Debunking the supposed drivers of Vancouver's crazy real estate market
AUGUST 25, 2011
Debunking the supposed drivers of Vancouver’s absurd real estate market
Vancouver house prices are nuts. RBC recently calculated that ownership costs associated with a standard condo in the city consumer nearly 50% of the average family income. The carrying costs of bungalows and two story homes are even more ridiculous, consuming 93% and 96% of household income respectively.
And we know what the other fundamentals look like in that city:
In trying to dismiss what is plainly obvious to anyone not living in “the best place on earth”, four narratives have developed to explain away the ‘supposed’ overvaluation issue in Vancouver. We’ve addressed three of them before. The fourth was discussed in an excellent article which I will highlight in a moment.
Let’s look at each story individually.
Story #1: House prices are not actually that unaffordable in Vancouver. The average price has been distorted by a handful of extremely expensive homes.
This story was popularized by condo salesman expert Bob Rennie and widely reported in the mainstream media. The Globe and Mail even ran an article titled, “Busting the myth of Vancouver real estate.”
"...People who specialize in housing affordability in the region say their statistics also indicate that the perception of Vancouver’s affordability problem is distorted by high prices in some places."
"...But Mr. Rennie noted the average condo in Metro Vancouver sold for a mere $313,000 last year after the most expensive condos in the top fifth of the market were taken out. Similarly, single-family homes in the top fifth of the market average $1.72-million. But once those high-end sales are removed from the price-averaging mathematics, home buyers in the rest of the region paid an average of $632,000."
Yes, you read that correctly. Vancouver is not really expensive. It's just that many of the houses there are expensive. Once you strip out the expensive ones, it's not so expensive anymore.
Rennie is clearly a comedian. You can’t make this stuff up.
Here’s the truth. We put this story to rest in a recent post titled, “Misleading averages and bad science” where we used the Teranet index to measure the rise in house prices in Vancouver relative to other fundamentals. This index uses a paired-sale methodology to gauge house price increases in certain Canadian cities. The index methodology largely eliminates the effect of a handful of extremely high or extremely low priced transactions, which can admittedly wreak havoc on averages. Here’s what the Teranet index shows:
Consider this story busted!
Story #2: Wealthy immigrants with buckets of cash have driven the market beyond the reach of locals, and it will stay there indefinitely.
Every bubble needs a “this time it’s different” story. This is Vancouver’s. This story is often told as the Hot Asian Money (HAM) phenomenon. Let me start by saying that as it pertains to Vancouver real estate, I believe this story has had a profound impact on house prices, but not in the way most would think. Bank of Canada governor, Mark Carney, in a recent speech in Vancouver, hit the nail on the head. In addressing the ‘extreme valuations’ in Vancouver, he had this to say:
"Given such developments, one cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand. The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear—greed among speculators and investors—and fear among households that getting a foot on the property ladder is a now-or-never proposition."
There it is. The HAM story is far more likely to influence the Vancouver real estate market not directly through an influx of foreign capital, but indirectly by stoking the powerful human emotions of fear and greed.
Let me clarify a point here. Are there wealthy foreigners buying real estate in Vancouver? Absolutely! But is that influx of capital sufficient to explain the rise in real estate values, and will it be permanent? These are the big unknowns.
Let me make three points on topic:
i) I have yet to hear a single intelligent answer to a very simple question. If wealthy foreigners are driving the market with all-cash offers, how do we explain the fact that BC in general has the highest debt-to-income measures of anywhere in Canada? Something about high house prices being sustained by foreign cash inflows doesn’t seem to jive with massive and rising indebtedness in the region.
ii) I’ve heard all the arguments about why folks from Mainland China are looking to get their capital out of the country: Political stability, chance to own property, prohibitive government regulations against ownership, deep belief in real estate as an asset class, better education opportunities…etc. I don’t dismiss those. I simply question whether Vancouver will always be the destination of choice given the extremely attractive opportunities to own real estate in other (truly) world class cities at a fraction of the price. This would be particularly true if (when!) real estate in the Lower Mainland starts to correct. For fun, play around with google search terms involving Chinese investors and real estate. What you will immediately notice is that there are hundreds of articles about Chinese buyers of real estate in many countries…
iii) Recent developments suggest that the debate about the role that foreign money is having on real estate is now a moot point. The top financial regulators in the country recently announced that they will be looking into this exact question. On the same day, major changes were made to Canada’s immigrant investor program. With regulators now looking into the issue and making it abundantly clear that they are willing and able to curb such inflows of foreign capital, it seems that this argument is now irrelevant. If it is the driver of Vancouver’s irrational real estate market, it won’t be for long.
Story #3: There is no more land!
Ah yes, the land constraint argument. Thanks to commenter 'Makaya' for reminding me of this one. It's true that once you move too far east or west of the city, you encounter rather rugged or rather wet building sites. The real story here suggests that construction has been unable to satiate demand due to land constraints from restrictive policy or just a shortage of building sites. Interesting argument, but again, let's let the data speak for itself. I discussed this at length in two recent posts:
Revisiting the "population growth drives house price" argument: Still leaking like a sieve
Here in Canada, the average house size is estimated to be roughly 2.4-2.5 individuals. Note the last definitive reading was in 2006. But also note the rather obvious trend:
Accounting for some new construction that replaces existing dwellings, and some construction for second homes, we might estimate that one new unit for every 2.3 new people added to a population would most certainly satiate demand.
So how has Vancouver fared in this regard? See for yourself:
You'll notice that over the past 10 years, during a time when house prices have risen over 150% in the city, there was one house built for every 2.24 new people added to the population. This level of construction is entirely able to satiate demographic demand. Note also that from 2002 to 2007, a full six year period, there was one housing start for, on average, every 1.48 new people added to the population. And this was during a time when house prices doubled! There’s absolutely no way that building constraints were any factor in the price gains seen during this period, particularly in 2004 when housing starts exceeded the total increase in population! The notion that house prices are driven by the inability of the construction industry to satiate demand due to land constraints, is completely and totally ridiculous.
Story #4: The underground drug economy is boosting house prices
I’ve had some commenters on this site adamantly insist that the drug industry is what is pushing house prices higher in Vancouver. Interesting argument. There’s little doubt that BC is Canada’s drug central, but is this the reason for Vancouver’s stratospheric house prices?
An interesting article by Frances Bula has looked at this very question. It’s well worth the read in its entirety, but I will highlight only a few key quotes:
The illegal drug trade and high real estate prices
“There are dozens of ways to launder money in real estate, from paying cash for down payments or renovations to buying houses in the names of dummy owners to establishing elaborate mortgage-repayment schemes that convert bags of dirty cash into legitimate-seeming transactions. Has the practice become so common in Vancouver it’s helping to drive up real-estate prices?”
“Does B.C.’s drug industry even produce enough wealthy people to manipulate the market? First, you’d have to know how big the drug industry really is in the province. The most thorough study of the marijuana industry, done by Stephen Easton at the Fraser Institute in 2004, estimated that our grow ops, numbering around 17,500, generate close to $2 billion in export value per year at wholesale prices; at retail, estimate $7 billion. Assuming (optimistically) Canadian middlemen get all the markup, that makes the marijuana industry about the same size as the forest industry. The $4-billion figure commonly cited seems more likely.”
“Then there are the drugs brought into B.C., like heroin and cocaine. One 2000 U.S. government estimate of total American spending on illegal drugs besides marijuana was $54 billion. Assuming that grew by 20 percent over the next decade, it would be $60 billion today. If Canada’s number is one-tenth—the general rule for economic stats—that’s $6 billion. B.C. usually accounts for at least one-tenth of national statistics, but with the heavy drug use here, assume we make up 20 percent of the market. That’s $1.2 billion in local sales (less wholesale costs and shipping). This is all tax-free, of course, which boosts buying power.
So let’s say the illegal drug market has the equivalent clout of double its retail sales: $16.4 billion. That’s still just a fraction of our economy (B.C.’s GDP is estimated at $196 billion this year).”
“…Tsur Somerville, the lanky, outspoken UBC professor who scrutinizes local real estate, thinks they do impact the market, but no more than any other growth sector. “It’s just another industry with wealth,” Somerville says. “The fact that it’s drug money makes it no different from the mining industry or any other.”
“…There’s a simpler explanation of what drives Vancouver housing prices up. Drug profits allow some buyers—just as it allows wealthy forest executives and Chinese immigrants—to participate in the collective activity of driving prices up. Housing prices in all cities go up when they experience demand shock. A big new business opens; local sales increase; wages follow. Developers gradually respond to that demand shock by building more housing. But it doesn’t work the same way in every city. Places that have market elasticity—where it’s easy for developers to build—gradually see prices return to a level in line with local incomes. As local incomes rise and fall, housing prices follow the same path.”
“But in cities that are less elastic—where there’s little developable land, or the regulatory process is onerous—housing prices rise long past the original demand shock. Speculators enter the game. Some are investors, betting the market will keep overheating. Many are simply people who buy beyond their income level, believing the housing market is worth betting on. Prices keep going up because they’ve all become part of a Ponzi scheme, betting that the next set of buyers will make the same calculation they did in deciding to get into the game. It doesn’t take drug money to drive up housing prices. It just takes buyers who act like they’ve been smoking too many funny little cigarettes.”
Well said! The Vancouver real estate market is a classic bubble, fueled by excessive expectations of market return and access to cheap and readily available credit. No one can predict exactly when this bubble will meet its untimely end, but for anyone willing to take an unbiased look at the data, the outcome should not be in question. For those interested in predicting future direction of house prices, I've suggested one metric worth keeping an eye on.
Cheers,
Ben
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44 Comments
It's sad, actually, when you consider how many people so desperately want and reason prices to stay high because they cannot fathom what would happen if they fell. Wilful blindness.
agreed, its also sad that most people don't stop to spend more than 5 mins to actually look at the facts when making probably the biggest financial decision of their lives. A healthy does of skepticism would do your average investor a world of good, good times and bad. I guess in the case of Vancouver and Canada, as with the rest of the world, we'll have to learn the hard way.
COV604, I think you're spot on there. Some people who put more time into shopping for their annual vacation than they do before purchasing their first home. When I finally do buy, I'm going to give the decision the weight and thought spending hundreds of thousands of dollars deserves. It's so easy to look at the monthly payment instead of the final cost of what you're buying.
Ben,
you also forgot the "lack of land", "best place on earth/everbody wants to live here" stories to justify high real estate prices in Vancouver...
Yes indeed. I should update that one...
"Rennie is clearly a comedian." That's gold, Ben. Gold.
Hey Ben,
Great work as usual. I believe there was a posting at VCI which looked at Landcor and Immigration stats and found that the number of "Investor Class" immigrants was well under 1000 in Vancouver.
I'll try to look it up and pass along the link.
Cheers
As I expected, the investor and entrepreneur class was capped to 700 on July 1st 2011, only to be replaced by new immigration programs.
http://www.cic.gc.ca/english/resources/manuals/bulletins/2011/ob337.asp
Same old diversion game from the government playbook...
(2010) Ontario’s new permanent residents were:
• 58.8% (69,491) in the Economic class
• 24.8% (29,333) in the Family class
• 11.8% (13,934) were Refugees
• 4.5% (5,354) were from the “Other” immigration classes
and categories (primarily public policy admissions)
PDF here: http://www.ontarioimmigration.ca/en/tools/OI_RESEARCH_STATS.html
If Canada can't find home buyers and renters, they'll just import them.
These quota changes likely won't take effect for a few quarters. Also note the investor immigrant class includes the primary as well as any dependents so the footprint in terms of primary residence purchase is reduced. In any case, nobody is holding a gun to locals' heads telling them to buy. If they don't like the prices, just say no and do what you have to do.
The other worrying story out of BC is its lackluster population growth in the past 2 quarters: http://housing-analysis.blogspot.com/2011/07/bc-population-growth-to-q1-...
Q2 data haven't been released yet. I don't know what to expect from them.
@Greg - I am not sure what do you mean by "As I expected, the investor and entrepreneur class was capped to 700 on July 1st 2011, only to be replaced by new immigration programs" - you probably mean that this new Pilot Program for Spouses/Common-law partners and Working-Age Dependent Children is going to affect the housing market?
These are the family members of the people that live and work in BC as the Temporary Foreign Workers. The program is to allow them to work:
b) allow eligible spouses/common-law partners of TFWs engaged in work within the NOC C and D skill categories in British Columbia to receive open work permits;
c) allow eligible dependents, aged 18-22, of all* TFWs in British Columbia to receive open work permits.”
how do you think it is going to affect their buying power. They could do it before already. If they finally stay here in Canada, they are the people that the economy needs if they are able to find a job.
Have to agree with Olga on this one. The Immigrant Investor program specifically targeted individuals with a net worth in excess of $1.6 million and who were able to make an 'investment' in Canada (an interest free loan to the government in reality). The new programs don't allow 'fast tracking' to citizenship on the basis of net worth.
@Ben, although I generally very much in agreement with what you said in this article and what is summarized by Frances Bula: "housing prices rise long past the original demand shock. Speculators enter the game..." The latest shock was probably the big immigration wave of the investors class when our government sold us cheaply. It is somehow corrected now and I hope will not be reinstalled again.
...but how would you explain the RBC quoted ownership costs (standard condo nearly 50% of the average family income, bungalows and two story homes are 93% and 96%). If about 70% of the people here are homeowners, the ownership cost burden like that would kill the local retail outside of the property market. But it did not happen... I told that before and I keep saying that the stats and the economy analysis based on these stats are grossly flawed. Richmond for example is the town with one of the lowest per person income in BC - and some of the highest home prices in BC. If you calculate their income to home ownership ratio, it will be more then 100%.
Most of my nice Chinese neighbors generally have no income to report at all, because they do not work. Some of them own businesses here in BC - but I guess they are all officially in red. Many of them have investments overseas and never pay taxes here, just consume whatever this country can offer. Many of them happily participate in this Ponzi scheme taking the HELOC from their houses. But the activity is visible down now, but it might be seasonal too.
A little hard earned money can get temporary worker anything they want.
http://www.bcfamilylaw.ca/2011/08/15/bc-immigration-and-canadian-immigra...
A little hard earned money can get temporary worker anything they want.
http://www.bcfamilylaw.ca/2011/08/15/bc-immigration-and-canadian-immigra...
Stop looking at stats and get real...
Get real, Greg. You think these are the people driving Vancouver's market to extreme heights? I'm sure temporary foreign workers making local incomes will be pushing prices to the stratosphere....
I don't know, will they Ben?
McGuinty: Give Ontario more power over immigration
-According to a government news release, immigration accounts for 47 per cent of Ontario's workforce.
-The province's finance ministry projects that immigration will account for all net growth in Ontario's working-age population by 2014.
http://toronto.ctv.ca/servlet/an/local/CTVNews/20110727/mcguinty-ontario...
@Greg yes but the temporary worker inlet is absolutely nothing new, going back years. The issue for certain markets like (parts of) Vancouver and Toronto is that ostensibly uber-rich foreigners are buying property with their foreign-earned capital and this is producing unhealthy distortions in terms of affordability and the economic viability of base industries who are having trouble attracting "top talent". 10% of immigrants to BC were from China or Taiwan through the investor immigrant class alone. This number will drop off significantly; going forward there will be a much more even playing field between wealth classes of immigrants, who must compete on skills and merit, not the size of their wallets. That's a big change and one, I perhaps naively contest, that is in-line with the Conservative ideal.
More basely, Canada has a currency valuation problem and this isn't helped by foreign inflows. Every little bit counts.
These are not the folks who would have qualified under the immigrant investor program. You answered your own question. These are people participating in the workforce and making local incomes. Not the same at all...
Are you saying that the investor and entrepreneur class is the only way for capital flight to enter Canada?
Not at all. Just pointing out that the programs you cited are not catering to the ultra wealthy....which Vancouver needs to sustain their ridiculous house prices.
What makes you think skilled worker applicants are not wealthy? You should get in tune with what's really going on and how the system is being abused at all levels.
If a nanny can do it, so can a millionaire.
http://www.torontosun.com/news/canada/2011/01/19/16954701.html
If you insist that it must be charted to be credible, study BC income gap changes and interprovincial/intraprovincial migration data. That should help explain what's going on there.
Uh, oh! Animal Spirits do seem to reveal themselves whenever the topic of "new settlers" comes up!
Come on, you old white settlers, that is a bad and potentially dangerous 'animal spirit'. So irrational.
@ Ben, your first graph shows that income doubled over that period - try adding what happened to interest rates during that period! They ARE 70% LOWER. So you doubled your income, and are borrowing at much lower rates. You can do the math and we both know your first graph is pointless.
Ben, what you fail to understand about Vancouver is that nobody works and it represents more of a resort town. If you went to Muskoka and measured the home values vs the local income, you would also be in shock and awe. You need to think about Vancouver in the same way. Otherwise, you are basically saying that everyone is starving and paying mortgage payments. That is not the case. Rather then trying to be a communist and make the world fit into your graphs, try taking the market for what it is and understanding other reasons.
If you are trying to find an inflection point in anything in real estate, you will continue to have it wrong for sometime. Understand the basics > Income>low rates>heloc>gdp It will slow down, speed up, but to think it will stop and go in reverse as you point to the US all the time. Canada is not anywhere near that situation.
"You need to think about Vancouver in the same way."
You are ASSUMING that Vancouver will REMAIN the same way.
>>>Ben, what you fail to understand about Vancouver is that nobody works and it represents more of a resort town.<<<
Hilarious! The real estate pumpers are sounding more desperate and ridiculous by the day.
Keep 'em coming, this is pure comedy.
"The Vancouver real estate market is a classic bubble, fueled by excessive expectations of market return and access to cheap and readily available credit." - Ben
Cheap and readily available credit is available in all of Canada, not just Vancouver. Which leaves "excessive expectations of market return" as your definitive explanation for the Vancouver real estate market.
That is simply an insufficient conclusion based on unverifiable speculation, therefore it qualifies as an opinion. That you are convinced that your opinion is correct, does not make it so.
It is human arrogance that convinces us that we must be able to explain every phenomena, but such is not always the case. Sometimes we have to admit that we just don't know.
The Vancouver real estate market clearly defies all logic as every conventional economic metric does not compute. I remain unconvinced however, by any of the theories that have been postulated thus far, and must reluctantly conclude that the Vancouver real estate market remains totally inexplicable.
The David Suzuki existential theory of Vancouver real estate prices. Why look to data and reason when they have been so poor at accurately predicting the previous follies of men?
"That you are convinced that your opinion is correct, does not make it so."
Same applies to you.
If you admit that you don't know, what backs your strong opinion that you think Ben is likely wrong?
I would suggest that you have misinterpreted my previous post. I concluded that Ben's assertion is an opinion, one that cannot be supported by empirical evidence. I do not "know" if he is right or wrong.
I am also willing to admit that I do not know how to explain the Vancouver real estate market, that there could be factors that we haven't considered, and that it is sometimes ok to say, "I don't know."
You're right, it is sometimes (I would argue always) OK to say, "I don't know." However, it is NOT OK to say "I don't know, but you're wrong." If you don't know, how could you appear so sure that the other person is wrong?
What troubles me in this situation is the position of the authorities. The stats like this have to ring the bell for the watch dogs, when something on a large scale is going on under the official radars - probably under reported incomes on a wide spread basis, but they do not look interested enough.
Just a few anecdotal examples of something that looks strange here to entertain the public here.
We recently had a discussion in a local newspaper that often the overseas and local speculators avoid paying the capital gain tax on the RE resell with the author saying that overseas investors have no right to get the property sale tax exempt as a principal residence once a year, but the RE agent answering said that there they have no authority to verify what is the residence of the seller is and that often there are few people in that seller's side pool - when the money are coming from one person and the "primary residence" is coming from the other person - someone local takes a HELOC for that deal, signs the contracts and claims the primary residence and the overseas person brings the money to pay out the other person's HELOC.
Something similar I encountered when I sold my townhouse. The wealthy Chinese buyer from the mainland China could not bring all amount in cash from overseas (some limitations on the other side, their country is not that eager to let them take the money elsewhere but rather prefer it to be spent inside of the country). So they did some funny deal with their friends here - their friends took a HELOC from their property and co-signed the mortgage. As I understood the buyer gave them a piece of the commercial action in China - some interest in the buyers factory there (may be the stocks). So now they are going to bring the allowed amount in cash from China from every trip to pay out the HELOC and to live on, and their income in China will remain unreported.
I am not sure though as how common it is, because I also know lots of local people that are actively participating in this "now or newer" proposition re. their chance to own (and to sell when retired) RE, attracted by the low mortgage rate.
I think what's wrong here is that many are assuming that house prices are only being driven from high valued homes, when in reality, the fulfillment of lower income properties has a 'bottom-up value effect' that squeezes and segregates the middle class.
On top of that, Canada indeed has a major immigration problem that is being abused. This explains the increase in renters and declining manufacturing sector (due to a lack of unskilled workers and no business investment) http://www.immigrationreform.ca/
"It is significant that of the 281,000 immigrants who arrived in 2010, only 17 per cent, or 48,800, were skilled workers selected for their potential contribution to our labour force. The remainder were spouses and children accompanying them, relatives sponsored by people already in Canada, immigrants sponsored by the provinces, refugees or others accepted for humanitarian reasons. So much for helping our economy or labour force! "
Low income housing in high demand.
http://www.straight.com/article-412656/vancouver/lowincome-housing-conce...
THINK of the governments options in this situation considering its failure to create jobs in manufacturing and its revenue now being heavily concentrated in the housing market.
1) raising interest rates would slow housing demand, squeeze homeowners and send many into foreclosure. Thus, reducing government revenue.
2) capping immigration will slow demand for housing, reduce renters, housing starts, construction, RE, ect. Thus, reducing government revenue.
3) stimulate the economy again. This will only launch inflation from current levels which is already above the BoC's target. In turn, it will send homeowners broke since their income has not kept pace with 'real' CPI. Thus, reducing government revenue.
4) i) Let the economy stagnate (repression) in order for homeowners to pay down their debt. ii) increase immigration and raise revenue via affordable housing. Unfortunately, this option will destroy the middle class and widen inequalities.
The government of Canada is in a very dangerous situation as any of the above actions are uncertain and will have risky ramifications attached to them. The Canadian economy now dangles from a single thread.
BC HST has been repealed.
http://electionsbcenr.blob.core.windows.net/electionsbcenr/REF-2011-001....
Typical ‘bear’ story about YVR real estate…read it a thousand times, nothing new here except the drug money correlation which just discredits this guy even more for thinking that knowledgeable people even believe that to be a factor in YVR housing prices…
I'll make you a deal. I'll buy a DT YVR appt and you rent it off me for 25 years. You pick the condo $600K or less. We can set 5 year leases for the exact carrying costs of the condo using 20% down...Every 5 years we can renegotiate the lease based on mortgage rates.
After 25 years of you renting the condo I will then own it...sound good?
I`m sorry...is there a point made by the author that you are trying to discredit?
Not a point...just the entire article and author in general...
You did a terrible job of it. Note the use of stats and facts to support the author`s position. What have you advanced beyond "I`ve heard it before therefore it must not be true?"
Step up and discredit the man if you have something to say. But discredit him in the same way that he has discredited the 'bull' stories in the article above. You`ll note that discrediting someone using factually-based arguments rather than conjecture is far more challenging.
Let's hear it.
It has been more than 10 years of a bull market for Canadian real estate, if our market had corrected conclusively in 2008 we would be in much better economic shape now, instead the housing prices kept inflating.
Now it is time for a correction. I would predict up to a 30% drop in Vancouver and Toronto.
The signs of the correction will become apparent this fall as the austerity measures by US , Europe and Canada take effect and the economy starts to shrink the housing market will start its painful process of correction. Low rates will not be enough to save this market as they did not save the US or the Japanese housing market either.
Watch for the condo market to dive first as the majority of the speculators gravitate to it
for easy profits.
Ben,
What has the number of unit sales done in the past few years? I have found that there is an interesting phenomenon that occurs in the housing boom busts. First the total units sold peaks and begins to decline (a good proxy is total sales in dollars). From that peak it takes from 18 months to two years until the average price peak and then the decline begins in earnest. It generally takes about 3 years from the avg price peak to bottom.
Using that idea, where is Vancouver in the cycle?
Cheers, Chris
Ben, I am guessing you don't own a house, hoping the market corrects. You might consider some other variables. In all of Canada, save vancity, it gets to minus 20 or worse and you have to shovel snow for half a year. Interprovincial migration is another variable. people simply don't leave van for any other city unless they get paid a lot more.
http://www.theglobeandmail.com/news/national/time-to-lead/interprovincia...
My point is that there are many other reasons for the vancity anomaly. I bought a condo last year in down town. My friends rent. Their rent is higher than my mortgage and their place isn't as nice. Don't discount emotional drivers like pride of ownership or the Realists argument. You can bet against him and play academic economist, present insufficient data, and always pay his mortgage by renting. Economists are great at explaining the past, so they think, but there are no economists that can predict the future and if there are such economists, they own their house, guaranteed.
So if I understand correctly, your argument to support the current real estate valuations are based on warmish (but wet) weather, a population growth rate that's less than the country's average over the past 10 years (1.6%....interprovincial migration is but one component) and that is creating a level of demand that has been totally met by the construction industry. Oh...let's not forget the fact that mythical economists who could predict the future would be 'guaranteed' to buy their homes.
Wow....that was convincing.
I was always of a belief that prices in Vancouver would dramatically fall. While others were 'blindly' buying under the pretenses that prices only go higher I was on the sidelines waiting to have the last laugh. I guess I really showed them. I still do believe that there will be a pullback in prices from the current all time highs but I highly doubt that we are in store for the US style collapse of real estate prices. There are still too many local people with dry powder on the side waiting for the market to drop to potentially dip their toes. From the investment purposes I would never buy a property but if you need one to live in then it might make sense even with these ridiculous high prices. Some of my friends that rent old 1B apartments in DT pay around 1.5k a month. With a reasonable down payment on a 300-330 condo your mortgage rate would still be around that same amount.
Just the other day I went to see a new duplex in New West that was listed for 699k. The first day of showing was Sunday and on Monday there were 7 offers on it and it sold for 715k.