On the bright side, it's easy to see how Vancouverites could become so enthralled with real estate, it truly is a gorgeous city, with breath taking neighbourhoods which are not only well kept, but oozing character and style. The houses didn't get so expensive by themselves, they're lovingly cared for, and look their best, always. Being that Vancouver is a city on the water, backdropped by majestic mountains, views are more than spectacular. A city nestled into the foot of the mountains, with the Pacific ocean as a setting.
All of this still doesn't justify the average home price of over $1,000,000 though. In Vancouver, $800,000 will get you a house you wouldn't be proud of, and would need updates and work. Add to that the very high property taxes and it's easy to see why Vancouverites are broke. Vancouver is a prosperous city, with a diverse economy, not reliant on any single industry, except maybe real estate itself. Like many Canadian cities, the real estate industry makes up for almost 20% of GDP. That isn't healthy.
Due to surviving the 2008 crisis, Vancouverites have become smug about their real estate industry, now believing more than ever that it's bullet proof. Realtors will tell you that real estate is the best investment in the world, no matter what you buy, it'll go up forever. The real estate game in Vancouver is likened to a big popularity contest, having invented marketing strategies which make realtors look like elite business people, with cosmopolitan flair. They are not realtors, they are international business executives with global contacts and a pulse on the next batch of foreign money coming to buy Vancouver's real estate.
Governments have recognized this cash cow and are doing their best to ensure it stays a producing cash cow by maintaining extremely loose lending policies, low interest rates, and an insurance agency dedicated to making sure you too can buy a $1,000,000 house with only $20,000 down. Banks turn a blind eye to violations such as using the same income to apply for multiple mortgages, thereby allowing people to own 2, 3, or 4 homes on the same income. You have to know how to work the system a bit, but it isn't that hard, most mortgage brokers are willing to wink and nod you through the process. They will of course make sure they aren't on the hook if it blows up, by making you sign off on the documents stating this is your only mortgage, but that's about all the trouble you'll face.
Condo developers have their business down to a fine science, and learned a decade ago how to sell a lifestyle, not a condo. Nobody buys a condo in Vancouver, they buy into a community, an urban lifestyle, complete with all their favorite shops, and necessities built into the development. Vancouver condo developers were among the first to perfect this system, and were invited to cities like San Francisco to show them how it's done, and of course take part in developments there.
Some realtors became so rich in the process, they became big time developers, and of course still operate as realtors, taking a commission for their own development. When a new development goes up, the developers take bids from realtors, who commit to selling a certain number of units, and place their money down as a guarantee. They essentially become the buyers of the units, with intent to re-sell as a realtor. This is one of the schemes the industry uses to announce "Sold out the first day!" When in fact, not one single unit was sold to an actual customer, all were bought by realtors.
What has all this brought? A city filled with people who worship real estate. You are known by your development and area of the city. It's as close to an identity as it gets. Nobody in Vancouver could ever fathom real estate falling in value. If you think you've seen a real estate bubble, you haven't, Vancouver is worse than any you'll ever see. Even cities like Los Angeles and San Francisco crashed in 2008, so the people have seen hard times. Not Vancouverites, they now are fully convinced that Vancouver is unique, even among cities like New York and Los Angeles.
About the Author:
I like to write about this on a Vancouver blog
, where I'm half marveling at this bubble, and half waiting for it to pop, as all bubbles do. Any Vancouver blogs
suggesting that Vancouver real estate is overpriced and due to crash, won't be too popular, and in fact will likely invite scorn and ridicule from Vancouverites. With at least 70% of their assets tied up in real estate, you can imagine why they wouldn't want to hear a message like that.
Michael Yates is a Vancouver Blogger.