Tuesday, October 23, 2007

east to west

I had occassion to go out to UBC today, and made my route along 16th Avenue. I did not see a lot of "For Sale" signs (west of Cambie), and the few that I did see, had "SOLD" plastered on them. That struck me as interesting - as I have been seeing an ever-increasing number of signs up east of Main St., and most just sit, and sit, even with "Price Reduced" as an incentive. It seems as if the low high-end on the West Side is still selling, while the lower stratum on the East Side, are not.

Intrigued by this, I did an MLS search of Arbutus, Dunbar and the University Lands. Arbutus has nothing under $1 million, Dunbar has 2 under $1 million (in the high 800K's), and the University Lands has none under $1.1 million.

This place in Arbutus (W. 22nd Ave.) is a cool $1.089 million. A 33x120 lot with a "tear-down"? (and the realtor cannot even be bothered to take a decent photo' for that kind of money...)

So, I thought I'd look for comparables on the East Side, and found this place. (at least the agent looked through his view-finder)

Dang near identical houses on more-or-less the same sized lot, but the second house is in East Van., in Killarney - one of the more "desirable" areas in East Van. The East Van. house is larger by 100 sq' to boot, but is priced at $535K - a bit less than half the price of the Arbutus house. How can travelling 40 blocks west make a shitey shotgun shack "worth" twice as much money?

Something else that I have taken note of, is that most of the blurbs from the East Side tell about how much the house can pull in with rent. This is further indication that this market is all about speculation - never mind "a great house in a great neighbourhood, great for raising your young family". So houses are just another commodity, and as such, are just as prone to boom and bust.

Incidentally, the Killarny blurb says Easily rentable for $1,700 or more for month. Yeah, right. I'd pay $1200 on a good day, but even at $1700 - you would not come close to positive cash flow.

What a disconnect.


Anonymous said...

These are just priceless. I love clicking on the mortgage calculator for the Arbutus house and seeing the qualifying income at $303 K. Yeah, this is the kind of place that people who earn three hundred aspire to live in.

Panda said...

Hey, that Van West house is a "Perfect starter home" according to the listing! Who would have thought that 1.089Million is a starter home? Starter home for whom?

That is something to see the homes side-by-side. Look about the same to me!

aetakeo said...

I swear, it's beginning to piss me off.

markoz said...

You don't have to go too far west to get into (more) insane prices. I live in the Main Street corridor and can offer these examples. I don't know how to post links so I'll give MLS numbers. This beauty, V672848, is 95 years old, very small and on a tiny lot. The bathrooms have no bath, just shower stalls. The upstairs bedrooms just have paint slapped on the old wallpaper. Oh, and the siding? It's asbestos. How about this charmer? V670786: The realtor says it is "liveable" but "does not have many redeeming features". Only $798,000. My personal favorite is V669234. 69 years young with a 1980's kitchen and two grungy suites downstairs: $1,080,000!

hadenough said...

Where is the money coming from? That is the big question.

Are Vancouver salaries really high - much higher than most salaries in the US and other parts of Canada like New York or maybe even London?

Do people have those salaries in Vancouver? Why does everyone seem to have so much money?

Is there something we don't know. Some great investment we know nothing about. Or could it be sub-prime and it will eventually hit the fan?

Where is the money coming from?

Anonymous said...

Where the money comes from depends on market segment, it seems.

For the high end:
1. Foreign investors, from Asia and the Middle East. Persians are snapping up the British Properties, for example.
2. Money Laundering
3. Celebrities like Jean Claude Van Damme

For the rest of us.
1. Liar, no doc, and specuvestor loans
2. CMHC adjusting insurable loans to 5% down, 40% of gross
3. Intergenerational Wealth Transfer

Drachen said...

"Are Vancouver salaries really high - much higher than most salaries in the US and other parts of Canada like New York or maybe even London?"

No, we're well below the national city average I we come 6th from the bottom in the 28 biggest cities in Canada at 58,800 (Median household income). Stats Can, Median Household Income

"Where is the money coming from?"

That's easy, it's coming from real estate investment of course! It's simple. If 5% of houses sell in a given year and the price increase is 20% over the previous year ALL houses are given a 20% mark-up by appraisers. Suddenly EVERYONE who owns property has more equity. The equity in this example city has gone up four times the actual amount spent on real estate! Banks loan people money based on their equity so they can buy more property.

Classic bootstrapping. The banks are starting to figure out that THEY are going to be stuck with a share of the mess so they're starting to be a bit more careful.

Clarke said...

I think I asked this before, but while some buyers have existing appreciated equity to use, one wonders what first time buyers are doing. I suspect it is liar loans, or 0 down, 40 year deals, but I still wonder.

I also live on the main street corridor in an apartment complex, and the recent sales in this complex alone are starting to make me feel like I am in the twilight zone. Two bedroom apartments selling for $460 k ($50k over asking price).

Anonymous said...

you're right - first-time buyers can't buy at all, period, unless they get an insane 0-down 40-year liar loan.

The other buyers (most of them) are residents of BC who are buying 3rd, 4th, 5th and 6th properties with bootstrapped equity as previously pointed out. Not Jean-Claude or the hypothetical rich Arab. The stats are out there, and it's something like 95% of sales are going to BC residents.

Listen, I lived in the UK the last 4 years and met people from all over the world. Most people had never heard of Vancouver. Even when I mentioned it was near Seattle, if they weren't Americans, they still had no idea. The world is a very big place, and North Americans are in the minority, especially those outside the US east coast. Nobody knows or cares about Vancouver, at least not anywhere near the number needed to influence the market here.

Anonymous said...

Actually, Jean Claude did buy a penthouse downtown in the Shaw Tower. He's currently selling it though.

My Friends in the British properties are all moving out. They are mostly old money, and rather racist. They are now calling the British properties the Persian Properties due to the number of Iranians that have bought most of the houses, Most of the BP people have moved farther west into Caulfield.

Not sure who's in Shaugnessy.

A lot of Americans bought downtown. They have done very well on their investments, having seen the properties appreciate 100% and the currency appreciate another 30.

Then there is the fabled money launderers. Bottom line is that is the High End of the market. High End markets are different than the middle and low end. High End buyers don't particularly care what happens to the price.

There are no buyers left in the low end, as the low end thinks it has some relation to the high end. Really, the low end is just looking at the high ends ass with envy....

solipsist said...

Good commentary from all. Thanks for your input.