The Real Estate Market in Vancouver: Getting out of Control or Is Value Just Being Realized?
You know, there was a time, not too long ago, that I told everyone that would listen that the area that I lived in (Vancouver) was dirt cheap in comparison to other cities in the world. When you compared it to cities like New York, San Francisco, London, the difference in price was almost laughable. We have beautiful snow-capped mountains, the ocean, we are a major trading hub, the climate is mild, little snow, and the people here are very friendly. Why were our prices seemingly so depressed in comparison to our cities in the world?
Well, first, let's look at the economic condition on Vancouver, and in general, the entire province of British Columbia. To say that our economy was stagnant in the 90's would be an understatement. After the Japanese stock market crashed in the very early 90's, billions of dollars in capital left our region. Then, the NDP government took over, and sought to make up for this lost capital by raising taxes. This chased our many of our hardest working citizens, sending them to places like Alberta, which boomed throughout the entire course of the 90's. Our economy remained stagnant, and because of that, real estate prices were stagnant as no one really wanted to purchase here, believe it or not. Wherever you have a hot economy and plenty of jobs, you will find a hot real estate market, as everyone wants to move there.
So in the early 2000's, a new government in BC took over, placing more of an emphasis on financial well-being and prosperity, and the economy boomed. Real estate prices started to soar, and caught fire even more when it was announced that Vancouver would be hosting the 2010 Winter Olympics. Due to the booming economy, new residents came here in droves, not wanting to miss out on the economic boom.
I mean, in reality, BC should have a booming economy. We have limitless natural resources, a strong tourism industry and a mild climate.
The question is, can the real estate market remain as strong as it is? I say yes, for the following reasons:
1) People say that the prices are "too high." What are they based that on? In the late 90's, a one bedroom apartment in New York was on average $800,000. Now, it is closer to $1.3 million dollars. I am sure that there were people in the last 90's that would have told you that the New York real estate market was overheated, but what are they basing it on? Are they just pulling numbers out of the air? If the demand stays strong, the prices can go as high as they want to. Supply and Demand 101.
2) The economy is still booming. The economy is booming, with no real signs of letting up.
3) The 2010 Olympics. The Olympics are meant to showcase the host city. Someone from Amsterdam visits during the Olympics and says "You know what, I really want to live here" and they buy a place. The positive impact of the Olympics is immeasurable and will positively affect the price of real estate in Vancouver for years after.
4) Retirement. Many workers throughout Canada will be retiring over the next 5-8 years. When they retire, if they don't become snowbirds and head down to the US, then where will they go? Most likely where it is warm and mild, which is British Columbia.
5) Momentum. The BC Real estate market has a big thing going in its favor right now; momentum.
All told, I expect the Vancouver real estate market to be markedly higher in 2012 compared to where it is now in 2007. If you can afford it, I would buy.
Filed under: Real Estate News