Vancouver vs. Los Angeles Real Estate:

[unicas]

http://viableopposition.blogspot.ca/201 ... state.html
In recent months, Canadian consumers have been admonished repeatedly by Mark Carney, head of the Bank of Canada and Jim Flaherty, Canada's Minister of Finance about the necessity for Canadian consumers to keep their wits about them when borrowing money to purchase a home. In light of that, I want to revisit Vancouver's real estate market, the hottest market in Canada and the United States. I'll look at the affordability of a median home measured using the Demographia concept of median multiple which is defined as the median price of a home divided by the median household income in that market. Keep in mind that Demographia defines markets with a median multiple of more than 5.1 as a "severely unaffordable market"; historically, real estate markets are most affordable when the median multiple is 3.0 or less.

The median price of a Vancouver home has risen by 81.9 percent since 2005 in contrast to the median gross household income that has only risen by 12.9 percent, from $56,500 to $63,800. Those two numbers alone explain the drop in affordability in Vancouver's market.

Now, let's look at what has happened to real estate in another West coast market, Los Angeles, one of the most unaffordable markets in Demographia's universe for three years running prior to the housing bubble collapse in 2007. The two markets are relatively comparable; both cities are located on the west coast, both have an affluent population and both cities are among the largest real estate markets in their respective countries. Before I get into the details, here is a quote about the Los Angeles real estate market that I found on the Bloomberg Businessweek website from April 11, 2005:

"For 2005 homebuilders are still optimistic about demand. There's a backlog of unfilled orders for new homes, and Los Angeles-based KB Homes, for example, recently raised its fiscal 2005 profit forecast. Ryan Brown is one real-estate investor who remains upbeat. He and his business partner, Jeffrey Lewis, buy and remodel homes in the Los Angeles area. Their latest project is a three-bedroom, three-bath house in the Hollywood Hills that is listed for $1.49 million. "The whole bubble thing is really overrated," Brown says. Yet even he has reduced his price expectations, figuring appreciation may slow to about 3% or 5%. For the industry as a whole, higher mortgage rates will inevitably cut orders. By 2006 home construction will become a drag on the economy.

More important than housing's direct effect on the economy will be fallout from the slowdown in home-price appreciation. This is where the economy will be most vulnerable. Thanks to the easy availability of refinancings and home-equity loans, consumers have gotten used to tapping into the equity built up in their homes." (my bold)

Annual price appreciation slowing to 3 to 5 percent? Didn't see the looming storm coming, did you Mr. Brown?

Back to the data. Here is what has happened to Los Angeles' median multiple since 2005 when Mr. Brown was so confident about the future:

In Los Angeles, since 2007, the price of a median home has fallen by $263,600 or 44.8 percent. One can quite readily see how easy it would be for mortgage holders to find themselves underwater when nearly 50 percent of the equity in a home vanishes into thin air. The median multiple has dropped from a severely unaffordable 11.5 to a still severely unaffordable 5.7 but housing is much more affordable in 2011 than it was in 2007.

To summarize, yes, I realize that things are somewhat different in Vancouver, British Columbia, particularly with the influx of hot Asian money. That said, as in all things, one can never say never. Just ask residents of Los Angeles Vancouver's real estate market is so vastly unaffordable by the majority of its residents that eventually, market forces will take over and the city's real estate market will follow that of Los Angeles back to a state of sustainable equilibrium. When that will occur, no one knows but I can guarantee that in 2005, residents of Los Angeles didn't see it coming either, nor did they suspect the magnitude of the readjustment. Just ask Ryan Brown.

[eyesthebye]

LA immigrants are hispanic, low net worth
Vancouver immigrants are Asian, high net worth

not difficult to see why prices in each are headed in opposite directions.

[jimtan]

To summarize, yes, I realize that things are somewhat different in Vancouver, British Columbia, particularly with the influx of hot Asian money.

That's putting it mildly.

[IKnow]

LA immigrants are hispanic, low net worth
Vancouver immigrants are Asian, high net worth

not difficult to see why prices in each are headed in opposite directions.

It's not Asian, it's Chinese, who have much greater propensity to speculate on real estates and live within their ethnic group, causing pockets of extreme high values.
The rest of the city benefits from diffusion of those values.
See, Vancouver has many Indians and Philipinos, but i don't see they have any significant impact on house prices.

The perfect storm was this:
* rich people in China needed to take money out before more society unrest there and more severe government crackdown on corruption (yes, corruption has to be key source of wealth)
* large existing chinese population in Vancouver happily speculate along
* low borrow interest rates got other people to ride the same train

[FuturePorscheOwner]

See, Vancouver has many Indians and Philipinos, but i don't see they have any significant impact on house prices.

Vancouver can be divided into a lot of different groups:
-Gay Dinks
-Old Money
-Drug Money
-Foreign Investors
-Persians High Net Worth
ect..
-Asian immigrants
-Rich White folks
-Upper class white folks
-Middle class white folks who live in their homes that were passed on by their folks
-Old Chinese money
-2nd/3rd generation Chinese money
-Speculators
-

The Indians have basically moved to Surrey/Abbotsford, to areas where they can get a good bang for your buck. If you look at a good chunk of the builders, their mainly Indians. They''ll buy houses, tear down, and make new ones, mostly for the Chinese market. If it wasn't any specific community that benefited from the boom, I think it was them to more of a great deal. (I'm Indian myself).

The Philipinos are mainly middle class labour folk, I'm not sure how much of a role they play in the market in Vancouver.


LA is huge, honestly its not a city in sense, but just amalgamation of major villages/towns. Its a lot cheaper to live in LA than Vancouver. West LA (The white areas) are honeslty the most desireable. The problem with LA like we have mentioned is a lot of illegal mexican immigrants, I would say being there for a while, that there is no comparison. We get the rich chinese and they get the hungry latino immigrants, but they work hard, very hard!

[jesse1]

With that many groups sounds like... wait... those groups are in every North American city.

The only way I see Vancouver as different is its incessant self-absorption. No surprise, with no more land being built, fenced in with the water to the west, mountains to the north and east, and the border to the south. Nowhere else to turn but inwards.

[eyesthebye]

"jesse1"]

The only way I see Vancouver as different is its incessant self-absorption.

Vancouver - much higher per capita wealthy immigrant than most other places in the world. Couple this fact
with the land scarcity...voila.

[thirdlittlepig]

"jesse1"]

The only way I see Vancouver as different is its incessant self-absorption.

Vancouver - much higher per capita wealthy immigrant than most other places in the world. Couple this fact
with the land scarcity...voila.

Vancouver does not have a land scarcity compared to other cities where people are packed in a lot tighter. Vancouver ranks 123 out of major world cities for population density, behind Toronto, Montreal, Ottawa/Hull, Frisco, Las Vegas, New York, Dubai. (Calgary is 139, Edmonton, 178) And most of these cities have plenty of rich people. They can always knock down a little neighborhood or some older condos and put in a whole pile of luxury condos in Vancouver.If that's what people want. If people do not want whatever, they won't build them. That's not a shortage, that's a lack of interested loaded customers. The only thing Vancouver has a shortage of is CHEAP or even AFFORDABLE housing. Even then, housing would be affordable if there were enough decent JOBS. As soon as there are more rich customers, or non-poor customers, or reasonable prices so people can buy, these homes will magically appear. If there was a scarecity of housing, listings would not be climbing. B.C. (and the lower mainland) has twice as many homes available for sale per capita than other parts of Canada. That's not a scarcity.

[jesse1]

much higher per capita wealthy immigrant than most other places in the world

If you say so. In some parts of the world there are much higher per capita wealthy.

[vanreal]

"jesse1"]

The only way I see Vancouver as different is its incessant self-absorption.

Vancouver - much higher per capita wealthy immigrant than most other places in the world. Couple this fact
with the land scarcity...voila.

Vancouver does not have a land scarcity compared to other cities where people are packed in a lot tighter. Vancouver ranks 123 out of major world cities for population density, behind Toronto, Montreal, Ottawa/Hull, Frisco, Las Vegas, New York, Dubai.

That is why Vancouver is so expensive. It is not dense enough. Way too much land zoned sfh.

[jesse1]

Way too much land zoned sfh

I think you'll find much of the stuff referred to as "SFH" is more "MFH". Any drive down the streets of East Vancouver reveals a city with streets upon streets of multiplexes.

[IKnow]

The Indians have basically moved to Surrey/Abbotsford, to areas where they can get a good bang for your buck.

No good bang for Indians.
Surrey/Abbotsford real estate values only track the inflation index.
North of the Fraser people feel bad if they don't see at least 10% rise a year in the past half-dozen years.
This illustrates my point - no chinese interest = not much real estate appreciation

If you look at a good chunk of the builders, their mainly Indians. They''ll buy houses, tear down, and make new ones, mostly for the Chinese market. If it wasn't any specific community that benefited from the boom, I think it was them to more of a great deal.

I think Indian developers have the gut to bet along because of the low interest rate.

The Philipinos are mainly middle class labour folk, I'm not sure how much of a role they play in the market in Vancouver.

My guess: next to none, Philipinos demand of real estates will cause the price to track inflation at most, nothing more.

the hungry latino immigrants, but they work hard, very hard!

Latinos make decent chehs in chinese restaurants in LA to serve the rich chinese there.
Heard that mainland chinese are buying houses in Vegas a dozen at a time.
So a principal house in Vancouver for prestige, investment properties in LA/Vegas/Phoenix.

[eyesthebye]

"vanreal"

That is why Vancouver is so expensive. It is not dense enough. Way too much land zoned sfh.

+1
Any RS lot with greater than 5000sqft of space should be rezones to RT - immediately, including Shaughnessy.
Then you can watch the value a detached home on RS lot moderate