Vancouver’s Real Estate Bubble Trouble

Brokers are rock stars, cabbies flip condos, and shacks are going for $1 million
By Bryant Urstadt

Note: This is a very interesting article, which is only in part about the Olympic Village in Vancouver. (I’m curious to see how well all the ‘green design’ that was planned into the village does over the next few years. It is certainly cutting edge on the whole ‘reduce, reuse, recycle’ scale of the building industry.)

I will say that Vancouver is a beautiful city that’s got it all (well, almost… there’s that whole ‘weather’ thing…) culture, ocean, mountains, and all in a very easily navigated environment. It’s well designed for an outdoor lifestyle. Its only drawback for this native Californian is her own need for a personal ‘Bramasole’ (yearn for the sun)…which Vancouver does not get in abundance. Overcast skies it does.

…but I’ll bet my skin would really like it.


Dragon boats race during this summer’s Dragon Boat Festival in False Creek. Seen in the background is the Olympic Village under construction.

The Olympics are over, and the Village is for sale. The complex in Vancouver, British Columbia, that housed the athletes during the 2010 Winter Olympics has been converted into 1,100 luxury condos. About 450 have been pre-sold, and the sales of the remainder may well render a verdict on a mystery that looms over this city like Grouse Mountain: Did Canada prudently steer its way clear of the worst of the financial crisis only to be rewarded with a massive housing bubble of its own?

On a bright, warm Saturday in late June, couples and families wandered through the empty village, which has been renamed Millenium Water. It opened for public tours last month and draws about 100 people a day. Millenium Water is a city of the future, built with enviro-touches like green roofs and automatic shades that moderate the temperature inside the apartments. An 815-square-foot, one-bedroom apartment is on sale for C$879,000, which works out to C$1,078 per square foot, or $12 higher than the average price in Manhattan, according to The Corcoran Report. (A Canadian dollar is currently worth about U.S. 96 cents.)

Millenium Water isn’t in downtown Manhattan, of course. It’s not even in downtown Vancouver, which is across an inlet known as False Creek. It isn’t really even in a neighborhood; the nearest establishment is the sales office for another condo development. If all this is starting to sound a little irrationally exuberant, especially given the shaky international outlook, well, that’s Vancouver for you.

“Real estate is like a sport here,” says Tracie McTavish, president of Rennie Marketing Systems, which is overseeing the sale of Millenium Water.

In the last 12 months alone, the average home price has risen 14%, to around C$1 million. One can look at charts to understand how long and intense the climb in prices has been, with inflation-adjusted prices of an average home in Vancouver doubling in the last 35 years, but it is much more fun to watch The Vancouver Real Estate Market Roller Coaster, a video posted by the anonymous owner of the website Vancouver Condo Info. Using software called NoLimits, the programmer turned that graph of inflation-adjusted home prices into a high-definition roller-coaster ride. Starting with a warning, “Please fasten your safety belt. Keep arms and assets inside ride at all times,” the years float by like mileposts during the ride: 1979, 1980, a long climb up to 1981, and then a harrowing drop down to 1983. But it is the ride up from 2000 to 2010 that is the steepest, and that, except for a brief drop in 2008, seems to go on forever.

The video ends with an imagined plunge into the ocean.

To a visitor, it can seem as if Vancouver’s main industry is real estate, like it used to seem in Las Vegas or Orange County. A newcomer, emerging from the gate for international arrivals, is greeted with three separate backlit billboards, all offering architects’ renderings of planned communities. Aspac Developments promises that they’re “building a legacy of excellence.” Concord Pacific describes each of its multiple developments as “a master planned world unto itself with park, schools, daycares, shops, restaurants, and resort-style amenities.” Polygon calls itself “Vancouver’s Builder of Choice,” and offers contact information in English and Chinese. Driving out of the airport and up Vancouver’s main thoroughfare, Granville Street, one notices billboards for brokers and advertisements on the backs of buses for Realtors and developments.

“Some of the brokers in Vancouver think they’re rock stars,” says Grant Connell, a broker with Sotheby’s (BID). According to Connell, they are getting paid like them, too. “Many have made $500,000 or $1 million this year,” he says. Connell, a former professional tennis player who spent years on tour, is among Sotheby’s top-producing brokers. As of June of this year, he had amassed 52 “ends,” as he calls a completed sale.

The market in Vancouver wasn’t entirely unscathed by the financial crisis. Like the rest of the world, it took a hit. But prices rebounded, and the average home in the city is now about 10 percent above the pre-crash peak. On a driving tour, winding up a twisted knot of roads in the West Vancouver neighborhood, which stretches up a slope with a view of the bay and the mountains, Connell slows down by two similar homes. “I sold the first for $4 million right when it came on,” he says. “The second was a little later to market. It took a long time to sell for $3 million. There’s your 25 percent 2008 correction right there.”

As Canada headed into 2009, Canadians jumped back into buying homes. Home prices in Canada have been strong from coast to coast, especially relative to the U.S. Vancouver prices, however, have run with special gusto.

In the second half of 2009, says Connell, “it was just spastic.” He points to a narrow lot right on the beach, a vacant slot between two nice homes. “That was a $5.2 million sale last year,” he says. “They tore down the home but never built anything.”

In Vancouver, new developments are pre-sold via “assignment letters,” or commitments to buy. Throughout 2009, say Connell and others, assignment letters were being flipped. “The minute I actually heard a taxi driver talking about flipping assignments,” says Connell, “I knew something had to give.”

read the rest of the story here:

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