The problem is, we’re too poor for this town

After listening to a group of international real estate experts chat about their respective markets, it became clear to me that in terms of house prices, Vancouver has nothing on London, New York, Moscow, Palm Beach or L.A. Compared to those cities, Vancouver real estate is the bargain bin.

Last night I attended the first REDTalk speakers event, sponsored by development company Wesgroup, and held at the Playhouse Theatre. The place was at capacity, with about 700 industry types in attendance, and the star attraction was clearly Josh Flagg, real estate agent extraordinaire, and star of Million Dollar Listing Los Angeles. Flagg — clearly an L.A. mover and shaker, dressed in capri pants and loafers without socks — currently has a listing with a price tag of $150 million (the former home of Sonny & Cher, among others). When the subject of Vancouver property prices was raised, Flagg couldn’t help but derisively laugh. “It’s totally under valued here,” he said. And he went on to say that we have everything that all the world-class cities have to offer, but at bargain basement prices. That would explain why so much of the Mainland Chinese market is snapping up properties around West Vancouver and the west side of the city. Those same properties would be three or four times the price in a place like London or L.A.

But here’s the thing: those other cities have a job market. We don’t. And the jobs we do have are low paying, as illustrated by statistics junkie Andy Yan, from Bing Thom Architects. Andy gave me this chart: PerCapitaIncome. It shows that Vancouverites make just a little more than $40,000 a year. It also shows we are hovering around the same incomes per capita as depressed American cities like Reno and Nashville.

It’s not about the high cost of real estate — our problem is affordability. We are being priced out of our own town. We can barely afford our $4 lattes. No wonder we gripe about the $1 million houses. Moderator Cam Good of Key Marketing did point this sad state of affairs, to which Flagg responded: “I don’t know anything about your incomes. I don’t live here.” And he couldn’t relate, either. Flagg made $200 million in sales revenue off real estate in the last year.

It was an interesting discussion, much of it about the global impact of the rich Chinese market. The other panelists included Alan Child, chair of real estate consultants Knight Frank Hong Kong, Stephen Hurford, of Hurford Salvi Carr, who has 287 projects in and around London, and Brendon Desimone, a New York real estate agent and blogger with a following of 70 million visitors a month. They echoed Flagg’s opinion of Vancouver’s cheap properties. Child said that in London, many developers sell directly overseas. It’s a practice frowned upon in Vancouver, because it’s felt that locals should get first dibs on their own market. And locals feel resentful that they’re being pushed out of the market by foreign owners who may not even occupy the houses. And it doesn’t work both ways. Canadians can’t find a sweet deal in Hong Kong’s property market. Hurford said if a Canadian were to buy a property in Hong Kong, they’d be looking at a whopping 24 per cent stamp tax. That drew a few gasps from the crowd.

So, we may gripe, but in terms of high prices, we haven’t seen anything yet. Desimone pointed out that in New York, a not-so-special condo sells for around $3 million. Flagg said L.A. doesn’t have a condo market to speak of, because everybody wants a single-family house. So we’re nothing like L.A. in that regard. Desimone and Child spoke about the problem of corrupt money behind foreign real estate purchases made under the guise of numbered companies. We don’t know yet if Vancouver real estate has corruption behind it, mostly because nobody is keeping track of where the purchasers are coming from. That’s a problem.

There was a hilarious moment near the end of the talk, when the forthright Flagg was asked about his opinion of Vancouver’s new Trump Tower. He didn’t hold back. “I’m unimpressed,” he said, and went on to slag the quality of the building as “cheap.” He also said he’d never buy anything with the Trump name attached. No doubt, any Trump Tower marketers in the room were slumping in their seats at those comments. Flagg then followed with, “Maybe I shouldn’t have said that.” Too late.

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Facadism: from San Francisco to Vancouver

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This is a shot of San Francisco workers going to the extreme bother of relocating a Victorian that was up for demolition, circa 1974. SF has a long standing tradition of heritage activism that continues today. However, the city is currently dealing with an increase in façadism, the development world compromise of maintaining a building’s facade in order to build behind or around it. It usually results in a much bigger, bulkier, or taller structure surrounding the old facade. It isn’t perfect, from a heritage perspective, because the guts of the building are torn out. As well, the mash-up of new and old doesn’t give either building its proper architectural due. Both structures end up out of context and diminished. But, for Vancouver, I would argue that it’s better than the complete loss of yet another heritage or character building. Case in point: the Period Revival apartment block at Oak and 14th (pictured here), which is slated for redevelopment. The 1928 design by Townley & Matheson (same architects who did City Hall and the Stock Exchange building) is to have its south facing and east facing walls retained and restored, with a tower going in behind. The building, called the Santa Fe, but originally named the Van Arsdel Apts, had not been well maintained over the years, according to heritage expert Patrick Gunn.

This is one of my favourite old apartment blocks in Vancouver, and I’m happy to see that its lovely exterior is being saved. I know not everybody will be pleased with the plan, but it’s better than the alternative.

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Random Acts of Gluttony

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These pics show the demolition of a house on Vancouver’s west side, at 3700 W. 37th Ave. The house, dated 1939, had been lovingly restored by its previous owners, but the new owners wanted to redevelop. It’s so outrageously wasteful and spoiled of us, to tear down a perfectly good house for no other reason than we’d want something bigger. As people who’ve studied sustainability have said before, “the most sustainable house is the existing house.” Tearing down a house, deconstructing or demolishing it, trucking away the materials, and re-building the house is a way bigger carbon load than retrofitting the existing house with energy upgrades. Wasn’t the whole idea that we were supposed to be living smaller? How is this a step toward becoming the greenest city on the planet?

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Affordability is a Relative Word

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Welcome to my new blog! 

Here’s my opportunity to discuss the stuff that I don’t get to in my job as a professional full-time journalist. For me, the biggest topic that’s emerged over the last seven years covering real estate for the Globe and Mail is how to survive in a city that makes it so difficult to do so. Vancouver’s great, obviously. That’s why the city is booming. But it can also feel like a daily grind just to make a living, find a little bit of property to call home, and pay the bills. I know we Vancouverites can seem like a whiny bunch, especially considering we’re living in a rainforest paradise. But we also worry a lot because we’ve hooked our carts to this real estate thing that can be scary. Scary if you’re not in the market, and scary if you’re in the market, and there’s talk of it heading south.

We are a weird city. Really, how is it possible that we are the lowest earners of all major Canadian cities, and yet we are somehow surviving the high cost of living here? A lot of people dismiss our situation as typical of so many other desirable cities, places like Sydney, Singapore, London, New York, San Francisco and L.A. But there’s a crucial difference between Vancouver and those metropolises: Jobs. We don’t have any. At least, we certainly don’t have much of a market for anyone who doesn’t work as a Realtor, techie or barista.

And so, like most of Vancouver, I think a lot about this question of affordability. My last column for the Globe and Mail was on the recent spike in sales in North Vancouver, which may be its own city, but feels more like a rainier, woodsier extension of Vancouver by way of a couple of bridges. My father was born in North Van in a tiny three room house that looked more like a shack, so even though I’ve never lived there, I have my own homegrown perspective on the place. With its affordable walk-up apartment buildings and split-level houses, it’s always been the poor cousin of its glitzy neighbour where the celebrities go to hide, West Van.

For a long time, North Van was the place for mountain biker types to live relatively cheaply and happily, tucked away from the density and clamour of Vancouver. While Vancouver racked up spots each year on the Most Unaffordable City lists, North Van quietly minded its own business, happy to share the same geography without all the bother. Those days might be coming to an end, however, now that a lot of Vancouverites are discovering that for $800,000 you can get a solid house on a big chunk of land — well worth the trip over the bridge. The most popular areas are Lynn Valley and Edgemont, which means there are still good deals to be found in other areas of North Van. Inventory is low right now, but by spring there should be a lot more listings on the market.

Another area where I think you can still find reasonable value for single family homes is New Westminster, which I wrote a column on last year. Again, if you’re willing to look at an up-and-coming area and not something already fully established, like Queen’s Park, you’re going to find the deals. That’s single family housing. If you’re not in the market for a house, or you’re simply wondering whether you should get into the market at all, there are other options in Vancouver the Unaffordable City. You don’t have to buy property. I know that sounds counter-intuitive in a city where we’re real estate obsessed, but real estate doesn’t have to be a given. Not everybody gets married and has kids anymore. Ditto the white picket fence. And there have been many sound arguments made against it. Calculations have been done that compare the overall cost of mortgage, taxes, insurance, maintenance and utilities of home ownership against the return and it doesn’t necessarily add up to a lot. If you’re good at investing in other markets, it might make sense to rent and concentrate on building your portfolio. I know several people in Vancouver who do just that.

If you’re like most people, however, and do not have the time or inclination to study the markets, then home ownership does seem like a convenient way to sock your money away. Convenient because you need a place to live. That said, condos aren’t always the ideal way to go if you’re hoping for some kind of a return on your investment. Columnist Rob Carrick at the Globe and Mail has made a strong case against condo ownership because of the high cost of maintenance fees, shoddy construction, and the fact that they don’t all hold their value.

In Vancouver in the last few years, condos have flatlined in price. Realtors tell me we’re stuck at 2006 prices. I’ve seen units go for well below asking, including one that I’m going to write about where the owner took a $500,000 loss. That’s unusual, but the point is, we shouldn’t think of condos as an instant moneymaker. I think that people often mistakenly assume that they are a sure thing because Vancouver real estate always seems to go up, up, up. But there are a lot of new condos coming onto the market, and that has a trickle down effect on the resale market. Maybe a condo is better thought of as a piggy bank — the place to hold your money until you sell it. If the building is solid and the location desirable, it’s probably a fairly safe, conservative investment. As to whether it’s going to earn you money, that’s another matter.

Then there are those people who think outside the box and get together with friends or like-minded investors and buy a property together. They might buy a house and split it in half or buy a small apartment block. I know of a couple of UBC professors who bought a big Kerrisdale house and divided it in half, each family taking a side. I wrote about them and others who’d split homes in one of my first pieces for the Globe’s Real Estate section, back in 2008. It’s a small trend that continues. Others buy whole buildings. Last night I attended a screening of a locally made documentary called Restoring Community, and it included an interview with a couple who purchased a heritage rental complex in Cedar Cottage, the Gow Building. They restored the entire building and made a deal with the city to add townhouse infill to the rear of the lot.

For anyone who’s interested, The Goodman Report is a fairly comprehensive source for apartment or strata buildings for sale. I’m sure the logistics would be pretty complicated (and a potential nightmare if you got the wrong investors involved), but the idea of buying a small eight-unit building or whatever, and sharing the cost among friends who would also live in it, sounds like an idea worth exploring… and one way to circumvent the high cost of real estate. If I weren’t in the market yet, and I could handle the prospect of co-ownership with a friend or trusted acquaintance, I’d probably give this model a try. Of course, if I were in my 20s, I’d most likely flee to a city with a better job market, but that’s another matter…

We’ve got to get creative as we do whatever it takes to survive Vancouver.

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