My clients are always asking me to predict when and how the Vancouver housing market will change. Sellers want to know if they should sell now or if prices will continue to rise. Buyers want to know when the "bubble" is going to burst.
There are some fundamentals in Vancouver that keep price high - limited land base, strong immigration, basic geography and desireable lifestyle. But here is one more reason that you may not have thought of as to why Vancouver prices have remained high over the years: Vancouver politics.
As a developer, I can attest to the difficulty of building a multi-family project in the City of Vancouver. Zoning bylaws in Vancouver are extremely restrictive and it can take up to 6 years, with considerable cost and complexity along the way, to gain rezoning and other approvals for a single highrise tower. This introduces more risk to the developer, in addition to slower returns on investment.
The solution to introducing more supply, and therefore bringing down the cost of housing in Vancouver is simple:
1. Reduce planning regulations and red tape;
2.Allow property developers more leeway to build taller buildings faster;
Now we all know that politicans represent the people (at least leading up to an election), and that regulations are put in place for a reason. However, I see so many wasted opportunities that it makes me want to cry over my super-food-smoothie at times. For example, what is with the low roofed Canada Line stations on Cambie? Wouldn't a tower overhead be mutually beneficial to both residents and Cambie Village merchants, not to mention encouraging transit use? What a great missed opportunity to create housing! Instead, we are left with a pretty structure to enter the station.
People often talk about higher density housing and in some cases even support it. But when projects are planned and public hearings are held to gain community support, polititians more often than not cave to local (and vocal) "not-in-my-backyard" (NIMBY) protests. Legitimate concerns need to be addressed, but the cost of forever protecting large single-family lots, even against small density increases such as laneway homes, is one we all pay.
Contrary to popular belief, I have never seen the value of homes in a neighbourhood with increased density go down after rezoning! Ever. It always goes up because developers accept the risk of buying land, adding value through increased density, and selling the newly created homes at a higher price per square foot basis.
On May 10th Vancouver council voted to increase Cambie corridor building heights to 12 storeys, Developers immediately recognized the value of increased density allowances and for this reason, the lucky homeowners along Cambie are seeing their lots (with older, smaller homes) sell for $3 to $3.5 million.
In my opinion, much higher buildings are neccessary in these locations, esspecially around the Oakridge and South East Marine Drive transit stations (which would have led to even higher values for the Cambie Corridor lots).
One more trend to consider: 70% of the residential housing in Vancouver is still detached homes, and yet Baby Boomers and busy young families alike are asking for smaller homes, homes on smaller lots with less maintenance, and homes with revenue suites (higher density). Not keeping up with this demand continues to drive up our property prices.
Next time a developer comes knocking at your door, invite him in! He (or she) may just have an offer you don't want to refuse.