Something is grotesquely wrong with Vancouver’s housing market, and the time for denialism is over
The realisation that something is grotesquely awry with Vancouver’s housing market has reached a tipping point.
Fuelled by the special sauce of Chinese wealth - and good old Fear of Missing Out - prices have decoupled from the local economy, with an average detached price of about C$1.4 million (HK$8.9 million). So far, so normal for Vancouver.
But the past couple of months have witnessed a kind of awakening.
It hit a nerve. Fellow millennials jumped on board #donthave1million, posting their own tales of real estate woe.
The various online and media rumblings will take solid form at a rally for affordable housing in downtown Vancouver on Sunday at noon.
Foreign money might be a factor, concede some, but it must similarly influence other markets, right? Not really – since immigration data demonstrates that the influx of rich immigrants to Vancouver (80 per cent of them Chinese) is unmatched by any other city in the world, at least in terms of wealth-migration schemes that clearly define asset benchmarks.
Others seek to frame unaffordability as inevitable, since Vancouver is a city of limited land supply. But plenty of other cities are in the same boat: New York and Singapore spring to mind. Both are expensive cities, but Vancouver has left them in the dust in terms of unaffordability. If Vancouver (price/income ratio 10.6) could achieve the affordability of New York (6.1), or Singapore (5.0) I’m betting that Eveline Xia would be dancing down Main Street.
Surely Vancouver has always been unaffordable? A quick check of the stats will show that as recently at 10 years ago, Vancouver’s price/income ratio was in dancing territory, at 5.3.
As for the perennial low-rates argument, pretty much everywhere has low rates. It tells us nothing about what makes Vancouver’s market special.
An exceptional cause must be found for an exceptional situation, and for Vancouver, that can be found quite easily in wealth migration, which exploded in the past decade.
The flipside to these various misunderstandings is the current focus on Australian-style restrictions on foreign ownership (Canada doesn’t even bother to track foreign ownership, let alone restrict it). Such restrictions might be an admirable goal, but I very much doubt they would have great downward impact on Vancouver prices.
That’s because I have not encountered a single real estate purchase in Vancouver that would have definitely been proscribed by restricting “foreign” ownership. Not one. The concept of the foreign investor dominating Vancouver’s market may indeed be a myth, since “foreign” buyers typically have residency rights or dual citizenship in Canada, or are able to make their purchase via a suitably endowed proxy (ie: a spouse or child with residency).
Foreign buyers probably aren’t to blame for Vancouver’s unaffordability. But foreign money probably is. And cracking down on the foreignness of funds will prove much harder than dealing with the foreignness of buyers, even if the will to do so exists.
Another factor often neglected is that a successful “fix” for unaffordability would crush a great many people, probably as many as it helps. In peril would be a real estate and development industry that employs thousands. Anyone who already owns a home would also be at risk. Thousands of elders banking on their homes as a retirement nest egg. Thousands of recent buyers facing the terrifying prospect of negative equity, with mortgages far exceeding the value of their homes.
It’s no surprise the politicians are treading carefully.
Yet it would be a mistake to weigh the issue in cold terms of winners and losers, cost and benefit - because it is a fundamental matter of fairness. Is it fair that so many people have been so vastly enriched, through no great credit of their own, at the expense of so many who have been impoverished, ruined, or simply forced out of their city, through no great fault of their own? The dividing line isn’t one of intelligence, or diligence, or any other worthiness – mainly, it’s a demarcation of age, between those who were old enough to have bought before the wildest market rises, and those who were not.
Wherever you stand on the matter, the time for denialism is over. At the very least, Vancouver deserves its long-overdue debate about the root causes of the unaffordability crisis, and what to do about it.
[*Update: This story has been updated to include a link to the latest Demographia study and to describe its scope]
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The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email [email protected] or on Twitter, @ianjamesyoung70 .