With the escalating prices of real estate in downtown Vancouver reaching never-before seen heights, many hesitant investors are asking the questions, is this a bubble? Will it all come crashing down? Is it all pre-olympic hype? As an experienced realtor who has followed the market for many years, I can say with confidence that this is not a bubble, but a dose of reality for a city that simply does not have enough land to supply the demand for accommodation, now, and in the future.
Many people are quick to compare Vancouver to areas of the United States which are experiencing a “burst bubble” effect with an increase in foreclosures. Some may say that we will follow suit because of recent gains over the past few years. It must be noted, however, that the situation in the United States is extremely different to Canada. For example, the majority of home buyers in this dire situation provide the lowest possible down payment, or even borrow more money than the property was worth. Even the slightest change in interest rates can have an extremely damaging effect. In Vancouver, a common down payment on a piece of real estate is 20%. That’s REAL money down versus creative financing in the US.
With the soaring increase in construction in the Vancouver, particularly concentrated in the Yaletown and Coal Harbour areas, there is the fear that supply will flood the market. There are already approximately 1800 units in development slated for completion in 2008, 90% of which are already sold, and almost 1300 units in development for 2009 of which 82% are sold. The market is NOT OVERSUPPLIED, the demand is still very much there, and between that demand and the rising cost of construction, the prices keep rising. We are now faced with a situation where the only potential development sites left in downtown are BC place, the Plaza of Nations, and Port areas.
It is reasonable to wonder how a unit that cost $300,000 three or four years ago could cost $500,000 today. The cost of construction has risen so much that a developer could not build the same suite for $300,000 today. Take a development like Yaletown Park in Downtown Vancouver. That development originally sold for $325 per square foot. Today, it would cost a developer $750 per square foot, leaving no choice but to increase prices. In Coal Harbor, the Fairmont development has already broken new ground by selling some units at over $2000 per square foot. That is TODAY’S prices, not ten years from now. The demand is there, and the $2000 per square foot ceiling has been broken.
Finally, the 2010 Olympics will have the largest impact on Vancouver real estate for years to come. Although it is only a two week event, the money and exposure it will bring to our city is priceless. The world will be introduced to Vancouver as never before and the infrastructure that comes with it in transportation improvements, new venues, and conferences will remain with our city.
When if comes to investing in real estate, there are two types of speculators: one who buys and hopes that the property goes up and then there is the one who is a position to buy but doesn’t for fear the property value will down. In my opinion, not buying when you can perhaps is the bigger risk. The world has its eyes open to Vancouver, and it is my goal to assist future clients in what will be the most important financial decision of their lives.
I’ve been in business for over 13 years, and have personally bought and sold almost every kind of property to build my own portfolio, including apartments, condos, small homes, raw land, commercial space, renovation properties, as well as building my own home at the age of 30. I’ve had a lot of success with negotiations, getting as much for my clients as possible. My personal mantra when it comes to negotiating deals is “Win, Win, Win” whenever possible. I feel best when everyone involved walks away feeling great about the transaction. When choosing a realtor, having one who's been through it all before personally, makes a big difference.
