News this week that the Vancouver housing market enjoyed a record year in 2015 may be cause for celebration for those who already own a home. But for those hoping to buy one, it’s quite another matter.
Vancouver real estate is many things: the most expensive market in Canada, a top destination for foreign investors, the “hedge fund to the world,” and a “vicious cycle” for locals.
These are the words of Carsten Love. The Burnaby native and realtor with Coldwell Banker Love Realty has a unique perspective — and some pretty strong views — about the city he loves.
Stopping short of describing himself as a “realtor to the stars,” Love counts a number of professional athletes and entertainers as his clients. Among them is lifelong friend Michael Buble, who discussed his own real estate interests in a recent issue of Vancouver magazine.
I spoke to Love to get his insights on the hot Vancouver market, and what the future holds. Some of his answers might surprise you.
Q: How has the market changed in your 13 years as a realtor?
A: When I started in 2003, I was 28 years old and worked with mostly young people who were buying condos. The market would predictably go up, and in three to five years, they were able to sell, having built equity, and upgrade to a townhome or detached house. Today, the stakes are much higher, and the opportunity to grow wealth through real estate is out of reach for most young people.
Q: Where are some of the best opportunities today?
A: All areas have great opportunities, if you can afford to be a part of the action. Condos didn’t really recover from the 2008 collapse until fairly recently, so buying condos can see good returns today. Vancouver and close outlying areas have seen massive price increases over the last few years, which is pushing people east in search of affordable property.
As for housing types, larger townhomes (generally in older developments) are seeing an above-average price increase, as the gap between attached and detached house prices grows. Townhomes will end up being most families’ end-game, with respect to buying property and raising their family.
Q: What are some of the risks? Is the huge price growth pricing Vancouverites out of the market?
A: Greater Vancouver is a special place in terms of property ownership. We are landlocked, with the Pacific Ocean in the west, the Northshore Mountains to the north, the U.S. border in the south and the Agricultural Land Reserve in the east. We also have an extremely agreeable climate, world-class amenities, restaurants, shopping, and endless beautiful landscapes.
People come here from all over the world, and feel safe and at home. This has created a firestorm with respect to owning property, not only from our neighbours to the south, but also China, South Korea, Iran, India and other parts of the world. This has driven up prices far beyond what average Vancouverites can afford. This is changing the landscape, not only in newly built housing, but also with who is living in these houses, and the make-up of the neighbourhoods. This force can’t be dampened, despite lots of talk on strategies to slow the housing market.
Vancouver has become a hedge fund for the world, a great place to park millions of dollars. Then there are others who buy here because there is no place quite like it in the world. It all adds up to pricing that is in line with the most sought-after mega-cities in the world. There is one difference — those cities have many high-paying jobs which give traditional, born citizens a chance to buy and live in the city or outlying areas. With Vancouver, this isn’t the case, and it leaves the younger population looking at either buying small condos or moving east to other parts of Canada or the U.S.
Q: What’s the prognosis for first-time buyers in this market? It can’t be great…
A: It isn’t good, and has caused many people to be forced into the rental market. This has increased the demand on rentals, which pushes up rents, which causes further anguish and depletion of their savings which they need in order to buy one day. It’s a vicious cycle.
Q: CMHC recently said there’s only weak evidence of overvaluation in the Vancouver market. How long can the strong price growth continue? Is it sustainable?
A: It is sustainable as long as the foreign money continues to cascade into the market. To the average buyer in Vancouver, it seems unbelievable what people are paying for all levels of real estate, but when you look at it from an international level, this city is very attractive.
Q: There’s been a lot of discussion about the influence of foreign investors in Canada, particularly Vancouver. What’s your take on this?
A: I work with foreign investors… Look, its not just Vancouver or Toronto, or Canada for that matter. It’s happening all over the world. Land is the new gold rush; there isn’t enough supply to satisfy demand, and this pushes prices up. It’s simple economics.
Q: Is their influence in this market a problem?
A: Yes, to future generations who will most likely never know the feeling of buying their own real estate and watching it increase in value. Only the rich will be able to buy and sell real estate, as local salaries do not match up with housing prices. It has already begun, and I don’t see it changing.
Q: What might be the solution?
A: Foreign buyers should have to pay an extra levy/tax, and this money could go to building low-income housing to compensate for the erosion of affordable housing.