Other than the Olympic Village daycare, are there others? If there are, tell me about them. My point is that these multi-million dollar facilities are paid for by the new residents of the projects within which they are located…even though the broader public benefits.

    Lastly, to bring down the cost of housing we need to simplify the approval procedures, because if there’s one thing that is certain, it is that those cities that have complex and challenging approval procedures (think Boston and San Francisco for example) also have higher housing prices.

    Now I’ll leave it to others to tell me what a fair price for a new 850 sq.ft. apartment on Main Street should be!

  • Jesse is right, like any asset, the price is based on the income generation potential – in this case, that would be rent (naturally you need to factor in depreciation, for properties that contain actual land there is the possibility that they will become more dense in the future, etc. – but basically the rental value determines the property value.)

  • This statement is a cop out.

    lol, I was curious what kind of response that was going to get if per chance someone who has visited realestatetalks would have caught it.

    Nonetheless that’s one occasion where the exuberant bulls over there aren’t wrong with that statement Jesse.

  • Also, if you want a reasonable price for a nearby city which is bigger, more prosperous and has a better climate than Vancouver, just try San Diego (Average price for a 4 bedroom place, $400,000, $165,000 for a one bedroom)

  • Michael

    Up to five times the annual gross income.

    There will be variations, in more desirable parts (e.g. Point Grey) where, say, the annual household income is a million it would be up to 5 million, in places where the average income is, say, 65k it would be 325.

    The rule of thumb in general is that you should not spend more than 1/3 of your income on housing, so that is another metric you can apply.

    It isn’t about what you “feel is right”, it’s about what is economically supportable, if you raise the cost of housing something else will have to give which in turn will result in less / lower paying jobs.

  • Bill Lee

    Just in San Francisco where 76 % of the population rents, and the average rent is USD$1700 a month. Hmm.

    Fly to Europe? I thought that in 1984 you could take the boat from Montreal to the continent.

    And yes, the space someone ‘needs’ is a lot less than they have, so lets double up in housing. Which is what couch-surfing is about.

    Price for a home was the question. and the answer is depends on the payments, which is why the 40 year mortgage became popular to keep payments low. Wasn’t there BCCentral column in the Sun the other week on a rise in house foreclosures/bankruptcies?

  • @Michael Geller, thanks for your always interesting comments. But let’s for argument’s sake say you’re a property investor, not a developer. What price would you pay for a $2000/month rented condo? As the City found out with The Village on False Creek, the construction costs are irrelevant, it’s the price you pay as an investor to get a decent return on investment. Land costs are certainly an important variable from a developer’s perspective, but not so much for the rational investor of a condo.

    So the question still remains, what price should be paid? I will take a stab, to start things off. As an investor I want a decent return on my capital. Rents are weak right now and I have little pricing power, nor have landlords for the past 30 years according to CMHC rental data. Now sit down for this: I want at least a 7% net operating income on my investment for a downtown condo. That means I would pay about $350 per square foot for an 800sqft condo that rents for $2000 per month. And that’s the minimum I would pay.

    I don’t know if anyone has seriously asked the question why large-scale rental investment firms haven’t bothered investing in Vancouver for dog’s years. Maybe because they can get a 7% NOI elsewhere? Shouldn’t that be setting of some flashing light in the control room?

  • “And that’s the minimum I would pay”
    Oops meant “maximum”.

  • Joe Just Joe

    Don’t think too many people are looking for a 7% ROI on condos. A know quite a few people that are have no issue paying $525K for two bedrooms and can manage to have the property be cashflow positive. They are long term investors though and are looking to safeguard their money in what is historically an inflation proof asset. As long as they cashflow they aren’t too worried about fluctuations in pricing.

    I agree completely with the “what the buyer is willing to pay answer” Buyers make bubbles, buyers pop bubbles. Buyers remake bubbles.

    Also agree with M. Geller, the CAC system is broken and needs to change. It needs to be a flat fee, perhaps district based, say $75psf d/t for any newly created density, $50psf for anything east of Main etc. Bringing certainty to pricing for both the sellers of property and the buyers, will help things immensely. No one is arguing against having development pay for services it’ll consume, just make it fair.

  • Jesse, actually I am an investor as well as developer, and just happen to have an apartment that rents for just over $2,000 a month…I paid over $600,000 for it which means it generates a terrible return…but I hope that it will be worth $800,000 before too long which is the same kind of thinking that motivates many of the condo buyers in the city. (I should raise the rent, but don’t want to lose the tenant!)

    While we often complain about the cost of renting, the fact is Vancouver renters are often getting much better value for their money than their landlords, especially if the value of the unit doesn’t go up…but few renters believe this.

    Also,….few renters believe that the reason developers are not building new rental housing is because the numbers don’t work…they think developers build condos because they make MORE money from condos…no, they build condos because they can make SOME money from condos….with the cost of land, construction and soft costs, the rents in Vancouver are not sufficient to cover the cost of building new rentals…if the land is free, then the numbers will work (although not always), which is what the STIR program was trying to achieve.

    For those of you who want to try and calculate how much a condo should cost, here are some numbers to play with…

    Land costs in the West End are currently around $140 a square foot of buildable area for a new highrise or lowrise apt…

    Land costs in other municipalities are less, but not dramatically less…condo sites in Richmond, North Van or Burnaby can often sell for $75 to $100 a foot. In Surrey it might get down to $20 to $25 for a highrise…$40 or more for a lowrise apartment…but of course this varies by location, etc.

    Construction costs for a new 4 storey frame building might be around $160 a foot…for a highrise in the order of $200 a foot or more, depending on the standard of finishes and the parking standards…a parking space can easily cost $30,000 plus soft costs, etc.

    Soft costs vary depending on project size and type…but can often be 20 to 25% of the construction costs. On top of this there are financing costs. Today rates are low, but they will go up. You need to calculate interest costs before the start of construction, during construction, and during the sales period.

    Now, before you think you can calculate the cost, you need to recognize that while one can sell almost 100% of the area of a townhouse project, you can only sell about 85 to 87% of an apartment project…the rest is lobby, stairs, elevators, corridors, amenity rooms, etc.

    And developers like to make a profit. Even if they don’t, their bankers expect them to make a profit. One rule of thumb is 15% of the sales price which equates to about 17.5% of the cost. Now that seems like a fabulous return, but remember it could take 3 to 4 years to take a project from conception to sell-out. Also, while a developer will not put up all the money…maybe 25%..he’s usually legally responsible for paying it all back…and to secure the loan(s), he has to put up other security…just in case.

    Now you can start to figure out how much that 850 sq.ft. condo on Main Street should sell for.

  • Glissando Remmy

    The Thought of The Day

    ‘Vancouver’s Real Estate industry should re-brand itself as the… Scalping Estate industry.’

    People, phlease, do me a favor, stop calling yourselves ‘investors’ in real estate.

    What you basically are, at best, is a combination between flip-floppers (short term- when you look at your condo as one would look at a container of TV fresh from South Korea) and greedy, ruthless landlords (long term-when you look at your five foreign students crammed in your 2B+Den (3rd B) as a source for your golfing ambition). Hoping for the best.

    Let,s be frank, basically no one in your situation would want to see Vancouver become affordable, that would cut right into your profits, so please cut the drama.

    Bob Rennie is in the business of selling. He is a salesman. He tells you what you want to hear.
    ‘Vancouver is affordable’ he says.
    What he is supposed to say…the truth? That there never was a better time to get into debt for a piece of crap? That would be uncivilized.
    Buy or Sell, he lives on your commissions.

    When Bernie Maddoff was wining and dining his ‘investors’ over the 20-25% returns he was ‘guaranteeing’ in spite of all the securities regulations, in fact laughing with them, at the prospects of making huge piles of money on the backs of the ‘stupid Americans’…well you know how that ended.

    Same here, only with brick and mortar, and solar panels, and low flush toilets, and granite counter-tops, and green roofs, and bike racks, and geo-thermal, and flex your muscles rooms, and surprise party dens, and enclosed solariums, and mountain views, and water views, and city views…

    http://www.youtube.com/watch?v=Lg9qnWg9kak

    Bob Rennie would love to market something like this in Vancouver. Can you picture his campaign?

    ‘Large 325 sqft, posh, multi-use condo, all inclusive, one and a half bedrooms + den, enclosed balcony, solarium, and 20 Flex,Thai massage parlor views.’ – Low 1 Mill.

    Affordable, he says.
    Who can blame him? In the city of Oz he is the wizard… in front of the curtain. That is because you people, insist of calling yourselves…’investors’. Stop.

    We live in Vancouver and this keeps us busy.

  • Judy Rudin

    @ Geller: ‘As for the rents, there was not a significant difference between the two markets (Vancouver & Toronto)’.

    @Jesse:’I don’t know if anyone has seriously asked the question why large-scale rental investment firms haven’t bothered investing in Vancouver for dog’s years. Maybe because they can get a 7% NOI elsewhere? Shouldn’t that be setting of some flashing light in the control room?’

    I understand that historically, and in every case where housing prices are unsupportable by what the market can bear to pay for that property in rent, that trouble in the form of weakening house prices, is coming.

    Any disagreement with that supposition, folks? Is it possible that we could be the “only’ exception to the rulke—or do others exist? Or is it that the wealthy will own and live (or not) in all future housing stock (single family res, condos0) and not be concerend about renting out as investments?

    @Jesse Can certainly see why noone is interested in building true apartment rental stock right now. Lots of “For Rent” signs in my hood. Looks like we are hitting some kind of ceiling.

    Frances, as per “how much” to pay for a home, it would be wonderful to think there was always rhymn and reason to the old saw that the price shouldn’t exceed 30% of your income.

    But with no increase in real income here in the last 20 years (therefore, a net loss today) versus the rise in real estate prices, I guess that all goes out the window.

    So, we are left with some potentially frightening scenarios around taxable income, upcoming infrastructure costs, etc.

    Are we living in extraordinary times, that require extraordinary measures—or any measures at all?

    It seems to me, we are sitting, waiting, waiting…but, for what?

  • Jack Hope

    As a rough guesstimate I would say that housing prices on the Eastside should be in the $450,000 range to be considered reasonable and $700,000 to $800,000 for the Westside. I’m not planning on living in the Westside. Ever.

    When I left Calgary all of my friends, family and acquaintances (and even strangers) felt it their civic duty to warn me about how much I’d be paying for housing, and that I’d never be able to afford to live here. And I manage just fine. Yeah, its more expensive here, but not that much more than Calgary, the price difference has shrunk considerably.

    That being said, more does need to be done to address affordability issues in the City and region. Unfortunately, that tends to mean greater density, which is the first thing that gets a given community bent out of shape.

  • “Vancouver renters are often getting much better value for their money than their landlords, especially if the value of the unit doesn’t go up…but few renters believe this.”

    I’m not a renter but I believe it. When I rent a car I pay a premium compared to owning it. When I rent a cement mixer and impact drill, same thing. But when I rent a condo…

    Just as long as we’re honest where the returns are expected to come from.

  • Sean

    Well, according to the Bank of Canada inflation calculator at: http://www.bankofcanada.ca/rates/related/inflation-calculator/

    …the east side house I bought in 1978 should now cost around $170,000. Yet my property assessment is north of $500,000, which is pretty close to what I’m seeing other similar properties nearby listing for.

    Does that mean that the current price is “unfair”? I don’t really think so. Vancouver only has so much land to go around and there are an awful lot of people who want it. It seems reasonable to expect that our burgeoning population is the major factor driving the increases in value over and above that of inflation.

    If some draconian government came along and forced prices down, what they’d effectively be doing is giving away money to the people at the head of the queue who were lucky enough to snag whatever properties were available.

    “What the buyer is willing to pay for it” isn’t really a cop-out – it’s how our system works, and we tinker with that at great risk.

  • Tessa

    Here’s an idea: if we want to make housing cheaper, eliminate minimum parking requirements and set a hard maximum. It has the added benefit of encouraging people to go car-free. People think this will destroy the street parking in their neighbourhood, but I can’t imagine many car-dependent families buying into a condo with no underground parking for their prized car.

    As for what the “right” price is, I do agree it’s tied to income. Unfortunately if there’s some weird stuff going on at the high-end of the income spectrum, it does has some ripple down effects, whatever Rennie likes to tell us. It affects what housing gets built (luxury condos at the village instead of a higher number of cheaper units, for example), and it effects land prices, among other things.

    And just because the average house hasn’t increased by leaps and bounds in the last year doesn’t mean it wasn’t absurdly unaffordable to begin with. It doesn’t mean it didn’t hold onto previous years’ increases, which has in cases such as my family members’ homes in the suburbs pushed the value up by as much as 50 per cent in a few short years. Meanwhile, median wages remain stagnant.

    “What the buyer is willing to pay” is something humans have contrived as one method of distributing property. It’s great in an equal society, but it’s got some major downsides when society is highly unequal, as is the case here.

  • We built our family home in Light House Park in 1967 for C$ 21,500.00 including the cost of the land.

    That was 44 years ago, so all things being equal, @ 5.5% (CMHC 25 yrs) amortized over 44 years it would have a theoretical “value” today of C$205,249.68.

    I haven’t kept track of it since we left but it must have changed hands several times, each time upping the ante, each time upping the compounded interest.

    Add to that a local real estate industry aggressively marketing off shore, plus the usual world class/paradise bull shit I’ll wager it is well into the millions by now!

    You want to make housing cheaper? Talk to the banks!

    As for Michael, as for Bobby, he wants to calm us down: he wants to sell a condo . . .

  • That was 44 years ago, so all things being equal, @ 5.5% (CMHC 25 yrs) amortized over 44 years it would have a theoretical “value” today of C$205,249.68.

    Correction: of course compounded over 44 years . . .

  • IanS

    For anyone who asserts that “whatever a buyer is willing to pay for it” isn’t the right answer, I’m curious as to how they think a “reasonable” price should be set?

    I understand that various mechanisms might be employed to lower costs of development or construction somewhat (eliminate red tape, fees etc), but I can’t imagine that plays more than a minor role in reducing costs.

    I also understand the strategy of reducing the amenities (no parking etc), but that really only lowers the price that a buyer would be willing to pay.

    Apart from that, how would a “reasonable” price be identified and applied, if it’s anything other than “what a buyer is willing to pay”?

  • Tessa, your comment about turning ‘minimum’ parking standards into ‘maximums’ is most valid.

    In fact, I would argue that if we could significantly reduce the parking requirements as improved transit becomes available, along with expanded car sharing programs, better and more reasonably priced taxi service, and yes, more extensive bicycle lanes….we could also address the supply of land…yes, the supply of land.

    That’s because we could start to turn more and more existing parking lots into development sites. We are starting to see this in Richmond and Surrey…and once the Evergreen Line is built, we can expect to see similar changes in Coquitlam.

    Personally, I consider reduced parking standards to be the second most significant considerations in reducing the price of housing. In fact, those of you who have had to sit through my ’10 ways to create affordable housing’ powerpoint know it is Number One on the list. That’s because it is easier to address than the price of land.

    If you haven’t seen this presentation, I’ll happily repeat it at Glissando’s election campaign launch!

  • The IMF report said that the US economy has been seriously eroded and that the age of America is over.

    http://www.globalresearch.ca/index.php?context=va&aid=25056

    Perhaps the Vancouver economy too? After all we are hoeing the same row!

  • Thanks for the post Francis. We just posted a brief report to our website so that the high level sales data are available. Your point about 2009/10 being an odd year is well taken, but 2008/09 was equally strange. A study covering price changes over the past decade would certainly be warranted. Similarly, looking geographically within the region would also be of great interest. Our report can be found at http://www.urbanfutures.com/average_prices.html

  • Jimbo

    “What the buyer is willing to pay for it”

    I would be willing to pay the average price if I could actually afford it. I would say that it should be connected what regular working folks can actually ‘afford’ to pay for it. If a couple earns the average income in a city then they should be able to afford an average home. This is not the case in Vancouver. As the RBC’s recent report stated “Vancouver and B.C. markets have become dangerously disconnected from prevailing local housing demand fundamentals”.

  • Michellem

    It would be nice to buy a decent townhouse style home without the issues of a strata council! A row-house with 3 – 4 bedrooms at a cost of $380,000 would be wonderful.

    Developers and this city are so short sighted when building so many 1 and 2 bedroom condos and leaving it open to sell to foreign investors who have no plan to live or contribute to Vancouver. Vancouver Schools are loosing students because we are being forced to move outside of Vancouver so that we can grow our family. Living in a 2 bedroom condo is very unhealthy for a child and a family that wants to expand. No place to play, unable to make any noise or run because of the neighbours, and finding crack pipes by your child’s bike is very upsetting!

    I am tired of the city so focused on “low” income housing for drug addicts, the homeless and mentally ill people. Granted they do need a place to live. But We the Working Families are the ones who are putting a roof over their heads while we can’t afford a decent home for ourselves.

    Vancouver needs more row housing that has small gardens with a pricing that meets the needs of middle class people. Vancouver needs to put limits on homes being sold to foreign investors who really have to social vested interest in our wonderful city.

  • Kirk

    People like Michael Geller are pushing up the costs of housing by speculating on capital gains. If people treated condos like a place to live instead of an investment (or, if govts taxed the capital gains on the sale much more than normal monthly cap rates), prices would come down significantly. But, that’s not going to happen. Property speculation is the biggest industry here. Some people joke that Vancouver’s entire economy is based on us selling condos to each other in one big Ponzi scheme. There’s probably some truth in that.

  • ““What the buyer is willing to pay for it” isn’t really a cop-out – it’s how our system works, and we tinker with that at great risk.”

    I am loath to compare Vancouver to other cities in North America. But… what I would encourage is to take a step back and ask what fundamentally gives real estate its value. As other large metropolitan areas in the US are finding out, the answer is “price-income” and “price-rent” ratios.

    Now by all means go ahead and stick to the “market knows best” line of thought. But I believe it’s a good idea to take a giant step back and ask objectively what’s really going on. Bob Shiller did. Paul Krugman did. David Altig did. And now some anonymous commenter on a Vancouver-area civic affairs blog did.

  • Max

    Something you will never see in Vancouver; this is from SHAG, hosuing group for seniors in WA State:

    SHAG’s Arrowhead Gardens affordable senior living community is the place to live for active seniors in the West Seattle area. With rents starting as low as $680 per month including most utilities and lots of unexpected amenities, you need to see Arrowhead Gardens for yourself. Arrowhead Gardens, where the lifestyle is rich and the rents are affordable. You can really live here!

    For a very limited time, Arrowhead Gardens is offering $99 first month’s RENT, enjoy 50% off on the normal security deposit and RENT FREEZE for the term of your lease for up to two years when you reserve your cozy, new apartment at Arrowhead Gardens by 5/31/2011.*

  • Ternes

    “What the buyer is willing to pay” is a perfectly good way to create real estate bubbles. Why would that be the “right” thing to do? Why not try to improve upon that?

  • Dan Cooper

    “what are prices that people think would be appropriate for a city of 2.3 million and growing, where it doesn’t snow in the winter?”

    Brousing through realtor.com for Portland, which pretty well fits the criteria above, I see that in the Woodstock neighbourhood , which could probably be compared to the Cedar Cottage/Dickens Elementary area in Vancouver, the most expensive houses are running under $400k. You can even buy what looks like a large, lovely house in the somewhat more upscale Ladd’s Addition neighbourhood (comparable to Douglas Park?) for about the same price.

    Not the most expensive (there are a few running into the low millions) but toward the top for Arlington Heights in the West Hills/Lincoln High School catchment area – like Dunbar/Lord Byng? – are houses for about $750k. $229/square foot for this one.

    So, the numbers for Portland seem about what you project as reasonable for Vancouver, Frances.

  • Dan Cooper
  • Sean

    I don’t see any comments on it so far, but one of the big factors in house prices are interest rates. With so many people gauging affordability by what they have to pay every month, low interest rates make much more expensive housing “affordable”.

    When we bought our house in 1978 and during the time we paid it off our mortgage rates ranged from 8.75% to 18%. You can bet that if interest rates were in those ranges today that house prices in Vancouver would be a lot lower. (Of course it would also cause a lot of other fallout…)

  • Sean

    @Ternes # 30

    ““What the buyer is willing to pay” is a perfectly good way to create real estate bubbles. Why would that be the “right” thing to do? Why not try to improve upon that?”

    Can you take up IanS’s challenge and suggest an alternative? I caution you: many have been tried through history and none have given us the economic stability and standard of living that we have today.

  • Sean

    @Dan Cooper #31
    “So, the numbers for Portland seem about what you project as reasonable for Vancouver, Frances.”

    My first though upon reading Frances’ question was to compare Vancouver prices to Seattle’s. But I think there are two reasons why such a comparison might not be fair:

    1) The recent US housing crisis seems to have distorted the market. (On the other hand, I suppose one could argue that the US market has “corrected” and ours hasn’t, and therefore our prices may be the distorted ones.)

    2) Vancouver and Victoria are really the only cities in Canada that meet Frances’ criteria. Portland (or Seattle) is only one of several US cities that are similar, and some of the others have even more desirable climates. It seems reasonable to me that this equates to greater demand for Vancouver real estate within Canada than there is for Portland real estate within the US, which naturally translates to higher prices here.

  • Kirk

    How about “What the buyer is willing to pay to LIVE in.”. Instead of “What investors are willing to pay so they can flip it for a profit.”

  • Bill

    Barring a monopoly or price collusion on the part of buyers or sellers, supply and demand will determine price. Whenever government enters that equation, the market will be distorted. Making housing more “affordable” through subsidies will in fact increase demand on a limited supply of housing. This will inevitably put price pressure on the remaining stock of housing not rationed out as affordable.

    Why not ask how much should a consumer pay for a car, television, a loaf of bread. If it works for housing, then why not for all consumer goods? Wait a minute, that’s already been tried hasn’t it and really didn’t work out for the Soviets did it.

  • Bill Lee

    Considering the average income of $44000 and families of $65000, many can’t afford the formulas debated.
    Thus the maids and gardeners live in Surrey.

    And what’s wrong with the whole province being converted by Queen Christy into all public housing. Housing would be cheap or free. Homeless would be cured and we would alllivetogether.
    Council flats everywhere?

    I would recommend a read of the cutting and funny Sue Towsend book “The Queen and I”
    http://en.wikipedia.org/wiki/The_Queen_and_I_(novel)
    4 copies in the VPLibrary’s new crappy pop-over and populist catalogue. Also cassette and Large Print

  • Max

    @Sean #35

    I was down to Seattle last weekend to see friends. She is Canadian and working as a nurse in the high risk neonatal unit.

    They bought a beautiful 3 bedroom house in the U of WA area for $450K. (In Vancouver, you can barely buy a newer 1 bedroom condo for this amount)

    When I asked whether they considered moving back to Canada, she said they would love to but would not be able to afford a home as they could in Seattle.

  • “Whenever government enters that equation, the market will be distorted”

    Bill, what the heck do you think government-underwritten CMHC mortgage insurance is?

    Then we get from you Soviet-era hyperboles. You’re hilarious.

    Not many comments here are suggesting imposing government house price ceilings. I, for one, offer the simple conjecture, backed by evidence throughout history including interior cities in BC currently facing price drops, that markets don’t always know best. That is not the same as calling for markets to be restricted through government intervention.

  • IanS

    @jesse #43,

    So, what is the solution? You’re critical of the market (perhaps with reason), but you also seem to dismiss government intervention.

    How, in your view, do we determine what a fair price is and then enforce that price?

  • Joshua Hergesheimer

    @Michellem, what do you mean “Living in a 2 bedroom condo is very unhealthy for a child and a family that wants to expand. No place to play, unable to make any noise or run because of the neighbours, and finding crack pipes by your child’s bike is very upsetting!”

    I know several people who live in False Creek in condos with children who actually enjoy living within walking distance of everything they want. And just because you have a backyard doesn’t make life healthier for your kids. Perhaps counter-intuitively, some planners believe that suburbs and cul-de-sacs are actually more dangerous for kids to grow up in, because the children have to be driven everywhere and are never allowed to venture outside the confines of a homogenous and unchallenging environment. If this is what “safe” means, then maybe a more holistic approach might change that view.

    I live in a house in East Vancouver, four houses away from Kingsway. There are dodgy back lanes and garbage around, but for some strange reason my kids actually enjoy walking to shops and parks.

    This is obviously not for everyone, but the idea that once you have kids you are ‘forced’ to leave the city is evidently not shared by thousands of other parents who seem willing to pay a lot of money (oftentimes more than the price of suburban houses) to live in a walkable neighborhood close to transit and schools.

  • Sean

    @Max #42

    “When I asked whether they considered moving back to Canada, she said they would love to but would not be able to afford a home as they could in Seattle.”

    I hear you. But of course this is exactly the issue. Lots of people would love to move here if the prices were cheaper because it’s perceived as a great place to live. But there’s only so much land available, and higher prices is the inevitable result when demand exceeds supply.

    In perhaps a perverse kind of way one could view this as a good thing in the sense that the “affordable” housing in Vancouver tends to be condos. They’re a more sustainable building form in their own right while at the same time creating extra density that makes it easier to have neighborhood amenities and better transit service.

    So one could view the “problem” of affordable housing as a motivator towards a “solution” of sustainability and more livable neighborhoods.

    People (such as myself) who prefer single family detached housing would likely rail against this kind of attitude, but we live in a world where we’re running up against limits to the choices we can make.

  • apple

    another problem with the “affordable” condos is that they are all too small for families – 2 bed max, with minimal storage.

    3 bed apartments with generous kitchen/dining/living areas were built once upon a time. how can we encourage those types of developments in the higher density proposed for areas outside of downtown?

    or what about true rowhousing as in toronto (that doesn’t cost a $1m)? could a wider variety of form & type of housing help provide the range of affordable options that people are looking for?

    i live in norquay and like that the city is proposing new zoning that would allow stacked townhouses on standard city lots. this would allow individual homeowners to reap the benefits of their increased property values and redevelop themselves… it seems like a small step in the right direction – making incremental density something that can happen on a smaller scale so that it occurs more organically and perhaps even provides the opportunity for greater affordability as some homeowners might be willing to take less profit out of a project than a typical developer?

  • Max

    @Sean #45

    The problem with banging up condos, over single unit dwellings and under the banner of ‘eco-density’ – where do people go who have kids?

    Condos are fine for singles or couples, but once you add kids into the mix, not the best housing choice. Especially if you have more than one child.

    I understand that some families don’t have a choice because of affordability – but they should have a choice regardless.

  • Sean

    @Max #46

    I grew up in rented apartments, so I don’t really agree that families can’t live in condos. My experience is that kids are a lot less picky about where they live than their parents are.

    That having been said, there’s certainly no reason why at least some condos couldn’t have better amenities for kids, and perhaps that’s something that city council should think about when it’s dreaming up initiatives like STIR.

  • “you also seem to dismiss government intervention”

    I have yet to see a stable housing market that did not involve some form of government intervention. Pick some jurisdiction in the world at random… say Germany… and study potential reasons why speculative bubbles don’t form there. Legislation limiting leverage, and adequately provisioning mortgage insurance reserves for correlated events, are some ideas that should be seriously considered in my view. But I’m not holding my breath.

    As I stated previous, a downtown condo will be attractive to cash-only income-seeking investors at around a 7% cap rate. Given there is enough opinion that this is way too high, it should not be surprising in the least that detached properties are, well, detached from local incomes.

    BTW 7% cap rate was about what 10 year old Vancouver condos were trading at in 1999. It’s also what condos in certain US markets, including those absent of both significant oversupply and highly elevated unemployment, are trading at today, just to give an idea of what return investors there are able to get on their capital. All this in a low interest rate environment to boot.

    I’m more than a little skeptical that Vancouver has some dimensional rift that allows it to carry lower yields ad infinitum. If the city is so desirable with as bright a future as its proponents claim to justify higher prices, we should be seeing rents going up to reflect this.