Realty Check, Vancouver Magazine, September 2001

>> David Baxter is executive director of the Urban Futures Institute, a Vancouver-based organization studying trends in population, land use and community change
>> Allyson Brooke is a Vancouver-area realtor at MacDonald Realty with more than 17 years’ experience
>>Carl Gomez is a regional economist with the Canada Mortgage and Housing Corporation, focussing on the Lower Mainland
>> Carmen Maretic is a Vancouver-area realtor with Prudential Sterling and president of CASH Society (Compensation and Accountability for Soaked Homeowners)
>> Merrilee Robson is national communications officer with the Co-operative Housing Federation of Canada
>>Richard Weir is vice-president of real estate acquisition with Bosa Development Corporation

We took six realty insiders—two agents, a developer, a demographer, a co-op housing official and an economist—to lunch, and boy, did we get an earful. Surprisingly, our disparate panel often saw eye-to-eye when it came to social policy and the role of government in adding value to the real estate market. We started with the most fundamental realty question that came to mind:

Is buying a home a good investment?

If your banker has been telling you that you can’t go wrong with real estate, think again. Our panelists agreed: buying a home is an emotional decision and a lifestyle choice, not a guaranteed investment. “People are fools if they think home ownership is a better investment [than other strategies],” was one blunt appraisal. The Vancouver housing market crashed in the early 1980s and could easily tank again, remember.

And many first-time buyers forget, when looking at the long-term benefits of owning versus renting, to add property tax and maintenance to the price of ownership; each year, plan on spending one percent of your initial investment on these items. Okay, let’s concede that a house or condo is only a part of a balanced portfolio. But real estate will always be more than just another commodity. What could replace it as a nest egg? Rightly or wrongly, owning a home gives people a feeling of control over their destiny. And as regular folks flee the stock market, real estate doesn’t look like such a gamble after all.

A healthy market: let’s just wait and see

Panelists agreed that vancouver housing prices have “hit bottom.” Our market analyst ventured that consumer confidence is returning, since the job market drives real estate. But consider Calgary, where realty sales are taking a dip, thanks to the tapping of consumer optimism. In Vancouver, we’re near the other end of the curve. The recent election has resulted in an outburst of pent-up demand, based (naively, perhaps) on the perception that everything will change for the better. Some panelists warned that a rush of new home buyers could spell trouble; a stable market, they argued, is always preferable to rapid inflation. “I’m very concerned about the future of [Vancouver] real estate,” said one of our realtors, lamenting marketing-driven booms. Our economist countered, suggesting the housing market is well on its way to stability. “Solid growth is only as solid as Tumbler Ridge,” came one reply.

One thing’s certain: there’s a high turnover of home ownership right now, mostly due to increased mobility. Still, location rules on the West Coast (unlike the east, where people pay more for bigger homes). As Concord Pacific proves, today’s buyers want to live within walking distance of amenities. Citing the older neighbourhood south of Oakridge as an example of this trend waiting to happen, our demographer offered that people will move in and renovate if the location is right.

Buyer (and realtor) beware

Panelists disagreed about the level of consumer awareness when it comes to home buying. Both real estate agents in the group criticized developers and realtors for emphasizing location over quality and security, and buyers for not asking the right questions (see “It Comes with a Roof, Right?”, page 38). Our developer responded that people aren’t stupid: they know that like any investment, real estate is fraught with risk: “How do I know what’s going to happen to Nortel? Why is real estate any different?” But the public can still be remarkably clueless. Even with False Creek and Kitsilano shrouded in tarps, there was debate over the level of leaky-condo smarts. One realtor accused some of her colleagues of failing to inform buyers about the real dangers. A solution: require even the most conscientious agents to annually upgrade their knowledge of building codes and legalese.

Demographically speaking

Our demographer pointed out that the average Vancouverite is 37 years old. Do the math and you’ll see that 20 years from now, today’s typicalhome buyer will still be in the workforce. If this suggests that detached housing will remain in vogue, it also throws a lot of risk onto the rental market, which is subject to the whims of mobile young people (hello, Calgary). With almost half of Vancouverites still renting, developers have responded by diversifying their projects to answer the needs of the marketplace. But their biggest challenge is keeping pace with the twists and turns of the economy. One bright spot is the large numbers of immigrants who continue to arrive in Vancouver seeking home ownership. Most of them are here to stay, and they regard real estate as a vital part of their portfolio.

A lack of political will?

Vancouver may be the envy of u.s. urban planners, but our developer argued that the city is missing a concerted social policy to help give residents a vested interest in their neighbourhoods. Example: the Downtown Eastside, which needs better services, more diversified housing and a healthier income mix. As Vancouver grows it will also need infrastructure enhancements, some of which our tax base may not support. Some panelists encouraged direct corporate funding to pick up the slack.

Our co-op housing official agreed that political will is lacking, but she was skeptical of some developers’ claims that the market will accommodate the growing number of Vancouverites waiting for affordable housing. However, she said most B.C. co-op residents are happy campers; another panelist claimed that Vancouver has the best social housing in Canada.

The Future: Don’t be a nimby

Looking into their crystal balls, our panelists saw inflation steadily rising over the next 25 years, leading to hefty increases in the price of Vancouver-area real estate. However, the owners of centrally located buildings will be able to beat inflation. High energy costs and changing work patterns will transform the suburbs; the most desirable locations will be fixed on intersections and neighbourhoods near transit corridors. As lifestyle grows more specialized and work less so, people will define themselves by the place where they sleep. And how will the face of our city change? Not as dramatically as you might think. Take Point Grey, where most of the change during the past decade or so has been unseen, in the form of illegal basement suites. On the other hand, successive waves of immigration will result in less neighbourhood exclusivity, as the oldest areas of the city become revitalized by their new populations.

Panelists made it clear that Vancouver is at a crossroads in the density debate. Few residents want high-density housing projects in their neighbourhoods. One in the group argued that, by opposing these high-density developments, many homeowners will end up with nowhere to live when the time comes to downshift into a condo.

The Bottom Line

In the end, it’s not a question of if but when you buy—just don’t count on a speculative market. As an owner, the only time you get stung is when you have no job and a large debt. And, of course, real estate loves inflation, because the purchaser pays down his or her mortgage in deflated dollars. Finally, home buyer, doom and gloom can be your friends. If the papers are preaching economic bad news, that may be a cue to jump into the market. When is the perfect time to buy? Try six months ago.

For more information about co-op housing, call the Co-Operative Housing Federation of B.C. info line at 604-879-5112.