International real estate professionals attending the first Vancouver RED Talks, a series of real estate and development panel discussions, told a crowd of local sales reps and brokers that prices of real estate in Vancouver – a place considered the second-most unaffordable housing market in the world – don’t compare to hotspots like London and Los Angeles.
It’s “not even close,” said panel member Josh Flagg, star of Million Dollar Listing Los Angeles. “There are not nearly as many expensive homes as you find in London, Moscow, Palm Beach and Beverly Hills.”
Flagg, who has sold $1 billion in real estate, recently listed the former home of Sonny and Cher. The 13,000-sq.-ft. home on 10 acres was also once owned by Tony Curtis. It’s listed for $150 million.
The Demographia International Housing Affordability survey, which uses medium incomes to determine affordability of medium housing prices, termed Vancouver the second-most unaffordable city in the world, trailing Hong Kong.
However, in terms of high-ticket items, Vancouver falls short as the MLS lists 15 houses priced at more than $10 million, with a ceiling of $22 million. The most expensive home in Vancouver, according to the 2015 B.C. Assessment Authority, is valued at $57 million.
Flagg said affordability is relative, as some Los Angeles areas have some of the highest per-capital incomes in the state. And Los Angeles is not a condo market. “It is more of a housing destination,” he said, adding that retirees wanting to down-size might buy a condo, and a “nice” unit would sell for approximately $4 million. But houses are where the sales are and they have dramatically increased in price. Six or seven years ago, a high-end home would sell for $30 to $40 million. Now, deals of $75 million are being closed and listing prices have topped the $100 million mark.
The normally slow winter has been brisk, he said, and the increased prices and activity is being credited to many Eastern U.S. residents now eyeing the West Coast with its milder climate. Rather than spending the money on a place in The Hamptons where summer is only three months a year, New Yorkers are finding Los Angeles a more attractive market, Flagg said, adding that prices there are now approaching those of New York.
He was joined on the panel by Alan Child, executive chairman of the Hong Kong division of Knight Frank, a global real estate firm headquartered in London with 355 offices internationally. Stephen Hurford, principal of London’s leading development consulting and marketing firm Hurford Salvi Carr and Brendon DeSimone, a U.S. real estate expert and columnist on Zillow Blog, rounded out the panel. Cam Good, president of The Key Group of Companies and founder and moderator of the event, said the RED Talks panel served as a means of looking at Vancouver from an international perspective.
The event gave sponsor Wesgroup the opportunity to exhibit its two latest projects. The River District is Vancouver’s largest housing development, situated on the banks of the Fraser River on a remediated mill site. It will have 7,000 units on final build-out, with a community centre and various shops.
The Brewery District, in New Westminster’s Sapperton’s area near a SkyTrain station, is on the site of the former Labatt Brewery. The nine-acre parcel of land now under redevelopment is directly across from the Royal Columbian Hospital. Wesgroup plans eight buildings on the site. Three are complete, with housing, retail and general office space as well as health-care office space and laboratories. There are 650 to 750 residential units planned.
Hong Kong market expert Child said projects such as the Brewery District have the elements of liveability that today’s clients are looking for. The price point, he said, is also reasonable.
Child, who has played a role in bringing developers to rapid transit lines in foreign countries, said that opportunities exist all along the rapid transit path, not just at the stations. He predicted that the influx of Asian investors could continue to areas that can offer a greater degree of liveability than many of China’s cities.
Air pollution remains an issue in many of China’s major cities, he said, adding that new construction to accommodate burgeoning populations has led to poorly designed developments. “Many of the cities are just not liveable,” he said.
While old Shanghai fares better, Child said the newer areas in the city have massive boulevards and streets that are too large to cross and come with a lot of constraints. As a result, being within walking distance of a rapid transit stations is seen as an advantage by Chinese buyers.
Child’s observations are borne out by a 2013 report on China’s urban competitiveness from the National Academy of Economic Strategy (part of the Chinese Academy of Social Sciences). It states that first-tier Chinese cities such as Beijing, Shanghai and Guangzhou fail to make the list of habitable cities even though they have commercial advantages. Only two main cities, Hong Kong and Macao, were amongst the list of most livable cities.
London development consultant and marketer Hurford said London is running out of areas to build in. “It is very hard to find places, we are literally building over railway tracks,” he said, adding this squeeze on available development sites has led to creative planning.
But despite the lack of land and densification that is occurring, there is still affordable housing in London. “Thirty-five per cent (of the units) have to be affordable housing,” he said, adding that these are spread throughout the complex. “You could have a multi-millionaire living next door.”
Hurford said financial institutions make available special financing for individuals required to be downtown because of their work. “In London, anyone who is considered a key worker can get preferential financing,” he said.
While the panellists toured several of Vancouver’s developments and found them good value, not all were favoured. Flagg said he thought the Vancouver Trump International Hotel and Tower development fell short. (The three penthouses are expected to sell for $20 million.) “I was not impressed,” he said.