Real Estate

Vancouver housing bubble?

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Deal Guru
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Mar 14, 2005
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Stabilo7 wrote: Driving to work via HWY 1 and living in Westwood Plateau took be about 40min-1hr to get to work, around Boundary road. The drive is a lot better since Hwy 1 opened up. Occasional slowdown around burnaby lake, but can always find alternate routes like Lougheed and Barnet... Not the best, but not the worst either.
Why is your location "Vancouver" when u live in Coquitlam? :P
De gustibus non est disputandum
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Apr 20, 2011
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http://www.realtytoday.com/articles/329 ... erties.htm

"Question: Tell me about selling on Beachview.

Ms. Qiu: "I've seen changes on this specific street. On the [waterfront] side of the street, almost every house has a dock, and you see so many new constructions - all the houses have been purchased to build a new house. Last year, there was a $9.78-million house sold, a $9.3-million house sold and an $8.10-million house sold, all on this side because of the water."

Q: Do you ever see bidding wars for these superluxury houses?

Ms. Qiu: "Rarely. There isn't much competition. But for anything under $2-million in North Vancouver, you see bidding all the time. I tried to get a house for my client: It was listed for $779,000 and there were 12 offers competing for that house. It went up to $920,000. It's very, very hard. Under $1-million, you have to be so quick. Or under $4-million in an area like West Vancouver, they also go very fast."
Deal Addict
Jun 20, 2011
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VANCOUVER
popbottle wrote: http://www.realtytoday.com/articles/329 ... erties.htm

"Question: Tell me about selling on Beachview.

Ms. Qiu: "I've seen changes on this specific street. On the [waterfront] side of the street, almost every house has a dock, and you see so many new constructions - all the houses have been purchased to build a new house. Last year, there was a $9.78-million house sold, a $9.3-million house sold and an $8.10-million house sold, all on this side because of the water."

Q: Do you ever see bidding wars for these superluxury houses?

Ms. Qiu: "Rarely. There isn't much competition. But for anything under $2-million in North Vancouver, you see bidding all the time. I tried to get a house for my client: It was listed for $779,000 and there were 12 offers competing for that house. It went up to $920,000. It's very, very hard. Under $1-million, you have to be so quick. Or under $4-million in an area like West Vancouver, they also go very fast."
I tried to get one in North Van about 1.5 months ago. Was listed at low 900's. It was a court ordered sale. Went up against 6 other bidder's all cash deals lol. Obviously I didn't get it. Surprisingly, they were apparently not all Chinese bidders.
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May 26, 2010
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DDHLeigh wrote: I tried to get one in North Van about 1.5 months ago. Was listed at low 900's. It was a court ordered sale. Went up against 6 other bidder's all cash deals lol. Obviously I didn't get it. Surprisingly, they were apparently not all Chinese bidders.
In fairness, court ordered sales are always going to attract a far higher proportion of cash-only buyers (regardless of ethnicity) due to the harder time that most people will have getting financing for them.
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Jan 14, 2009
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DDHLeigh wrote: I tried to get one in North Van about 1.5 months ago. Was listed at low 900's. It was a court ordered sale. Went up against 6 other bidder's all cash deals lol. Obviously I didn't get it. Surprisingly, they were apparently not all Chinese bidders.
Low 900's could be local families that "downsized" from their West Side home and decided to move to North Van. Probably pocketed some change in the $2 million range lol.
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Jun 20, 2011
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zakarydoks wrote: Low 900's could be local families that "downsized" from their West Side home and decided to move to North Van. Probably pocketed some change in the $2 million range lol.
The property needed about 120k-150k in renos lol. Thing is, anyone shelling that amount of money out and flipping it would still make money. Similar house on the same block sold for 1.3million another one up the block sold for 1.5 mil.
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Apr 27, 2015
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[QUOTE]Searching through the currently active listings in the Vancouver area today (as of this writing), I was able to find 11 homes on the market that are currently tenanted. Here is a list of those 11 properties, including the current asking prices, rents, taxes and condo fees (if any). I've also calculated the cap rates.

[IMG]http://www.vancouverobserver.com/sites/ ... 50x287.png[/IMG]

For comparison, I also looked through listings in the Seattle area and was able to find 11 homes there. Why Seattle? It's probably the most comparable city to Vancouver: both coastal, with similar populations, climates, culture, lifestyle, natural beauty and incomes.

[IMG]http://www.vancouverobserver.com/sites/ ... 50x287.png[/IMG]

Cap Rates

Capitalization rate (or cap rate) is used to estimate an investor's potential return on his or her investment. The cap rate of a property is its net income divided by its value. For these examples, I've taken the annual rent and subtracted property taxes and condo fees to determine net income. I then divided this income by the current asking price.

In Vancouver, the average cap rate is a dismal 2.32 per cent, and not a single property generated returns higher than any of the 11 Seattle properties. Seattle cap rates averaged over two and a half times higher, at 6.11 per cent.

Considering you can buy a Real Estate Investment Trust ETF which currently yields 5 per cent, why would anyone settle for 2.32 per cent? At least in Seattle, you can be somewhat compensated for the extra hassle of being a landlord.

Price-to-rent ratios

When making a decision to buy or rent, a common metric investors consider is the price-to-rent ratio. To calculate the ratio, divide the price of the property by its annual rent. From an investment point of view, the lower the ratio the better. When the ratio gets too high, renting is usually a better option. Here are some commonly used price-to-rent guidelines from Trulia.

Price-to-rent ratio of 15 or less: Buying a home is a better deal than renting for a someone planning to live in a home for at least five years. However, if the plan is for less than five years, buying could be a better deal, if the index is 10 or less and depending on moving and closing costs.
Price-to-rent ratio of 15 to 20: Renting or buying a home could be a better deal, depending on the prospective buyer's personal situation.
Price-to-rent ratio of 20 or more: Renting is a better deal than buying a home, except for people planning to live in a home a very long time (15 years or more).

The average price-to-rent ratio in Seattle it is 14.5. According to Trulia's guidelines, buying is probably the better option for anyone planning to keep the home more than a few years.

However, in Vancouver the ratio is a staggering 36.9. Considering that Trulia recommends renting anytime the ratio is above 20, most rational investors wouldn't even consider buying here.


Is Vancouver in a bubble?

When looking at these fundamental metrics, anyone buying a home in Vancouver today must be counting on continued, significant appreciation. But with valuations already at unreasonably high levels, why would anyone expect them to continue going up?

While there doesn't appear to be a standard, universally accepted definition of a bubble, here is a pretty good one from the Federal Reserve Bank of San Francisco.

Economists use the term “bubble” to describe an asset price that has risen above the level justified by economic fundamentals, as measured by the discounted stream of expected future cash flows that will accrue to the owner of the asset. The dramatic rise in U.S. stock prices during the late 1990s, followed similarly by U.S. house prices during the early 2000s, are episodes that have both been described as “bubbles.”

While the causes of the current situation are debatable, there is no doubt that prices in Vancouver are well "above the level justified by fundamentals"."

Using the definition above, the Vancouver real estate market is clearly in a bubble.[/QUOTE]


http://www.vancouverobserver.com/opinio ... ing-bubble
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Apr 20, 2011
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zakarydoks wrote: Low 900's could be local families that "downsized" from their West Side home and decided to move to North Van. Probably pocketed some change in the $2 million range lol.
North Van is popular yes for those that have a dislike for foreigners. Most people in Vancouver don't care about the rental rate when buying a place to rent out since the taxes in Vancouver lower than most other places in North America.
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DDHLeigh wrote: The property needed about 120k-150k in renos lol. Thing is, anyone shelling that amount of money out and flipping it would still make money. Similar house on the same block sold for 1.3million another one up the block sold for 1.5 mil.
Exactly as long as they keep it for a year it would be tax free when they sell, and with realtor fees in Vancouver already half of that of those in Toronto helping a bit too! Leasing out a place is just icing on the cake for most.
Sr. Member
May 26, 2010
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A great read - and a point that I've made many times before on here, that cap rates do not justify the asset prices at the moment. In response people have argued that cap rate is only one factor, and statistics on ROI provide a different perspective - as obviously an investor/speculator putting down a 20% down-payment is getting a more attractive ROI than cap rate - however, in my mind this just underlines how much of the asset prices in real estate are being driven by easy to obtain and cheap credit.
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Apr 20, 2011
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Most of the fun is from buyers buying houses without subjects and in many cases the buyers aren't concerned with mortgages or renting out their places
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Apr 20, 2011
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Seattle does attract Chinese money, but not the type you'd expect it to be.
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Sep 19, 2002
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Thanks for supporting my point. Vancouver has experienced decades of sustained Chinese investment. Seattle is just starting to notice foreign investment in the last couple years. That King 5 report reads like a Vancouver Sun article from 1997. The two cities aren't even remotely comparable.

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