Blog › March 2013

Million-dollar question: Vancouver-area survey reveals suburban dreams

If you had $1 million, would you buy in Vancouver, or would you scuttle off to the suburbs? REW's biannual survey results suggest a love of picket fences.

How do you feel about buying a house?

Is it a good time to buy a home in Vancouver? Is it a good time to sell? Real Estate Weekly (REW) has released the results of its biannual Greater Vancouver real estate consumer confidence survey, which gauges the perception side of Lower Mainland real estate market, and the results are surprising.

As it turns out, would-be home buyers are more confident than would-be home sellers, by a widening margin.

Do you think it’s a good time to buy a house or a condo in the next three months?

When Mustel Research Group asked, "Do you think it’s a good time to buy a house or a condo in the next three months?", 54% of respondents answered "yes". This is a slight majority (for the first time in a year), though the margin of error in the survey is 4.1%. Depending on your own level of optimism, there could actually be more confident market-watchers, or few enough to keep them below the 50% mark for another season.

So, why buy?

  • 23% of those optimistic about buying cited falling prices (or some variation of the housing-bubble). This was also the #1 reason respondents gave for not wanting to buy, by the way.
  • 20% cited low interest rates.
  • 18% pointed to an overstocked market: plenty of choice.

You don't have to be a sociologist or statistician to predict the top reasons for responding "no": high prices.

Do you think it’s a good time to sell a house or a condo in the next three months?

Okay, this is where things get interesting. When asked, "Do you think it’s a good time to sell a house or a condo in the next three months?", 63% of respondents answered "no". That's 30% more people saying "no" than we saw in March 2012.

Not that surprising, really, presuming that the would-be sellers are somehow aware of this increase in buyer optimism: buyers are more inclined to buy when they perceive advantage (lower prices or future increases in property value, for example), which equates to disadvantage in some form to the seller.)

Why the doom and gloom, sellers?

  •  Nearly half of those who think selling is a bad idea pointed to dropping property values.
  • 20% blamed slowing sales.
  • 12% said there were too many properties on the market already; that it's getting too crowded out there.

Even some who thought it a good idea to sell, thought so for less-than-optimistic reasons: 26% of them said that they'd sell only to avoid seeing their property values shrink more than they already have.

So, all Mustel Research Group did was attach some numbers to the cocktail-party conversation you've been having for the last five years.

Respondents from the Fraser Valley characterized these survey results the most clearly: Langley-east residents were the most optimistic about buying, and the most pessimistic about selling.

In terms of bucking the trend, Richmond residents proved more pessimistic towards buying, while Surrey/Delta/Langley residents were more optimistic towards selling.

But wait! There's more! It involves a deep, dark secret. The real estate version of that Fergie song hidden on your iPod.

If I had a million dollars (If I haaaad a million dollars)

Now we come to the third (and best) question on the REW real estate market survey. Mustel Research Group asked folks the following: "Suppose you had exactly $1 million dollars to buy the only residential property you would have in the Lower Mainland area. Knowing that you can live anywhere in the Lower Mainland area, and that the farther you get from the City of Vancouver the less you pay, which one of the following types of property would you be most interested in buying?"

Here's how it broke down, based on the five options offered:

  • 34% would buy a large house and property in the suburbs.
  • 23% said they'd keep the million dollars and rent.
  • 20% would spent the hypothetical million bucks on a small detached house.
  • 12% opted for a luxury condo in a city centre.
  • 10% would choose a townhouse or duplex in a city.
  • Meanwhile, 1% were like, "I dunno."

Wow. So, for all the talk about eco-friendly urban oases and all the glass-and-steel towers popping up around False Creek like toadstools, you're telling us you'd rather scuttle off to the suburbs?

To be fair, you would have trouble finding a detached house close to Vancouver's city centre for only a million dollars. The million dollars may be hypothetical, but Lower Mainland property pricing is all too real: if you want space, you have to leave the area.

To what extent this survey result is a referendum on urban living versus an acknowledgement of how far a million dollars would go is not really clear. Furthermore, were respondents optimistic or pessimistic regarding what the hypothetical money would buy? That small detached house near the city centre may be hard to find, but it does exist. It's just not in Kitsilano.

Also, who "didn't know" what to do with the imaginary million dollars? It's an imaginary million dollars, dude/dudette: just pick something.

Generation gap

Age mattered in the REW survey as well. Turns out that those 55 and older were most keen to keep the cash and carry on renting. Generation Y (18-34) coveted the large suburban house with property, followed by the downtown condo. So Gen Y either really loves mowing the lawn, or really hates it.

Generation X (35-54), however, was most likely to seek a suburban life with that million-dollar windfall: the top two choices were the large house with property and the small detached house. (By now you all know where I stand.)

Generation X has really grown up... or sold out. Come to think of it, formerGeneration X frontman Billy Idol himself lives in the 'burbs: well, the hills overlooking Los Angeles, anyway.

It's not just about plucking weeds: the decision to buy property with land also speaks to home-life values. Urban living conjures thoughts of cultural and economic diversity, walkability, nightlife. Suburban living suggests quiet Sunday mornings in the garden, knowing your neighbours, commuting by car.

REW points out that there's no battle of the sexes here: men and women agreed on everything in the million-dollar survey section.

Familial status mattered in the survey results as well. Overall, singletons, couples without kids, and families with broods all favored buying a home with the fictitious $1 million rather than keeping the money.

However, single respondents were more likely than the others to keep the dough. Families with children were the quickest to buy, be it to provide a yard for the children or to secure an investment. (Remember, though: a house is only an investment if it's actively earning you money. Otherwise, it's an expense.)

Emotion matters

We know that emotion and perception are powerful drivers of the real estate market, and that everyone professionally involved in that market (including REW) wins when emotions are positive.

What is yet to be determined is whether or not this spring-has-sprung optimism will bear out in terms of increased property sales.

As of February, the sales-to-active-listings ratio is at 12.2%. That's still below average, but a pip up from January. Also, new listings are down by nearly 6% compared to last month, but still come in higher than the 10-year average for February.

While new listings are down, overall listings are up. So, some of that buyer optimism may be well-placed: there is indeed more to choose from, and the longer a listing sits on the market, the bolder you can get in negotiating its price.

Beware, though, the pushback of seller optimism: if REW's survey reflects reality, you may find yourself up against sellers who are selling because the see themselves up against a ticking clock-- determined to command the asking price. This is emotion we're talking about.

Besides, a glut of listings does not indicate that your dream home can be found by the dozen. How many available properties are of the type you're looking for, in the neighbourhood you want to call home?

Is this whole thing a self-fulfilling prophecy? Are we being told how to behave in the real estate market? Will we actually behave as the survey suggests?

A note on sample size

This is where I wish that the sample size were larger: 561 randomized telephone interviews seems like too small a net to cast when we've glimpsed the Ogopogo of suburban aspiration. We're gonna need a bigger boat.

If you want dig further into the REW/Mustel findings, you can check out the slideshow below. Those figures should provide you with enough cocktail-party bons mots to last until September, when we'll see the results of REW's next Lower Mainland real estate survey.

 


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Vancouver foreign investment panel tackles 'safety deposit' condos for wealthy

Downtown Vancouver may have the equivalent of nearly two-dozen 30-storey condominium towers sitting empty, serving as merely oversized "safety deposit boxes" for the wealthy, according to researchers.

But blaming the city's severe housing prices on absentee foreign investors could just be "this decade's version of the Yellow Peril," a UBC business professor warned the audience at a panel titled Foreign Investment in Vancouver's Real Estate Market this week, raising questions about whether such fears are simply anti-Asian racism in disguise.

Foreign investment -- a heated debate topic in the city -- is a deeply uncomfortable conversation for many, but panelists agreed that more research is needed to address the city's affordability anxieties.

"I find it particularly striking that the emergence of concern about foreign investment started in about 2010, when all of a sudden the good people on the west side of Vancouver discovered that they could sell their houses for $3 million to people who spoke Mandarin, pocketed the money, and then were aghast that their kids couldn't move in," UBC Sauder School of Business's Tsur Somerville told a packed audience downtown on Wednesday. "There is a little bit of this that feels really manufactured very recently.

"This seems to be this decade's version of the 'Yellow Peril.' The reality is that we keep using 'foreign investment' as our new buzzword for Chinese investment. Obviously, there's a long history on the West Coast of North America of worrying about some problem -- whether it's low wages, venereal disease, the plague, whatever you want -- and blaming it on the Chinese."

One of the advocates best known for raising the controversial question of foreign investment and housing affordability in the media is Sandy Garossino, an independent candidate for city council in the 2011 civic election.

In response to Somerville's cautions about anti-Asian racism, Garossino told the panel audience that such accusations are not "very helpful," adding that her concern is actually about the emergence of "ghost cities" of empty condominium towers acting as financial "parking spaces" for the world's wealthiest -- and not about the nationalities of those investors.

"It's not like people made this up out of thin air," she insisted. "I don't think this is something that people in Dunbar thought up as a way to blame or point fingers at anybody.

"Until it started to become a problem, all the realtors were singing the praises of all this money flowing out of Asia. Suddenly, everybody's to blame and everybody's a racist because they believed what the media, the head of the Bank of Canada, and the realtors told them. That's not particularly fair... We need to track this, and we need to look at the effect of capital flow, regardless of where it comes from, on housing."

The three panelists agreed, however, that there is not enough data to fully answer questions of how many of Vancouver's empty homes are foreign-owned. Nor is there even an accepted method to measure how many units are in fact not lived-in at all here.

Somerville argued that the most important questions are not at all about where their owners are from -- in fact, many investor-owners are from other parts of Canada, or even the Lower Mainland.

"The whole notion of foreign investment is not what we should be talking about," he said. "Our issue here is really with unoccupied units. Our concern, if we're thinking about housing affordability, is really with units that have been built and purchased, but they're not occupied. 

"They're occupying land, which is our scarce resource, but they're not addressing occupancy issues for people who want to live here. If what it is that we're concerned about is empty units -- and I think that is a really reasonable concern to have, even if it is all luxury units -- it's still going to have upward pressure on housing markets, and affordability is clearly an issue."

For urban planner and research Andy Yan at Bing Thom Architects (BTA) Works, the conversation really boils down to what kind of city people want to build, and what for. He is among the few researchers attempting to figure out how many units are sitting empty in Vancouver, and if foreign investment is actually a significant concern.

On the panel, Yan explained various methods he has used in his quest to find answers -- from counting how many owners have their property tax assessment forms sent to an agency or manager instead of their home addresses, to how many homes use less energy than a single refrigerator, 75 kW hours a month (the answer: 5.5 per cent of the city's units). 

But given that the average household consumers 400 kW hours every month, he added that roughly 17 per cent of Vancouver's homes only use two fridges' worth of energy. Are they empty homes? Part-time residents living elsewhere? There are no clear answers to the mystery, he said.

He pointed to 2011 census data, which reveals that the number of units not owner-occupied in the city varies by geography. But in luxuriant Coal Harbour, for example, up to 23 per cent of condominiums may be sitting empty. In downtown Vancouver as a whole, he estimated that figure at 15 per cent unoccupied.

But one certainty is that investment from outside the city is a reality, and Yan suggests that policies around housing investment might need to be reformed or examined.

"We live in a remarkable urban global age," Yan explained. "While I'm not sure about foreign investment in Vancouver real estate, I really do think that when you look at other cities around the world, money flows. 

"Money in the world is coming to Vancouver just as much as it's coming to San Francisco or Singapore or Saudi Arabia. How it's parking -- where it's landing and where it ultimately parks in a city -- fundamentally provides challenges if we (are) to aspire to a sustainable, liveable and just city. And where it's parking in a city, perhaps, poses a challenge towards rethinking some of those parking rules."

Garossino pointed to what she sees as a disturbing trend in some world cities: "ghost cities" of investor-oriented buildings never even designed to be occupied -- some with bedrooms too small to even fit a bed. Additionally, apartment pre-sales have become a new terrain for speculative investment and global trade.

In Hong Kong, for instance, there are more more condominiums purchased than the actual supply of newly constructed units.

The paradox has resulted, Garossino argued, in there being a quarter-million empty condos in Hong Kong -- the equivalent of one thousands 30-storey towers.

"When we hear about 'ghost cities' in China, actually we're building 'ghost cities' in our cities," she told the panel audience. "We in Vancouver are participating in a global market which is affecting New York, it's affecting London, it's affecting Hong Kong, it's affecting many global cities. We're not building micro-suites; we've got a manufacturing business, and we're building really large safety deposit boxes... This is no way to build a community."

David P. Ball reports on affordable housing for The Tyee Solutions Society.

This series was produced by Tyee Solutions Society in collaboration with Tides Canada Initiatives Society. This series was made possible through the support of Real Estate Foundation, Vancity, and BC Non-Profit Housing Association. Support for this project does not necessarily imply Vancity's endorsement of the findings or contents of this report. TSS funders and Tides Canada Initiatives neither influence nor endorse the particular content of TSS' reporting. Other publications wishing to publish this story or other Tyee Solutions Society-produced articles, please see this website for contacts and information.

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Fraser Valley Statistics Package - February 2013

POSITIVE SIGNS FRASER VALLEY HOUSING MARKET IS STARTING TO MOVE

(Surrey, BC) – Sales on Fraser Valley’s Multiple Listing Service® (MLS®) in February experienced a typical ‘early spring’ surge, increasing by 48 per cent in one month going from 617 sales in January to 913 last month. However year-over-year, they reflect a decrease of 28 per cent compared to the 1,269 sales processed in February 2012. Since last September, home sales have idled at levels last seen in the early 2000s.

Based on February’s increase in activity, Ron Todson, President of the Board, is guardedly optimistic, “We’re seeing signals that the stand-off between buyers and sellers over the last six months is coming to an end.

“Business has picked up in the last month with increased traffic at open houses, sellers quicker to accept offers and homes selling on average two weeks faster than they did in January.”

Todson adds that tightening inventory has also had an effect, “When buyers see that their selection is diminishing they’re more motivated to act.” The Board posted 2,582 new listings last month, a decrease of 9 per cent compared to the 2,846 posted during February last year pushing the total number of active listings down by 1.6 per cent compared to 2012. 

“As your REALTOR® will explain, each market is different. Right now, the market for detached homes is balanced in North Delta and Langley. The condo market is brisk in Abbotsford and Central Surrey and townhome sales are steady in North and Central Surrey as well as Cloverdale.

“One commonality amongst these areas and property types is greater affordability. What’s not doing well generally anywhere in the Fraser Valley is sales of higher-end homes unless they are priced competitively.”

In February, the benchmark price of single family detached homes in the Fraser Valley was $540,900, an increase of 0.7 per cent compared to $537,200 during the same month last year. For townhouses, the benchmark price was $296,700, a decrease of 1.3 per cent compared to $300,500 in February 2012 and the benchmark price of apartments was $202,500, an increase of 1.5 per cent compared to $199,500 in February 2012.

In February, it took on average 49 days to sell a detached home compared to 64 days in January. Townhomes took 60 days on average to sell compared to 72 days the month before and apartments spent an average of 66 days on the market in February compared to 83 days in January.


Fraser Valley Real Estate Stats as of February 28, 2013

The February 2013 statistics are in from the Fraser Valley Real Estate Board and as expected, they show a significant drop in the number of sales compared with February 2012. The number of new listings was 2,582 in 2013 compared with 2,584 in February of 2012. The real difference is found within the sales data: only 907 sales in 2013 compared with 1,134 sales in February of 2012.

For more information on current sales or a breakdown of all the current data, please feel free to contact our office at 604-385-1840.


Is foreign ownership impacting Vancouver House Prices?

With the latest PR disaster by MAC Marketing Solutions where by it’s staff were falsely depicted as foreign buyers of a new development in Vancouver, the debate about the extent of foreign ownership of our Vancouver Real Estate has once again been surfaced.

We all routinely hear of those anecdotes from the real estate observers that foreign ownership is pushing up our prices here in the city, and making our neighbourhood appear haunted with empty properties all over the place.

So do these overseas purchasers invest and leave these homes and condos empty, or are they integrating and becoming new members of the community?

The truth is, we have no concrete statistics. In Canada, we don’t tally the amount of overseas owners or investors.

We do have a couple of sources of information and data that have been compiled by various groups

During 2012, the City of Vancouver started an academic working group which was created under the Mayor’s ‘Task Force on Housing Affordability’. Their task was to determine if Councillor Raymond Louie, who holds the position of the task force’s liaison’s statement that this was “a persistant theme that has been advanced by some”.

The report concluded that considerable investigation and resources would be required for a comprehensive study on the matter, but some interesting things turned up…

Andrew Yan of Bing Thom Architects undertook research pertaining to the energy usage of a selection of Downtown Condos. They assumed that if a condo is empty, then it will consume less electricity than one that is occupied. A refrigerator uses roughly 75 kwh, if a condo is using less than this, we can assume it’s empty. They concluded that 5.5% of the sample was empty for any given month.

They raised the threshold for the power consumption and experienced a change in the results. If they used a 100kwh threshold, then the % of empty condos rose to 8.5%, increasing again to 150kwh brought a potential vacancy rate of 17%.

In conclusion the City’s working group noted that we would need to cross reference data from several different stakeholders, BC Hydro, BC Assessment, provincial home-owner grants and census data. Only then would we be able to build a clearer picture, however the costs associated with doing so would prove probative as it would require a huge level of co-operation between various levels of government organisations to produce the data which may not even be meaningful or relevant.

Landcor Data Corporation figures for 2012 reveal that only 0.2% of people who purchased properties in the Metro Vancouver area last year.

As realtors we often find that many purchasers who are coming from overseas are actually residing in the properties, and building lives here for their families in the same way people who were born in Vancouver do. They are not only paying property taxes here, but they are out in the community, shopping at the grocery stories, buying clothes at the mall, and purchasing cars and other items. This results in more revenue for the province and the government in the forms of taxes, but also supporting the local economy with jobs and other spin off revenues.