Vancouver’s high property prices

Why are housing costs high and rising in Vancouver, while they are low and falling in Victoria, capital of British Columbia? Victoria is smaller than Vancouver, and lies on the southern tip of Vancouver Island, so is cut off from the mainland. But that does not explain why the two housing markets are out of sync. For whatever reason, global demand for residential property is high in beautiful Vancouver compared to equally beautiful Victoria.

The most expensive housing market in North America is not where you’d think. It’s not New York City or Orange County, California, but Vancouver, British Columbia. Now, Vancouver is a beautiful city—a thriving deep-water port, a popular site for TV and movie shoots. By all accounts, it is a wonderful place to live. But nothing about its economy explains why—in a city where the median income is only around seventy grand—single-family houses now sell for close to a million dollars apiece and ordinary condos go for five or six hundred thousand dollars. ….

When price-to-income or price-to-rent ratios get out of whack, it’s often a sign of a housing bubble. But the story in Vancouver is more interesting. Almost by chance, the city has found itself at the heart of one of the biggest trends of the past two decades—the rise of a truly global market in real estate. ….

If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there. So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them. [Andy] Yan says, “If the choice is between losing ten to twenty per cent in Vancouver versus potentially losing a hundred per cent in Beijing or Tehran, then people are still going to be buying in Vancouver.”

James Surowiecki, “Real Estate Goes Global“, The New Yorker, 26 May 2014.

Mr Surowiecki interviewed Andy Yan, an urban planner at Vancouver-based Bing Thom Architects.

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