Sigh, smh. The statistical flaws in this "back of the envelope" calculation are something else.
This was a study based on "a Financial Times multiple choice survey of 77 high net worth and affluent mainland Chinese individuals, 'admittedly not a statistically significant sample size,'” According to this survey, 9 individuals out of these 77 Chinese bought property in Vancouver. After some more mathematical shenanigans, this is extrapolated to imply that Chinese mainlanders buy 33% of the Vancouver real estate market. Really?!? And this statistically baseless extrapolation becomes newsworthy?
Hmmm. Sorry, I don't think I agree with you. Sure, from a frequentist perspective this analysis is "unpublishable," but from a Bayesian perspective is yields some important insights.
First of all, the main point of the study is not to obtain am accurate point estimate of Chinese buyers in Vancouver. The main point is to underline the importance of more studies.
In other words your criticism kind of makes the analyst's point for him.
Second, you would be surprised at the amount of information even small sample sizes can provide when there is great uncertainty about the true data distribution.
Third, this analysis is in agreement with two other
In other words, don't get hung up on the exact %. Nobody really cares about the difference between 33% and 35%. What decision makers need to know is whether it's a lot or a little. This "quick and dirty" analysis supports the contention that it's a "lot", not a "little".
Furthermore, this study was not done in isolation. The NAR study and the urban planner's study both point in the same direction.
Taking all this evidence under consideration suggests that overseas buyers are likely a driving force in the run up in house prices in Vancouver. And that's newsworthy.
Well, everyone has been blaming the prices on rich Chinese buying up everything, but this is the first actual evidence that I've seen no matter how flimsy it is.
EDIT: I should have been clearer that I never doubted that Chinese money was coming in, but I've previously seen nothing to convince me that it was significant or indicate how significant it was. Even if this estimate is of by a factor of two, it is still fairly significant.
The only thing that counts is money...... keep selling. Sell it all. Sell sell sell.
Who gives a toss for community or society or cohesion. Sell everything.
As long as property sellers can take all that lovely cash and buy more and bigger homes then what else matters?
Ordinary middle class people and the young - make em rent! Why the sense of entitlement that people should be able to afford to buy a home, what are you a communist? Whose country do you think this is?
In fact put one giant price on the whole of Vancouver and sell it ALL in one big job lot.
>>Ordinary middle class people and the young - make em rent!
Let me know the address of this secret cabal that meets every evening plotting misery and pain for the young and the middle class.
On a more serious note, this is just capitalism and free market economy playing out against you.
Also remember those days when people screamed real estate being a bad investment from the roof tops, while people belittled real estate investments and glorified stocks, a section of people have quietly invested in this area.
The fact of the matter is these opportunities were available for every one, but just like other things like in life like age, education, marriage, kids- time is a critical factor in these things. If you don't make the right moves at the right time blaming others hardly makes sense. People can't buy expensive homes for the same reasons, people with no education can't go back in age and do their schooling.
Investments are all about time, in fact I'm sure there are good house deals at the outskirts which many people are investing in. The young and middle class isn't buying them because they are too far/<regular excuses>. And yet when the prices go up after a few years and that too becomes expensive, same people will come up with the same complaints.
The same is now happening in Toronto. It's truly awful. So many great communities being destroyed by greed. Especially if you're someone who loves city life and does not want to move away.
>Ordinary middle class people and the young - make em rent! Why the sense of entitlement that people should be able to afford to buy a home
Why indeed?
If there is a shortage of housing, why not build more houses?
Otherwise, if a person wants to exclusively use a piece of land, why shouldn't he have to outbid everybody else?
Unless of course an 'ordinary middle class' and 'the young' are somehow more valued than 'rich chinese people' and so should be given special privileges?
>In fact put one giant price on the whole of Vancouver and sell it ALL in one big job lot.
Well not everybody wants to sell obviously but if everybody does want to sell, why shouldn't they sell to 'rich chinese people'? Why should they not be paid the most for what is rightfully their property?
Young professionals trying to create careers/long term lives here are completely priced out of the market. I'll be leaving soon. San Fransisco like property prices, with far, far less compensation.
You simply can't own a house unless you're a millionaire, and a small condo will be upwards of $200k for a mortgage when you don't own the property. It's just insane.
Even if I'm pulling in a quality $80k (high-ish by here standards), I'm nowhere near affording a $2mil property. I'll be lucky to have a small condo with 2 bedrooms. What's the incentive to stay?
"We have 540k as a down payment and we are going to take a 160k mortgage. Adding strata fees for the place we want its going to be 1200$ a month for the next 30 years, and we end up with a 950sq 2 bedroom in a decent condo off Davie."
$1200 / month (this is mortgage + condo fees) for 950 sq ft, and this is after putting down $540k - and it's not even a brand new building. And compared to SFH, condos are actually realatively reasonable priced, by Canadian standards at least.
There is a similar story appearing in UK in places like London and in my home town of Cambridge. This isn't yet not he same scale, but it is affecting the property market.
In Cambridge 1 in 20 new-build properties is purchased by non-resident Chinese buyers, which has been one of the contributing factors that has seen prices rise by 50% since 2010 [1] and are 47% above 2007 pre-GFC peak [2]. Note - unlike Vancouver that has a a big (30%) local Chinese population, only about 1.4% of the Cambridge population is Chinese or of Chinese ethnic origin [3]
To some extent this is just about free markets and a movement of capital. But it is starting to price out many local people out of the property market that does have a social impact.
There are other factors at play including a booming tech & biotech sectors, restrictive planning, stock-piling of building plots etc, but the foreign buyers issue is a major contributor.
Many causes behind this - saying the Chinese are to blame is glossing over the issue IMO and is very much akin to saying tech workers are behind the property issues in SFO. There are more sides to this...
One of major contributors to rising property prices is the gutting of trust in the stock market or any speculative market for that matter, over the past two decades. Super low interest rates haven't helped either with people looking to park their cash left with property as the only safe place which provides a rate of return.
With regards to Chinese buyers, there is some truth (again stressing that it's only a part of the picture). For the past 20 years nearly every trading partner with China has incurred a massive balance of payments deficit. That money's coming home to roost (literally). The same thing happened in the 80s when Japan was an exporting powerhouse - they bought real estate and companies across the US and Europe, pushing up the price of real estate.
Correct me if I'm wrong but this just seems like the next wave of gentrification. If you make a place nice and safe, people with the most disposable income buy it all up.
Everybody feels this way about the next wave. I'm not unsympathetic and am similarly unable (and/or unwilling) to buy a house in this overheated bay area market.
Most of Vancouver and Canada was already nice and safe since pretty much forever. It's really not traditional gentrification. There is no local or canadian economic boom driving this.
The difference between a housing shortage and a housing bubble is when rents disconnect from housing prices. Rent is about 1/2 or less compared to an equivalent mortgage in many parts of Vancouver.
middle class white people displacing brown and black people is called gentrification.
rich chinese people displacing middle class white people is called "this is totally unfair, why isn't this illegal?".
of course, guess who's making all the money selling these units? the rich white people (developers, bankers, politicians, contractors, lobbyists, lawyers) who decide what's legal and illegal. as per usual, they are the winners in this whole charade, while the middle and lower classes just blame the dirty foreigners. it's even better when they're chinese -- who doesn't hate the chinese??? so convenient. shhh, let's not mention the other 2/3rds of buyers.
the aforementioned elites are playing and winning a game as old as time, as they do.
It's also true in Boston, which like SF has a housing stock constrained by geography. Doing a quick search on Craigslist the prices are also a good deal lower in Vancouver than Boston. I'm looking at you, $3500/mo 1-br rental in Boston with peeling paint leaky windows, and $2500/mo basement studio in the 'burbs. It's not uncommon to see (grotesquely) wealthy foreign (and some old-money domestic) students buy property here, at whatever the cost, further driving up the unattainability for those who actually intend to stay and integrate with the local community.
I have a tech salary in the low six figures and I'm considering a commute from Providence because I'm priced out of Boston. I don't want roommates any more in my thirties, and I'd like to actually have a place for my car (long-distance work and personal trips). I'd love to buy in Boston (or Cambridge, Somerville, Brookline, or other places served by mass transit), but I'm simply priced out of the market. In what world can anyone afford to buy the $1-2MM 1-br condos here and the $2-3MM houses? Local financiers, sure, working physicians, and some corporate execs, but they're a minority of the population.
Paying rent in Boston, you know you're being exploited, but you don't have a choice. My current place is owned by a Chinese "investor" who uses unlicensed contractors to do unpermitted construction on an illegal third-floor apartment above mine. The construction quality is abysmal (think toilets not attached to the floor and fluorescent lights half-hidden behind drywall), but unless I want to be homeless I have no recourse because all leases turn over on September 1st. My place just has peeling paint and cabinets that fall off the wall, and at least me and my roommates are only paying $5k/mo for it. shrugs
Newsflash: young medical professionals can't afford this crap either. Most of the people I know in that camp have monumental student loans. The climate of aggressively taxing high income means professionals will always be at a disadvantage since they pay half their income to taxes (in Canada at least). 350K student loan is equal to 700K in pretax earnings. Plus you gotta eat and stuff.
Vancouver rental prices are actually not that bad, as rent prices are usually more closely aligned with incomes (which are comparatively low in Vancouver).
Prices to buy in Vancouver are completely insane and detached from local incomes.
I am curious about the downstream effects of house prices becoming increasing multiples of income in so many western countries. E.g. I suspect it will hit entrepreneurship. Younger generations are buying houses later and taking out massive loans when they do. For the boomers you'd often hear how they bought a house soon after college and paid it off by their early thirties. This would put people in a good place to leave their work for a couple of years to start a business. Now people have these huge mortgages where your ability to start a business is hampered by your ability to get a financial buffer to take a year or 2 off. And lets not forget most businesses are created form people mid-career, not the TV typical university dropout.
And small community business, how will they exist in the future. If someone wants to set up a local 'physical presence' vet/daycare type business that are typically mixed into residential areas the threshold is now so high ot exist and especially set up a new business. How can a daycare buy a million+ dollar house and expect to make money paying that back on having 30 local kids being looked after.
Also what is going to happen with retirement and periods of unemployment. I suspect society will be less stable as either the government has to foot high rent costs (unlikely) or we will see increased population movements during retirement, and now the government has to look after older people that before a family who lived nearby could help out with. And during low employment cycles society can absorb this downturn if people dont have large loans. Historically people cant 'tighten belts' for a year while things improve, harder when your neck deep in debt. So we will again see more movement of people, debt default etc. It will serve to exacerbate recessions etc.
Also these higher prices skew the economy. When people are tied up in these ever increasing loan/income ratios there will be less spending on dining, holidays, hobbies etc. It will weaken the economy by concentrating the spend in limited areas.
I believe we should look to ensure affordable housing for owner occupiers. Residential investment need to be discouraged (note I'm not saying stopped) as a speculative asset class. I've seen a few suggested methods to achieve this but I feel the simplest is to place a yearly 'asset tax' on non-owner occupied residential property (I would also include farms). Having a % tax would make it easy to adjust to find the right balance given economic cycles change. Also this would encourage property hoarders not in heavy debt to sell for lower taxed asset classes. This I feel is important as most solutions focus on controlling the investment lending side which is limiting in reach.
Micro-managing regulations that distort property market very often cause more problems than they solve, especially if they become unremovable. The root cause for rising property price is monetary loosing by central banks. Once you create that much money you can't control where it flows.
Of note: At least in the US, baby boomers will start dying off.
What will happen to their houses? In some cases, they'll become their kids' residences. In other cases, their kids will now own TWO properties, and now they'll rent out the 2nd house, adding supply to the rental market. In still others, the reverse mortgage scumbags will own the property, and it'll add to the corporate-owned housing stock.
It is darkly amusing to me that land-use regulations purportedly designed to protect the poor and middle-class will wind up killing the prospects of their children. But that's what happens when you limit entrepreneurship to those who are already well-off.
There aren't any small businesses anymore and for good reasons. The mom and pop shops are inefficient. They do not employ the highly efficient operational system that big businesses can employ so all your coffee shops are now starbucks or some other franchises.
>Also these higher prices skew the economy.
Pricing is how an economy works. It is the messaging system communicating changes in demand/supply balance. If it is 'skewing' the economy in the sense that it causes changes, then it is working as intended.
>When people are tied up in these ever increasing loan/income ratios
There is only so much land to go around so if you want to use a particular piece of land that is highly desirable then you ought to outbid everybody else.
>I believe we should look to ensure affordable housing for owner occupiers.
the solution to this is georgian land value tax. There is no reason otherwise to ensure 'afforable housing for owner occupiers' except your personal belief that society should subsidise a particular class of property ownership whereby the owners use the property directly. What is going to happen is that people who cant afford to own a house (or dont want to borrow money from banks to buy one) is going to have to pay the tax for renting.
If this is indeed a problem, then raise property taxes on non-owner occupied homes. From the perspective of the host country, it's free money - the taxes are paid for by foreign residents, and can go towards supporting local citizens and services.
We should ban Chinese main landers from buying houses in Vancouver as it's destroying the city in the process. Unless we are okay with the city being basically unaffordable for the local population, and just enriching real estate agents and property investors at the cost of the city.
Although this "study" was based on back of the envelope estimates, and the 1/3 estimate is probably inaccurate, there is anecdotal evidence of large-pursed foreign investors from around the world -- not just China but Australia, Russia, etc -- who are sustaining, if not increasing the demand for housing in populous areas.
This foreign investment is great for people who are trying to sell a home in one of these markets but horrible for buyers, who can't compete with all-cash fast-close-best-price offers. Further, the few realtors who are boots-on-the-ground for these investors have market insights -- they know what's potentially about to go on the market but hasn't yet, get insider information, etc -- and use this information asymmetry to their advantage by offering on homes even before any real home buyers have a chance or offer on the first day of listing! I have personally gone through losing multiple times to these sorts of customers while trying to buy a new home (in the NYC metropolitan area on the NJ side), not an investment property.
The experience of buying a home in a high-demand housing market where institutional/major investors are participating really challenges my thinking about whether free market practices should be allowed to operate in housing at all. Considering the rising cost of housing, it is tough to side with capitalism on this subject.
I'd like to see a study about the "artificial growth" of housing prices by investors. Interestingly to note is that such a study may conflict with the agenda of at least some leading universities who tend to publish reports about rising cost of housing after receiving generous funding from housing investors. NYU Furman, for instance, has a long-lasting public relationship with Capital One (and god knows who else in private).
Everyone was happy with low inflation from low prices from cheap Chinese labour. Now they are crying into their iPhones about how they cannot afford to live in the most desirable cities.
The likely responses to this are a) a pied-a-terre tax on unoccupied residential structures, and b) authorizing a LOT more construction, probably by increasing permitted density, which will lead to a lot of single-family structures and townhouses being replaced by condominium towers.
There are similar issues in Toronto, but here we are building new towers on every corner, or near enough. Toronto, fortunately, has plenty of room to spread in three directions.
I have no idea if these stats are true, but I've never understood why any town would allow foreigners to homes and leave them vacant. Is there any reason (other than 'yay capitalism') to not put more restrictions on who can buy and what they can do after it's owned? This wouldn't be a story if the homes were full of new migrants being added to the towns and buying big houses.
I was hoping that people here were more skeptical (EDIT: and less hysterical) than users in the forums of the local rags...
Some are fond of perpetuating the narrative that the city will be hollowed out with empty homes and locals fleeing the city. Yet a recent report to city hall reports that detached homes are not as vacant as "popularly" believed:
"The vacancy rate in Vancouver for single-family homes, duplexes and row houses is only about one per cent, and that rate has been static since 2002, according to the report. Meanwhile, the combined vacancy rate for condominiums and purpose-built rental apartments is 7.2 per cent. That number is in line with the findings of a 2013 study by the Urban Futures Institute, which put unoccupied apartments in Vancouver at 6.2 per cent on 2011 Census day."
I don't believe these numbers. I highly suspect that Canadian permanent residents or Chinese origin are included in these numbers. Ethnically Chinese people make up a large portion of the Vancouver area, and they get help with their down payments from their parents like most Canadians in urban areas.
[+] [-] jhou2|10 years ago|reply
This was a study based on "a Financial Times multiple choice survey of 77 high net worth and affluent mainland Chinese individuals, 'admittedly not a statistically significant sample size,'” According to this survey, 9 individuals out of these 77 Chinese bought property in Vancouver. After some more mathematical shenanigans, this is extrapolated to imply that Chinese mainlanders buy 33% of the Vancouver real estate market. Really?!? And this statistically baseless extrapolation becomes newsworthy?
http://www.vancouversun.com/business/chinese+investors+third...
[+] [-] tryitnow|10 years ago|reply
First of all, the main point of the study is not to obtain am accurate point estimate of Chinese buyers in Vancouver. The main point is to underline the importance of more studies.
In other words your criticism kind of makes the analyst's point for him.
Second, you would be surprised at the amount of information even small sample sizes can provide when there is great uncertainty about the true data distribution.
Third, this analysis is in agreement with two other
In other words, don't get hung up on the exact %. Nobody really cares about the difference between 33% and 35%. What decision makers need to know is whether it's a lot or a little. This "quick and dirty" analysis supports the contention that it's a "lot", not a "little".
Furthermore, this study was not done in isolation. The NAR study and the urban planner's study both point in the same direction.
Taking all this evidence under consideration suggests that overseas buyers are likely a driving force in the run up in house prices in Vancouver. And that's newsworthy.
[+] [-] cherioo|10 years ago|reply
Seeing this touted feel like reading: Breaking news, a city with 100% Caucasian population does not see a single Chinese buyer!
[+] [-] goodcanadian|10 years ago|reply
EDIT: I should have been clearer that I never doubted that Chinese money was coming in, but I've previously seen nothing to convince me that it was significant or indicate how significant it was. Even if this estimate is of by a factor of two, it is still fairly significant.
[+] [-] est|10 years ago|reply
are there any meta-journalism news site offering analysis like yours?
[+] [-] johan_larson|10 years ago|reply
[+] [-] hoodoof|10 years ago|reply
Who gives a toss for community or society or cohesion. Sell everything.
As long as property sellers can take all that lovely cash and buy more and bigger homes then what else matters?
Ordinary middle class people and the young - make em rent! Why the sense of entitlement that people should be able to afford to buy a home, what are you a communist? Whose country do you think this is?
In fact put one giant price on the whole of Vancouver and sell it ALL in one big job lot.
[+] [-] meric|10 years ago|reply
[+] [-] kamaal|10 years ago|reply
Let me know the address of this secret cabal that meets every evening plotting misery and pain for the young and the middle class.
On a more serious note, this is just capitalism and free market economy playing out against you.
Also remember those days when people screamed real estate being a bad investment from the roof tops, while people belittled real estate investments and glorified stocks, a section of people have quietly invested in this area.
The fact of the matter is these opportunities were available for every one, but just like other things like in life like age, education, marriage, kids- time is a critical factor in these things. If you don't make the right moves at the right time blaming others hardly makes sense. People can't buy expensive homes for the same reasons, people with no education can't go back in age and do their schooling.
Investments are all about time, in fact I'm sure there are good house deals at the outskirts which many people are investing in. The young and middle class isn't buying them because they are too far/<regular excuses>. And yet when the prices go up after a few years and that too becomes expensive, same people will come up with the same complaints.
[+] [-] noam87|10 years ago|reply
CBC did a great piece on it: http://www.cbc.ca/doczone/episodes/the-condo-game
[+] [-] big_al337|10 years ago|reply
[+] [-] diskcat|10 years ago|reply
Why indeed?
If there is a shortage of housing, why not build more houses?
Otherwise, if a person wants to exclusively use a piece of land, why shouldn't he have to outbid everybody else?
Unless of course an 'ordinary middle class' and 'the young' are somehow more valued than 'rich chinese people' and so should be given special privileges?
>In fact put one giant price on the whole of Vancouver and sell it ALL in one big job lot.
Well not everybody wants to sell obviously but if everybody does want to sell, why shouldn't they sell to 'rich chinese people'? Why should they not be paid the most for what is rightfully their property?
[+] [-] moonshinefe|10 years ago|reply
You simply can't own a house unless you're a millionaire, and a small condo will be upwards of $200k for a mortgage when you don't own the property. It's just insane.
http://www.payscale.com/research/CA/Location=Vancouver-Briti...
Even if I'm pulling in a quality $80k (high-ish by here standards), I'm nowhere near affording a $2mil property. I'll be lucky to have a small condo with 2 bedrooms. What's the incentive to stay?
[+] [-] mistermann|10 years ago|reply
Ha!
https://www.reddit.com/r/vancouver/comments/4bo9wz/were_buyi...
"We have 540k as a down payment and we are going to take a 160k mortgage. Adding strata fees for the place we want its going to be 1200$ a month for the next 30 years, and we end up with a 950sq 2 bedroom in a decent condo off Davie."
$1200 / month (this is mortgage + condo fees) for 950 sq ft, and this is after putting down $540k - and it's not even a brand new building. And compared to SFH, condos are actually realatively reasonable priced, by Canadian standards at least.
Beyond insane.
[+] [-] OSButler|10 years ago|reply
[+] [-] smcl|10 years ago|reply
[+] [-] frandroid|10 years ago|reply
[+] [-] yelnatz|10 years ago|reply
[+] [-] adamt|10 years ago|reply
In Cambridge 1 in 20 new-build properties is purchased by non-resident Chinese buyers, which has been one of the contributing factors that has seen prices rise by 50% since 2010 [1] and are 47% above 2007 pre-GFC peak [2]. Note - unlike Vancouver that has a a big (30%) local Chinese population, only about 1.4% of the Cambridge population is Chinese or of Chinese ethnic origin [3]
To some extent this is just about free markets and a movement of capital. But it is starting to price out many local people out of the property market that does have a social impact.
There are other factors at play including a booming tech & biotech sectors, restrictive planning, stock-piling of building plots etc, but the foreign buyers issue is a major contributor.
[1] http://www.theguardian.com/cities/2016/mar/22/china-cambridg...
[2] http://www.thisismoney.co.uk/money/mortgageshome/article-328...
[3] Guardian data - available in a Google doc https://docs.google.com/spreadsheets/d/1yc8W1SiCbWd9V4I9KmTl...
[+] [-] nextos|10 years ago|reply
[+] [-] leonroy|10 years ago|reply
One of major contributors to rising property prices is the gutting of trust in the stock market or any speculative market for that matter, over the past two decades. Super low interest rates haven't helped either with people looking to park their cash left with property as the only safe place which provides a rate of return.
With regards to Chinese buyers, there is some truth (again stressing that it's only a part of the picture). For the past 20 years nearly every trading partner with China has incurred a massive balance of payments deficit. That money's coming home to roost (literally). The same thing happened in the 80s when Japan was an exporting powerhouse - they bought real estate and companies across the US and Europe, pushing up the price of real estate.
There was actually an excellent piece in the Prospect by Andy Grove (former Intel CEO) which lamented the loss of manufacturing in the US and the effects it would cause: http://prospect.org/article/andy-grove-trade-globalization-a...
Again just a facet to the picture, but you put all these pieces together and you can see the problem a lot more clearly.
[+] [-] antoniuschan99|10 years ago|reply
The Japanese were like the Chinese at one point too, selling crappy electronics in the 60s and being seen as extremely wealthy in the early 90s.
[+] [-] runamok|10 years ago|reply
Everybody feels this way about the next wave. I'm not unsympathetic and am similarly unable (and/or unwilling) to buy a house in this overheated bay area market.
Reminds me of an article I recently read: http://www.atlantamagazine.com/homeandgarden/the-gentrifier/
[+] [-] mahyarm|10 years ago|reply
The difference between a housing shortage and a housing bubble is when rents disconnect from housing prices. Rent is about 1/2 or less compared to an equivalent mortgage in many parts of Vancouver.
[+] [-] beachstartup|10 years ago|reply
rich chinese people displacing middle class white people is called "this is totally unfair, why isn't this illegal?".
of course, guess who's making all the money selling these units? the rich white people (developers, bankers, politicians, contractors, lobbyists, lawyers) who decide what's legal and illegal. as per usual, they are the winners in this whole charade, while the middle and lower classes just blame the dirty foreigners. it's even better when they're chinese -- who doesn't hate the chinese??? so convenient. shhh, let's not mention the other 2/3rds of buyers.
the aforementioned elites are playing and winning a game as old as time, as they do.
[+] [-] mthoms|10 years ago|reply
[+] [-] jbotttt|10 years ago|reply
[+] [-] hkmurakami|10 years ago|reply
[+] [-] throwawy32416|10 years ago|reply
I have a tech salary in the low six figures and I'm considering a commute from Providence because I'm priced out of Boston. I don't want roommates any more in my thirties, and I'd like to actually have a place for my car (long-distance work and personal trips). I'd love to buy in Boston (or Cambridge, Somerville, Brookline, or other places served by mass transit), but I'm simply priced out of the market. In what world can anyone afford to buy the $1-2MM 1-br condos here and the $2-3MM houses? Local financiers, sure, working physicians, and some corporate execs, but they're a minority of the population.
Paying rent in Boston, you know you're being exploited, but you don't have a choice. My current place is owned by a Chinese "investor" who uses unlicensed contractors to do unpermitted construction on an illegal third-floor apartment above mine. The construction quality is abysmal (think toilets not attached to the floor and fluorescent lights half-hidden behind drywall), but unless I want to be homeless I have no recourse because all leases turn over on September 1st. My place just has peeling paint and cabinets that fall off the wall, and at least me and my roommates are only paying $5k/mo for it. shrugs
[+] [-] tostitos1979|10 years ago|reply
[+] [-] matthewaveryusa|10 years ago|reply
[+] [-] jmschlmrs|10 years ago|reply
Prices to buy in Vancouver are completely insane and detached from local incomes.
[+] [-] Gustomaximus|10 years ago|reply
And small community business, how will they exist in the future. If someone wants to set up a local 'physical presence' vet/daycare type business that are typically mixed into residential areas the threshold is now so high ot exist and especially set up a new business. How can a daycare buy a million+ dollar house and expect to make money paying that back on having 30 local kids being looked after.
Also what is going to happen with retirement and periods of unemployment. I suspect society will be less stable as either the government has to foot high rent costs (unlikely) or we will see increased population movements during retirement, and now the government has to look after older people that before a family who lived nearby could help out with. And during low employment cycles society can absorb this downturn if people dont have large loans. Historically people cant 'tighten belts' for a year while things improve, harder when your neck deep in debt. So we will again see more movement of people, debt default etc. It will serve to exacerbate recessions etc.
Also these higher prices skew the economy. When people are tied up in these ever increasing loan/income ratios there will be less spending on dining, holidays, hobbies etc. It will weaken the economy by concentrating the spend in limited areas.
I believe we should look to ensure affordable housing for owner occupiers. Residential investment need to be discouraged (note I'm not saying stopped) as a speculative asset class. I've seen a few suggested methods to achieve this but I feel the simplest is to place a yearly 'asset tax' on non-owner occupied residential property (I would also include farms). Having a % tax would make it easy to adjust to find the right balance given economic cycles change. Also this would encourage property hoarders not in heavy debt to sell for lower taxed asset classes. This I feel is important as most solutions focus on controlling the investment lending side which is limiting in reach.
[+] [-] wqnt|10 years ago|reply
[+] [-] rconti|10 years ago|reply
What will happen to their houses? In some cases, they'll become their kids' residences. In other cases, their kids will now own TWO properties, and now they'll rent out the 2nd house, adding supply to the rental market. In still others, the reverse mortgage scumbags will own the property, and it'll add to the corporate-owned housing stock.
[+] [-] markdown|10 years ago|reply
I agree. Entrepreneurship will increasingly become the domain of the rich (or rather, the children of the rich).
[+] [-] Kalium|10 years ago|reply
It's tragic any way you slice it.
[+] [-] diskcat|10 years ago|reply
>Also these higher prices skew the economy.
Pricing is how an economy works. It is the messaging system communicating changes in demand/supply balance. If it is 'skewing' the economy in the sense that it causes changes, then it is working as intended.
>When people are tied up in these ever increasing loan/income ratios
There is only so much land to go around so if you want to use a particular piece of land that is highly desirable then you ought to outbid everybody else.
>I believe we should look to ensure affordable housing for owner occupiers.
the solution to this is georgian land value tax. There is no reason otherwise to ensure 'afforable housing for owner occupiers' except your personal belief that society should subsidise a particular class of property ownership whereby the owners use the property directly. What is going to happen is that people who cant afford to own a house (or dont want to borrow money from banks to buy one) is going to have to pay the tax for renting.
[+] [-] landryraccoon|10 years ago|reply
[+] [-] x5n1|10 years ago|reply
[+] [-] Dowwie|10 years ago|reply
Although this "study" was based on back of the envelope estimates, and the 1/3 estimate is probably inaccurate, there is anecdotal evidence of large-pursed foreign investors from around the world -- not just China but Australia, Russia, etc -- who are sustaining, if not increasing the demand for housing in populous areas.
This foreign investment is great for people who are trying to sell a home in one of these markets but horrible for buyers, who can't compete with all-cash fast-close-best-price offers. Further, the few realtors who are boots-on-the-ground for these investors have market insights -- they know what's potentially about to go on the market but hasn't yet, get insider information, etc -- and use this information asymmetry to their advantage by offering on homes even before any real home buyers have a chance or offer on the first day of listing! I have personally gone through losing multiple times to these sorts of customers while trying to buy a new home (in the NYC metropolitan area on the NJ side), not an investment property.
The experience of buying a home in a high-demand housing market where institutional/major investors are participating really challenges my thinking about whether free market practices should be allowed to operate in housing at all. Considering the rising cost of housing, it is tough to side with capitalism on this subject.
I'd like to see a study about the "artificial growth" of housing prices by investors. Interestingly to note is that such a study may conflict with the agenda of at least some leading universities who tend to publish reports about rising cost of housing after receiving generous funding from housing investors. NYU Furman, for instance, has a long-lasting public relationship with Capital One (and god knows who else in private).
[+] [-] nonex|10 years ago|reply
[+] [-] SixSigma|10 years ago|reply
[+] [-] johan_larson|10 years ago|reply
There are similar issues in Toronto, but here we are building new towers on every corner, or near enough. Toronto, fortunately, has plenty of room to spread in three directions.
[+] [-] mrgreenfur|10 years ago|reply
[+] [-] msie|10 years ago|reply
Some are fond of perpetuating the narrative that the city will be hollowed out with empty homes and locals fleeing the city. Yet a recent report to city hall reports that detached homes are not as vacant as "popularly" believed:
"The vacancy rate in Vancouver for single-family homes, duplexes and row houses is only about one per cent, and that rate has been static since 2002, according to the report. Meanwhile, the combined vacancy rate for condominiums and purpose-built rental apartments is 7.2 per cent. That number is in line with the findings of a 2013 study by the Urban Futures Institute, which put unoccupied apartments in Vancouver at 6.2 per cent on 2011 Census day."
Read more: http://www.vancouversun.com/business/affordability/more+than...
[+] [-] im3w1l|10 years ago|reply
[+] [-] 3pt14159|10 years ago|reply
[+] [-] c3t0|10 years ago|reply
Waldorf Astoria in NY was one of their big purchases
They were bidding on Starwood Hotels http://www.reuters.com/article/us-starwood-hotels-m-a-anbang...
Fidelity Life is also theirs http://www.bloomberg.com/news/articles/2015-11-09/anbang-to-...
[+] [-] beedogs|10 years ago|reply