A Critique of Vancouver's 'Downtown Plan'

This long but well written critique of Vancouver's Downtown Planning in Canadian Architect is well worth the read. Writer Trevor Boddy comments on Vancouvers habit of replacing office space in the downtown core with condo's and mentions the alarming fact that one third of Vancouver's head-office jobs have left Vancouver in the last six years while Calgary has seen an increase of 64 percent. Are we forgetting about jobs in the midst of our condo mania?

"A revealing example is the fate of Rhone and Iredale's 1969 West Coast Transmission Tower on Georgia Street, recipient of many engineering awards for its Bogue Babicki and Associates-designed cable-hung forms, converted recently into condos and renamed "The Qube." Many more of downtown's dwindling stock of towers would have met the same fate, had City Council not slapped a moratorium on such conversions last year. Although hard to grasp for many planners--especially Americans or Canadians in slow-growth cities--too much housing may be killing peninsular downtown Vancouver, especially the mono-form, mono-class, crank-the-handle towers of recent years."

and what article mentioning condos in Vancouver would be complete without Bob Rennie?

"..Leading this trend is the extremely influential and political condo super-marketer Bob Rennie-topping Vancouver magazine's 2005 list of most influential Vancouverites. As a society we may come to regret a scene in which 15 percent of the cost of new housing goes to marketing, but only five percent goes to all design fees. With the exception of a token condo tower by Arthur Erickson for Concord Pacific, Vancouver's finest architects are largely conspicuous by their absence in the downtown boom."

Boddy has lots of not-so-nice things to say about the state of architecture and design in Vancouver. He refers to the corner of Richards and Nelson streets as "a particularly bleak concentration of the Beasley-era architecture of Vancouverism", but wraps his critique up with a postive note, well.. positive other than the 'sharp recession' bit.

"Vancouver will succeed--despite its resolutely lame mass media, the rewarding of its architectural bottom-feeders, its unsettling convergence of developers' and planners' pretensions--because of the depth of passion many of us invest in it. We have let the rhetoric of real estate supplant the craft and consciousness of city building, and a sharp recession is what will soon set things right. The bones of a great city are coming into place, and now we need time and public wisdom to put some flesh on it. Love-hate relationships are always signs of a love frustrated, and Vancouver is now ours to make or break."

There are a lot of good points in this critique from an architectural point of view, ranging from design to planning to jobs - definately worth the read if you have the time.

Vancouver Housing Market - is the psychology shifting?

Earlier this summer it seems like everyone I talked to about real estate thought there was only one direction prices would ever go - Up. Several co-workers we looking for places to buy before they were 'priced out' of the market, and everybody knew somebody who's condo had gone way up in value and of course no one wanted to miss out of the money train. But lately things seemed to have changed.

Yesterday the topic came up at work and the majority of coworkers are now expecting a crash or 'correction' - this is a dramatic shift from just 5 months ago, within the same group of people. A few people who were home shopping in my office bought this summer, and the one that hasn't has an 'absolute top price' for a condo that is more than $100k less than todays prices - he's interested in buying, but at todays prices he'd prefer to rent and be able to take time off to travel and snowboard. Everybody else either already owns or isn't interested in looking to buy.

I would have taken this discussion as an isolated incident, but then I saw bc_cele's comment over at the Vancouver Housing Blog mentioning a very similar experience from the very same day, and more and more I'm running into people with negative opinions on real estate in vancouver - from dissapointment at being priced out to downright ridicule of the market. With dissapointing sales numbers in July have we seen the peak of the market, or will the August numbers jump right back and start climbing again?

Condo's in Vancouver are not that expensive.

Looking for a Condo? Something a bit unique? Something that really stands out? Well you'll have to go to New York to get it, and prices start at about $29 Million USD per unit. Just don't settle for the second from the top, you're better than that.

House Prices: Sydney Australia vs. Vancouver BC

A lot has been made recently of this article in the australian press reporting on a house in Sydney selling for 42 percent less than it sold for three years ago. Housing market bears are quick to point to this article as evidence that "yes, actually real estate prices DO go down, sometimes drastically", while people more bullish on the Vancouver market point to the fact that "this is only one house out of many and the real decline in house values overall has been closer to 15 percent or so, besides vancouver is different because the olympics are coming and I'll sell just before the crash anyways".

But I say you're BOTH wrong, and you're not looking at the big picture. You're forgetting one very important fact, and that is that Syndey Australia is on the other side of the world from us. This point is illustrated above and is the cause of a common but major misunderstanding regarding australian housing market data. First off lets look at a graph of that house price:

Looks bad doesn't it? You might look at that price drop and get a bit freaked out about the possibility of prices dropping in Vancouver just after you buy that shiny new $400k condo right? But that feeling is caused by one common amateur mistake- you are failing to make hemispere adjustments to that data. Australia is on the other side of the earth, which is why we refer to it as 'down under'. Before you attempt to interpret any Australian real estate market data you need to make one major adjustment, like this:



There! That looks a lot better doesn't it? Look at that rise- It's bold, steady and strong. Just like the Vancouver market!

US home sales dropping.

This article in today's vancouver sun says that home sales in the US this July were the lowest they've been since January 2004. Dropping home sales across the US have pushed the inventory of unsold homes to a record high:

"The latest snapshot of housing activity was weaker than analysts anticipated. Economists were forecasting the pace of sales to fall to 6.55 million.

"The housing sector is fragile," said David Lereah, the association's chief economist.

The median price of a home sold last month was $230,000 US. That was up just 0.9 per cent from the same month last year and marked the smallest year-over-year increase since May 1995. The median price is the middle point, where half sell for more and half sell for less.

The inventory of unsold homes in July rose to a record high of 3.86 million. That represents a supply of homes still available for 7.3 per cent of a month. That is the longest period to exhaust the supply of home since the spring of 1993."

contrary to the opinion that housing exists only in local markets, these drops happened across the US - In the northeast sales dropped by 5.4 per cent, the Midwest saw a drop of 5.9 per cent while the West dropped by 6.4 percent. The South held out the strongest with a sales drop of 1.2 percent.

The concern in the US is how the housing market slowdown will effect the economy overall:

"One of the things that Federal Reserve Board Chairman Ben Bernanke and his colleagues are watching closely is the housing slowdown. If home prices and sales were to crash, that could spell big trouble for the overall economy. Thus far, Bernanke has said the market's slowdown has been fairly orderly and smooth.

Lereah said he still expects a "soft landing" for the once high-flying housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again - as some analysts have said is a possibility."

Will we be able to make enough money off of the olympics to keep a frail US economy from effecting Vancouver?

Vancouver: the only city in the world?

So Vancouver is the most expensive city in Canada and getting more expensive - If you are renting or thinking of buying in Vancouver here's a question for you: Are you tempted by any other cities in canada or the rest of the world? What keeps you in Vancouver - quality of life? friends and family? work? some combination of those items?

If you've considered moving what motivates that line of thought? The cost of living here? Increased career possibility? Change of scene?

How do you FEEL about Vancouver right now?

There are still good deals out there!

Check it out! If you bring cash this house will only cost you $462,000.. You might even get a deal as the seller is 'motivated' since at least April or so. It brings in $1450 per month in rent too! Can you make those numbers work?

I used the ever handy mortgage calculator to discover that if you put 5% down you'll need an annual income of $157,631 to buy this house, so it's quite the status symbol. And yet some people claim that Vancouver is in the peak of a bubble. pshaw!

Is Vancouver 'Severely Unaffordable'?

I just found this story in the sun from way back in January - It's about a study that ranked cities housing affordability based on the ratio between median house prices and median income, and guess what - Vancouver was rated worst in Canada, and 15th worst city in the world for affordability at that time.

This is the second year for the survey, which was developed to compare housing affordability around the world, the report's co-author Hugh Pavletich said in a telephone interview from New Zealand.

"We felt there was a desperate need for an easily understood measure of housing affordability both within countries and across borders," Pavletich said. "So it doesn't matter what currencies we're talking about, or even the house prices and the household incomes. The key thing is the multiple of household income it takes to buy a home."

This multiple should not be greater than three, Pavletich said. He called Vancouver's index of 6.6 "bloody absurd."

"Historically back in the 1970s and 1980s within the property industry, it was always considered a rough rule of thumb that people should not have to spend any more than three times their household income to buy their homes," he said.

Now as house prices get "out of hand," this guideline has faded from public view, Pavletich said.

See? Things are different now! And since things are different that means the prices will never go down. Maybe 'bloody absurd' is the new reality?

In unaffordable cities, the key problem was the "strangulation of land supply" by local government, Pavletich said. Not allowing enough land to be developed was creating an artificial scarcity which is driving prices up, he said.

Three cities in Canada made the most affordable list with Winnipeg in third place worldwide with a house price to income ratio of 2.4, followed by Edmonton and Quebec City, tied at 14th with an index of 2.8.

The United States, with the world's most unaffordable real estate, also had the most affordable, with indices of 2.2 in both Buffalo and Rochester, N.Y.

Pavletich hopes the survey will get people to question housing affordability and urge governments to actually set housing affordability targets.

Hmm.. I wonder how much of a role government can play in prices. Obviously things like interest rates and employment factors have some impact on prices, but is the current boom due to 'not enough land' to build on? If they opened up the land just northeast of terminal and main would that make a difference? Should they open up Stanley Park, Jericho beach park and the UBC endowment lands to condo developments?

Buy or Rent?

Are you paying someone elses mortgage? Probably not if you're renting in a building thats just a few years old. The gap between rental costs and owning cost have grown rather severely over the last few years, a fact that makes some people wonder whether buying makes financial sense. This point is debated in an article in todays business edge.

"Today there's more pressure to make your best offer first, and you don't get the chance to come back with a counter-offer, usually," Mastracci says.

"The danger is always that the market gets away on you. If it gets away and prices rise dramatically, as they have in certain locales across Canada, it really hurts when you go and plunk your money down on the table for your first purchase."

According to a recent housing affordability report by RBC Economics, home prices continued rising faster than incomes during the second quarter. B.C. remained the least affordable province, but Alberta's energy boom sent the cost of a two-storey home jumping $28,000 in just three months.

However, even in a torrid market "you shouldn't think this is really going to be the end-all and be-all, your best investment," Mastracci cautions. "It may not be - especially if you buy at a high time."

Over 20 to 30 years most homeowners might get an annualized return of four to six per cent, he estimates.

So if you buy now and hold for 20 or 30 years you might make six percent per year. What if you had bought in 1980 or 1991? What if you buy in 2011?

What if a condo rents for $1500 per month vs. a monthly mortgage payment of $3000. What if you were incredibly disciplined and you put the $1500 monthly difference into a savings account or GICs?

What if the housing fairy came to vancouver and magically turned all homes here into wonderful, solid, trouble-free buildings?

That would be awesome.

Slowing market 'returning to balance'

According to an article in todays Province CMHC has gotten out the crystal balls and they forsee a 'return to balance' in the next year or so in the Vancouver housing market. Hopefully they're reading the tea leaves and not smoking them. As prices and interest rates have inched up over the years they believe that the recent slow-down is a sign of things to come:

"In general, we see a trend toward more balanced conditions next year," said Cameron Muir, senior market analyst for CMHC in Vancouver. "In the last few years, most markets in the province have been in the seller's favour.

"The erosion of affordability is going to begin to impact the market next year. High home prices and increasing interest rates will make housing less affordable and squeeze out buyers at the margins.

"With fewer first-time buyers able to afford homes, it will ripple through the whole market.

"It's not a disaster, it's a return to balance," Muir added.

Ever seen a see-saw when one person gets off? The unlucky fella left on the other end usually ends up with a bloody nose.

Olympics are expensive

I don't think that anyone could have predicted this, but apparently it is quite expensive to host the Olympics. Original cost estimates have this way of ballooning over time and suddenly people aren't so keen on paying for it all.

Today's tale of olympic price over-runs is in the vancouver sun where we learn that building the Paralympic sledge hocky arena may now be too expensive for Whistler.

The price tag for Whistler to build a bells-and-whistles 2,750-seat arena in the village for Paralympic sledge hockey may force the resort municipality to abandon the project.

It could also result in much of the 2010 Paralympic Winter Games being moved to Vancouver.

Nearly four weeks after telling a council meeting that the cost, now believed to be in the $45-million to $50-million range and the long-term operating costs, were "more than we can comfortably afford," Mayor Ken Melamed says it may be too late to salvage the project.

"There comes a point in time when we can't physically build it in time," Melamed said. "Frankly, we may have crossed it."

Meanwhile Athens struggles to find a use for Olympic venues built there for the 2004 olympics.

In what critics say is a checklist of how not to do things for future Olympic cities, especially London in 2012, Athens is still struggling to find use for the state-of-the-art venues it paid more than 3.5 billion euros ($4.50 billion) to build.
Promising to showcase modern Greece, the Games went off without a hitch despite years of construction delays, but left a legacy of over-spending and venues in a state of abandon.
The wild water canoe and kayak facility was hailed as the world's best, as were the rowing centre and the weightlifting arena.
But two years after the Games that cost a record 12 billion euros, most venues remain fully or partly shut as the government desperately seeks private investors, the only viable option to recoup some of the funds pumped in to build and maintain them.
"We cannot keep them as Soviet-style sports venues alone. What would Greece do with the world's best canoe and kayak facility?" said Christos Hadjiemmanouil, the head of the company managing most Olympic venues.

How much are you paying for a burger?

A study released by UBS bank compares the cost of living in different cities based on the average number of minutes required to work to afford a BigMac at local market prices. At the very top of the results is Tokyo, where average wages mean 10 minutes of work equals one Big Mac. Unfortunately it doesn't look like they included Vancouver in the study (come on guys! we're world class!), but in Toronto the average wage means 14 minutes of work to buy the burger.

Tokyo scored at the top of the survey, which aims to eliminate variables such as exchange rates, even though it is one of the most expensive cities in the world, UBS said in the Prices and Earnings report released Wednesday.

“Wages only become meaningful in relation to prices — that is, what can be bought with the money earned,” it said.
The bank calculated the “weighted net hourly wage in 14 professions” and divided it into the local price of “a globally available product,” for which it chose McDonald's flagship hamburger.

It seems very strange to me that even though they have the highest purchasing power, a graph of Tokyo land prices over the last 20 years looks like this:



What happened there? Maybe there is no fundamental link between real-estate prices and local market earning power. Another example: the price of an average house in Vancouver will get you two average houses in Toronto, but the average income in Toronto is higher than Vancouver. For 2004 statcan says average family income in Toronto was 60,100 while in Vancouver it was 56,200.

Obviously income is not the only factor in local market value, but how much are we betting that future demand will hold if local economic factors don't change dramatically?

Building cheaper condos

Builders are building cheaper condos, apartments and townhomes because that's what the market is demanding. Solid well-built homes are no longer fashionable as buyers now desire homes made out of cardboard and duct tape. New material technology makes the leaky condo crisis a thing of the past as new homes can simply be wrung out by hand if they become too moist.

"Canada's construction boom continued in July, but Canada Mortgage and Housing Corp. says it is seeing a swing away from single-family units towards cheaper condominiums, townhouses and apartments."

Is that evidence of increased demand for this kind of dwelling or are the limits of affordability being reached? Ah! Here it we are, its a 'growing interest in less expensive dwellings':

"Strong multiple starts reflect a growing interest in relatively less expensive dwellings," said Bob Dugan, chief economist at CMHC's market analysis centre.

Single-family homes have been trending down for several months, reaching their lowest level of the year in July. It is a trend that Dugan expects will continue for the remainder of the year.

"Rising prices and slightly higher mortgage rates are expected to soften the demand for new homes in the second half of 2006,” he said."

article on CBC

Real Estate Boom - pity the owner.

I think there is a tendancy among people looking to buy in a booming real estate market to think that people who bought several years ago have it easy. If you are out house-hunting, looking at the way prices have risen dramatically over the last couple of years, you probably have a couple of worries: What if I don't buy and prices keep going up until I can't afford to buy anything? Or the flip side: What if I buy and prices drop wiping out my downpayment or interest rates go up and I can't afford my mortgage?

These are all valid concerns, but what about current owners? Owning real estate in vancouver is not the panacea that some might think, and some of the same concerns affect the comfort and security of people who bought years ago. If you own and prices are high your money is only paper-wealth. Until you sell and actually capture that money it merely means that your property taxes are higher. I suppose it also means that you can take out multiple mortgages based on the paper value of your property, but that's just more debt, not more money.

So what do you do as an owner after seeing prices rise like they have? If you sell and grab the cash what do you do with it? Buying another home in Vancouver just means you're buying at current values, which doesn't add anything to your bottom line. With the high Canadian dollar and market starting to falter in the US it might be a good time to think about investing there, but do you really want to move? Do you rent and wait to see if prices drop or level off?

Either way it's a gamble. Bubbly real estate markets can be emotional rollercoaster for owners as well as sellers and buyers. What does the future hold? We'll just have to wait and see.

Bad morning America

Gee whiz! Newsweek just can't stop stomping all over the US market. Here's another article filled with gloom and doom about the real estate market there, seems like they're printing one or two a day now:

..those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regions—existing home sales across the country have slipped for three months straight and new home sales nationwide have declining as well—there are growing fears of a looming crisis.

Aren't you glad it can't happen here? At least we don't have the ridiculous volume of 'creative' mortgages. I do wonder though - is what's happening south of the border going to have a tightening effect on the availability of credit here?

Mountains of Debt? Ignorance is Bliss.

There's an interesting Newsweek article on MSNBC.com about the growing debt problem in the USA. In 1952 the average debt to income ratio was under 40%. Now its 126%. In BC we spend an average of $1.07 for every dollar earned.

So is this really a problem?

I don't know because I have discovered the power of ignorance. Though I am occasionally bothered by doubts, I am embracing my inner ignoramus and plowing head-first into the future. What's my secret? I have fashioned a sturdy hat out of these shoe boxes.

I highly recommend it.

Vancouver Real Estate: Now is the best time to buy.

So maybe you've seen the news on TV or in the newspapers - The numbers are out and this July saw a big drop in home sales - it was lower number of homes sold in vancouver than in any july in the last five years. This can be a troubling sign for those thinking of buying into the vancouver market, particularly in the condo market where some 'experts' claim that townhomes and condos are overpriced and due for a 'correction', or that vancouver real estate is in a bubble and we've reached the top of the market.

But look at it this way:

There has never been a better time to buy real estate in vancouver.

How can I say that? Does that mean I think that prices will keep going up and up after this pause? Do I have some inside information indicating that july is an abberation and the market will recover and prices will start rising again? No. By all indications it looks like current valuations are at their peak for some time and rising interest rates or any other economic hickups could result in price drops, particularly in the condo market. So how can I say that its a good time to buy?

Simple. It's all about value. Condo's in Vancouver have never drawn a higher price than they do right now, and as anyone with even the most rudimentery economics education knows things with the highest prices have the highest value.

What does this mean for you? If you buy now, you are likely to find a 800 sq ft condo in vancouver for around $500k. This same condo may have been priced as low as half that price just 3 or 4 years ago. If prices drop in the future, that means the value of the condo has dropped, and which would you rather have: a $500k condo or a $250k condo? A home is not just an investment- it's a statement on who you are and if you're the kind of person that wants a highly-valued condo then NOW is the absolute best time to buy real estate in the lower mainland!

Oh the irony

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