2015 UDI Keynote Transcript
(Listen to audio only)
So, as always, with anticipation, please join me in welcoming Vancouver’s residential marketing icon Bob Rennie. (applause) (music playing)
Thank you. So, I played Pharrell Williams’ “Happy” and why did I play “Happy”? Well, the survey says that we are the unhappiest place to live in Canada. (laughter) There’s lots of forces working against affordability right now to a point where in isolation each seems manageable yet in accumulation, I think, we’re in trouble.
So, this year I decided to start out on a sort of no foreplay format, something common at my household. (laughter) Oh, now it went big… I can’t say it… (laughter) That was, uh, okay (laughs) That was not intended.
I’m becoming very uncomfortable with how we’re addressing affordability on all fronts, especially on the supply side. I said last year and I want to repeat it, we’re trying to solve affordability on the most expensive land in Canada, perhaps affordability is a regional issue. I call today’s talk ‘Can We Solve Affordability Without Density?’ This is a tough topic. It is about supply and demand. There is no affordability without density. So, I felt we had to get the topic to the surface and hopefully what would come out of today’s talk is some really healthy conversations with respect to neighborhoods towards, towards solutions on affordability.
The title grew out of my CMHC address last year and that I was going to run for office and my platform would be pretty simple. I’m pro affordability, but I’m anti-density. So, I’ve been thinking and I’ve been thinking an awful lot and I think it’s time that we got the pro-affordability and the anti-density camps together.
I think they have to meet. I think they should go for dinner and they don’t have to like each other, but I think they have to start to understand each other because there’s just too many forces working against affordability right now. And, at the same time, I’m counting 19 of them and we keep dealing with them in isolation and I think they’re potentially topic, toxic in accumulation. So, hold that thought.
I’ve been rude with my anxious, anxiousness to get that out of the way. If you’ve been reading the media this week … Oh, I’ve got it right here. Ann phoned me Monday – Anne McMullin, our leader – and said, “Will you be talking about anything controversial? Not that there’s anything wrong with that, but we just want to be prepared.”
And, I said, “You know, I don’t think so.” (laughs) And, then it came out in the paper, “Give Up On Your Dream,” (laughter) which is sort of … I didn’t finish the Martin Luther King story, but I just wanted to get these topics out of the way.
So, I was really rude in not thanking everybody. Thank you to everybody in this room for allowing me to be up here today. This is my 40th year in real estate and I think this is my 12th or 13th year, I don’t know, being up here. Thank you again to Anne for putting up with me and the numerous phone calls this week and for inviting me back.
And thank you to Norm and, yes, I am going to go on the board of the Chicago Art Institute. I’ll be voted on on June 16th and I’m allowed to talk about it. (applause) Thank you. And I’m there for art knowledge, not for philanthropy, just to clear it out.
I told Norm’s a story that I went out in November. It was freezing cold for three days and you spend time with curators and you spend time with artists and you spend time with the board and had great dinners. And, the last night you walk into a room that is almost as, I’d say half the size of this room, three stories high, table for ten, overlooking Chicago.
And, everyone arrives at 7:00 and we all shake hands and we all say hello. We sit down to dinner and the fellow to my left I probably spent the first 20 minutes of the first 35 minutes talking to him and something didn’t add up. And I said, “Charles,” I said, “Can I ask, what do you do?” And, he said, “You’re not serious?” I said, “No, what do you do?” He said, “I’m the director of this museum.” (laughter) And, so my face is beet red. And I wasn’t going to tell you the whole story, but I will.
And I said, “And, that’s not your wife?” And he said, “Why do you think she’s my wife?” And I said, “Well, you both have the same color hair.” (laughter) And the guy next to me leans over and said, “He’s gay.” (laughter) And so I’m a complete misread, so I said to the table, “Would everyone just go around the table and lie to me and make up something.”
But something that what the lady that I thought was his wife said is … She was telling stories at the table, and she said in grade one the teacher said to the class, “What does your dad do for a living?'” And when they got to, I think her name is Nancy, when they got to Nancy, they asked her and she said, “I don’t know.”
And they said, “What does your dad do?” And she goes, “I don’t know.” She said, “Well, what does he do when he leaves the house?” She said, “I don’t know. He’s the president of the Ford Motor Company, but I don’t know what he does.” (laughter) And that’s the sort of philanthropy that’s in Chicago. It’s, it’s not like here, but I’m just very fortunate that I have a little art voice, so they invited me.
Okay, now I should move on. Happy, so we’re not happy. We actually voted ourselves the most unhappy place to live in Canada. I believe that we’re so passive aggressive out here on the west coast that we just couldn’t say it, we just couldn’t say, “I’m happy,” on a survey because then we would get caught if we end up not happy.
This way, nobody will know if we failed. Sort of like the Adrian Dix thing, you all told me who you were going to, who was going to win, but you weren’t telling me who you were going to vote for.
I blame this, and I tend to blame a lot of things on the fact that we don’t have head offices. We do have tech, Telus, Lululemon and now we have HootSuite, but we just don’t have that corporate branding, all of that brand protection that supports community for brand enhancement. Not the invisible giving, but that visible corporate leadership, that parental guidance where we’re all made to feel comfortable celebrating success of a company or of a brand openly.
Sometimes I think that we’re almost at a point in society where it comes to celebrating corporate success … And I tried to come up with an analogy. And the only one I could come up with was if General Electric sponsored a parade in Vancouver, or in San Francisco, or in Seattle, I think in San Francisco at the parade I would lean over to my daughter and I would say, “GE, they’re such great corporate citizens. Look what they’re doing for us all.” And, I would say, “You need a refrigerator, let’s buy GE.”
I worry that a climate exists here unlike cities with numerous head offices that we might overhear somebody saying, “They’re only sponsoring this parade to get more business, you know.” And the negative is terribly, terribly infectious. I decided this year that we really need to get the elephant in the room out on the table. I thought that someone should get the conversation started, or maybe it’s we should get the conversation re-started.
It seems to me the acknowledgement in the media this week that the City of Vancouver only has 47,000 single homes is already changing the conversation. The state of affordability is potentially toxic.
My 19 influencers that I see that are placing extreme pressure on affordability are we have zero ability to create single family housing stock in Vancouver. We have record high land costs throughout greater Vancouver. We have rising construction costs. We have, rightfully so, very upset neighborhood and community groups that really need to be informed on population growth and on the real pressures of the city. We have consumer’s expectations. We have the million-dollar single family home on the verge of extinction.
Number seven, we have an aging population with tax-free billions in equity to spend. And what do you think I picked for number eight? China. It would be so easy if it was only China. Should we be taxing foreign home ownership? We have zoning that was enacted in isolation of today’s population. We’ve become very insular as a society. We have very few head offices, which I have already mentioned. We still keep using the word “white.” Higher taxes and less services creep is happening every day.
We have a nameless, faceless blog-sphere out there of opinions in isolation of fact. We have the courtroom being used to fight politics and density. We have population increases. We have the ever increasing transfer of wealth, more money to buy homes. We have a limited supply of homes.
We have a cultural shift of wanting to live where everybody else lives. And we have less reliance on the car. So, there’s my 19. So, I thought that I would do is try and wrap these 19 in some data. So let’s find out if we’re not happy, what are we?
Well, at Rennie we went out and we did extensive in-depth polling, working with Greenberg Quinlan and Rosner out of Washington D.C. and their Canadian affiliates. And, again this year, Andy Ramlo and Ryan Berlin at Urban Futures will find the data to answer any crazy, abstract question that I have. And David Baxter also worked closely with Urban Futures on my data today. And Sandra Cawley does all of my inventory numbers and the guys at Landcorp have the best B.C. Assessment-generated data that you can find.
So, the Rennie housing in-depth report started out as an idea when CMHC stopped doing their renovation and home purchaser survey two years ago. Our in-depth polling surveyed two demographics. We went to Millennials and to Baby Boomers in Burnaby, Richmond, Surrey and Vancouver.
We wanted to see when and we wanted to see where the Millennials and the Baby Boomers are different and we wanted to see where they are the same. My psychiatrist told me 25 years ago, “Bob, once you’re conscious, you cannot pretend to be unconscious.” I’ve always translated that to mean once you know the data, deal with it.
So, our in-depth … I know what you’re thinking. (laughs) Our in-depth polling asked, “Generally speaking, do you think things are heading in the right direction, or do you feel things are headed in the wrong direction?” 62% of Baby Boomers in Vancouver, Burnaby, Surrey, and Richmond feel we’re on the right track. And, the big surprise, 81% of Millennials feel we’re on the right track.
On the “Could money buy happiness?” Boomers earning over $100,000 fell from 62% saying, “We’re on track” to only 49% saying, “We’re on track if you earn over $100,000”. When you break down the question by city, boomers in Surrey, 74% say we’re on track, while Boomers in Vancouver have only 51% of us saying we’re on track.
85% of Millennials in Vancouver say we’re on track. Not surprised, this aligns with transit issues, bike lanes, sustainable communities, HootSuite, climate change and tech start-ups. It’s what the Millennials want. My takeaway is that Baby Boomers tend to live with looking in a rear view mirror.
Baby Boomers believe Millennials have similar aspirations to them. They don’t. 51 to 69-years-old, they’re not as, are they not as happy or do they just feel we’re not on track? I think it’s because they know what they could have had. While the Millennials look ahead with hope and they are not jaded with what could have been.
Millennials are born between 1980 and 2000. Today, they are 15 to 35-years-old. For our survey, we used 19 to 35-year-olds. Millennials in each of the four cities are really, really, really happy. All are either side of 80%. They say we’re on track, whether they’re earning under $50,000 or over $100,000 a year.
These Millennials are happy, and they’re a force, and I think we better start to understand them. They’re our future consumer. They are a consumer now. They currently earn 20% of the income in Canada, while Baby Boomers are flattening out at about 30% of the income in Canada. They’re the largest generation in the United States, representing one third of the total U. S. population in 2013.
Back to our in-depth … 89% of baby boomers are recommending home ownership. 48% say they’ll help their children with a down payment or have helped their children. This is right on track with Royal Bank’s findings last year, the 48.5% of the first-time buyers are getting help from parents or grandparents.
When it comes to visible minorities, I think this is a really important stat, 61% of local Asian Baby Boomers say they have helped or they will help their children. For non-Asian Baby Boomers, that 61% drops to 42% say they will help or have helped their children.
When we asked Millennials and Boomers what best describes your financial situation, Millennials and Boomers both claimed 42% had no savings at the end of the month, while 58% had savings at the end of the month, only 16% of the 58% have, had any significant disposable income.
Of the 16% Boomer man home owners had the highest to report and were most likely to have the most discretionary income. Baby Boomer women had the least savings at the end of the month.
All of those Asian Millennials that are in line at our condo pre-sales and that are buying condominiums, they are labeled as offshore, but they’re locals because 61% of their parents say that they’re going to help them into home ownership. 44% of Vancouver’s population is of Asian origin.
29% of greater Vancouver’s population is of Asian origin. And Richmond is breaking 50% of the population being a visible minority. I believe at 51% it’s no longer a minority (laughter). Just thinking.
We’re talking about the region. If we’re talking about the region, it’s a different conversation that if we’re talking about Vancouver. The only new housing stock of detached that could be created in Vancouver would be two laneway homes on every lot with a title and you would have to rezone huge areas of the city of Vancouver to get any meaningful supply.
In 1988, I did an interview with Vancouver Business Magazine. It’s an out-of-print magazine, in an article and I said the W was the most expensive letter in the alphabet. Using the Wheel of Fortune analogy, referencing the extreme difference between the W in West 5th and the E in East 5th, and my observation back in 1988 was one day the comment will be, “Wow, do you live in the city?” And we’re here.
I believe that Main is the new Granville, Fraser is the new Oak Street, and Kingsway is the new Cambie Street. When I see a 33-foot lot value home just off Nanaimo and 6th Avenue at the corner of 6th and Penticton asking $995,000 and sell for 1.2 million, the story to me it starts to write itself.
I always use Biff and Buff as my demographic couple and I’ll just go quickly … my two daughters when they were, you know, I’ll use six, seven, eight-years-old, I used to tell them a story about Biff and Buff. And Biff and Buff was an imaginary couple and we’d talk about their mum who was Mumsy, and we talked about where they traveled and what they would do.
And I did this, was about three years running, and then Kris wasn’t coming and I took my two daughters to Hawaii and I said, “Biff and Buff are going to join us.” So, how do you get out of that? So, I ordered this big bouquet of flowers. It was in the room with a card and we walk in the room and I go, “Oh, look, there’s flowers.”
I pull the card out and I go, “Oh, Biff and Buff aren’t coming. Mumsy is sick.” And my daughter, Katie, who’s here, tilts her head and said, “I thought they were bears.” (laughter) So I used them as my imaginary couple to this day.
So it’s going to be tough for Biff and Buff if they want a detached home.
Here’s the data, we will not create another single family home in Vancouver in my lifetime. I think I’ve said this to you every year for the last 12, 13 years. And finally we’ve picked up that there’s only 47,000 homes and it’s going to be difficult.
As we want to all live in urban centers we are moving to the light, Richard Florida’s line. We all want to live where everybody else lives, is Vancouver hanging on to the sacred single family zoning at the expense of affordability?
This is a huge topic. It’s a very sensitive topic. There’s no way you can bring it up without being accused of, “Bob wants more condos to sell.” That’s the least of my worries. I just think we have to start to deal with it. Somebody has to ask the question, we are not making any more detached housing, demand is increasing, and every year detached housing numbers are going down in the City of Vancouver.
Between 2006 and 2011, we lost 900 single-family homes. Here’s the dilemma as we create badly needed density, think Cambie Street, single family homes disappear. It’s not just that we won’t make another, we’re losing. And as we want more density we’ll lose more single family homes. I have to allow for one-third of Vancouver being parks, schools and streets.
56% of Vancouver’s land is zoned RS-1 and 100% built out with no supply and increasing demand, creating density in single family neighborhoods, like the Cambie corridor, is a very sensitive community issue with massive political risk.
Brian and I, Brian Jackson is here, Brian and I are arguing in the newspaper, which I think is so hot (laughter). We’re not, to me you bring up the topics and you come at it from as many directions as you can. Creating density in single family neighborhoods is not like creating density downtown in the central business district, or over 20 years ago at the warehouses, 30 years ago at the warehouses of Yaletown.
Creating density next to office towers and next to warehouses is very different in single family neighborhoods. Yet, when we do see controversial developments, like Will Lin’s Independent on Kingsway on Broadway or Peter Wall’s Strathcona Village in the 900 block East Hastings move ahead on the consumer side, affordability, aging in place, and support from surrounding postal codes is overwhelming.
Independent at Kingsway and Broadway, 165 of the 258 condos were priced under 499. 49%, 111 of the 226 that were sold, when we did our audit, were sold to purchasers, 111 were sold to purchasers that live within five kilometers. Seven of Independen’s purchasers, 3% were from offshore Asia, two purchasers were from off shore Europe.
Strathcona Village on the eastern edge of the downtown edge east side … You know when we did Strathcona Village, I think I started to talk about it last year when I was here, we launched it, we launched it from the 1300 block Richards.
We called it 900 East Hastings, so that anybody in Yaletown when they came to the 1300 block Richards, they knew this wasn’t Yaletown product and Strathcona would come over to see us just like Woodward’s came to Shaw Tower when we did Ian Gillespie’s Woodward’s. It didn’t work.
Everybody from Yaletown came in saying, “I want one,” and then realized it was 900 Hastings and no one from Strathcona would come over. So, Peter turned on a dime, we had a vacancy come up on site. Coincidentally there was a fire there recently. We have a vacancy on site. We moved the presentation center back on site, we renamed 900 Hastings to Strathcona Village, brought each of the approximately 300 units per pod on at a time. 100% sold out with buy-in from the community.
Strathcona’s story is very similar to Independent’s, all 280 condos were under 499, and 230 of the condos were under 399. This is affordable product. 100% sold out, 52%, 145 of the 280 condos were sold to home buyers that lived within five kilometers. Offshore buyers at Strathcona Village, zero, three sales to offshore Europe. Peter’s Wall Central Park. I’m not saying this because Peter is sitting here. This was already written. So, Peter Wall (laughter) is so handsome…
So Wall Center Park, Peter Wall’s three tower development at Vanness and Boundary of the 1,009 sales to date, 3% of the sales are off shore, 17 from Asia, and 13 are from Europe, so 3% total off shore.
The irony is that the 1,009 purchasers at Wall Center Central Park, that 280 purchasers at Strathcona Village, including 17 school teachers that bought at Strathcona Village and the 226 that bought at the Independent, so that’s 2,307 condominiums, almost right in line with CMHC’s report, 2.2% were off shore. They bought and they stayed in their community, but you know what they didn’t do? They didn’t show up at any public hearings.
This is affordable housing. They show the support with a deposit check. And I think that this to me might be the heart and soul of today’s talk. At CMHC’s keynote address a few months ago, my recommendation was maybe it was time CMHC, as a stakeholder, got out into communities early, start attending the anti-density, not in my backyard meetings, and explain the consequences of no supply, explain …
It shouldn’t take three years to get an Independent’s through. Explain population forecasts and the pressure on affordability from first time buyers, families and our seniors wanting to age in place. If we do not allow density we’re effectively telling our Millennials, families and seniors that they have to move out of the city. Knowing UBC professor Dan Hiebert’s …
I’ll tie this together, knowing UBC professor Dan Hiebert’s findings that I actually shared with you last year, when Dan broke down the 2.4 million people in greater Vancouver into 3,400 pods of 650 people, we have an average of 24 ethnic groups per 650 people. And even Richmond has 17 ethnic groups per 600, 650 people.
So, what would happen if community groups started to register? If community groups had to register to carry their voice, and as a group not be recognized unless they represent some of the diversity of their neighborhood by age, gender, ethnicity and represented homeowners and tenants and the buying demographic that wants to stay or children that want to buy in the neighborhood?
And what if community groups could choose two urban planning type professionals from the DP board and take some of the pressure off of planning and off of politics? My over-simplified version, which may be right or may be wrong, but the way I look at the world, is density on the Cambie corridor. You can see the condos going up on Cambie, you can see them going up on 41st, and you can see them going up on 25th.
My hat’s off to Brian, to the city for the density that we’ve achieved on the arterials, but condos have jumped from 675 a foot to $850 per square foot and rising. Just wait till Oakridge opens. So now the quiet streets, not quite planning terminology, but the quiet streets, 26th, 39th, et cetera and so on, they’ll be the next phase that density will come on.
The commercial brokerage community will advise and the quiet street landowners will all agree that when condos are built on their quiet streets, that they’re worth at least $50 per square foot more than condos that were built on the arterials.
And, to me, this is totally, totally, it just flies in the face, it’s contradictory to affordability. If the quiet streets and arterials were zoned at the same time, and easier said than done, based on supply and demand, the only way to create meaningful affordability is through supply.
Just like at the Independent, the developer will build into the consumer demand on building type and suite size and housing type. And I’m guessing, but on supply and demand, if a lot came on at once, Cambie probably would have been moved to 775 a foot and the quiet streets would have moved to maybe 825 a foot instead of the pressures that we see that they’re all $50 and $75 per square foot more.
To me, it’s a much simpler way to attack affordability is through supply. So no civil, civic government can afford to take the political risk if they want to continue governing. We’re never going to get ahead of the affordability issue with baby steps.
Density around transits should not even be a discussion. The R&D in the City of Vancouver has been done at Cambie and Marine. I’m watching transit stations, I think that the time has come to really inform community groups as to the consequences.
My suggestion is maybe the Urban Development Institute, everyone in this room, and CMHC should form a joint committee. Ben Smith in the office told me that UDI used to use “More homes for more people”. Take that name off the shelf, form a committee and really start to inform community groups as to the consequences of the “can’t age in place” and “your kids can’t live here” unless we come up with real creative solutions that allow planners and politicians to actually take the political risk.
If we don’t change things from today’s climate of “I want a detached home in a city that can’t provide it”, we could run the risk of our worst fear ever of Vancouver city ending up as a resort city.
So, there’s the headline. Seriously in all cities, not just Vancouver, not in my backyard, I believe it has to be one of the largest detractors to affordability. A suggestion is why can’t C-2 zoning go from four stories to six stories? When C-2 was enacted, my bet is was it was the zoning respected the limitations of wood framing construction at four stories. Structurally we can build six stories now.
A bold move would be count one signature from council and one from Brian and we’ve got six floors. Because Brian doesn’t have enough to do, but there’s not one person in this room that would trade jobs with Brian and being out on the front line, like he has to do.
But, if we could do something like that then we could, we could do a fifth floor, just Blue Sky, do it as all small suites and affordability to get our first-time buyers into the market and keep them in the neighborhood. Do them with no parking so we’re not adding congestion to the neighbourhood.
And then the sixth floor, if we could do something creative and for seniors to age in place and some sort of seniors living. It’s a very difficult problem. It’s very difficult to solve new problems, this new population growth with lack of supply when we’re dealing with old zoning.
And that young couple Biff and Buff they have to do one of two things: give up on the idea of a detached home or move out of the desired location. Or we have to offer Biff and Buff a new product type to keep them in the city. I believe that Nelson Rockefeller’s children and grandchildren cannot afford a house in Manhattan where they grew up. Can you find a house in Manhattan? I doubt it. Nor can kids in London or L. A. They’re all moving up or they’re moving out.
I ended last year’s talk saying, that if I owned Vancouver I would rezone the entire city to town homes. Of course, this is facetious, but that’s a ground-oriented solution, but you need scale. When Greater Vancouver’s population, knowing when greater Vancouver’s population has increased by 34,670 people every year since 1991. And Vancouver has grown by 7,776 every year since Expo ‘86.
I tend to use Expo ‘86 as a marker. That’s when we handed out our business card to the world and the world kept it. We did it again with the Olympics, and I think we’re doing it again with TED Talks. We have TED Talks here annually here now. I rank TED Talks as one of the big moves in our city. It is elitist. I think it’s 7,500 to 17,500 to attend for the week.
TED on the surface seems very insular and expensive, but the caliber of intellect that comes through our city during TED Talks will result in investment, and it will result in jobs, and the tens of millions of views on TED Talks reminds the world that we’re here.
So, back to populations. Knowing that for the next 15 years the trend will continue, can we get ahead of the curve and start to take this pressure off of affordability when there will be 5,000 people a year moving to Vancouver for the next 15 years? And there will be 39,000 people moving to greater Vancouver every year for the next 15 years.
So, when we looked at home equity in greater Vancouver, interesting stat, is today our 25 to 34-year-olds have 30% equity in their homes. And our under 25-year-olds have 46% equity in their homes. So how can the 25-year-olds have 46% equity in their home? This all ties to the massive amount of equity that our aging population is sitting on.
Our over 55-year-olds are sitting on $157 billion in clear title housing. Last year we were talking about and looking at the consumer and what consumers were looking for. Consumers are looking for a frictionless experience, not unlike some of my friend’s marriages. (laughter) Get it? (laughs) I have to do something while I’m writing this.
And last year we talked about energy centers, home buyers wanting to live where everything is an elevator ride away. You’re going to see a huge pressure on energy centers, their transit, their shopping, their restaurants and their entertainment. Wall Centre Central Park, the 1,009 sales that I mentioned, is an energy center. 46% of the buyers ranked location, close amenities as their number one factor in their purchasing decision.
At the Amazing Brentwood, 67% ranked amenities as the number one influencer in making their purchasing decision. An amazing energy center. I don’t think I’ll ever be able to name, participate in naming a project, an adjective again because even if you didn’t like Brentwood, you have to say, “I don’t like the Amazing Brentwood.” (laughter)
There are transit-oriented sites. These are all transit-oriented sites, not relying on the car. We’ll put up all of our car-sharing and transit information online. They’re both adjacent and around the Joyce and Brentwood Sky Train stations.
We haven’t talked about the transit referendum, but if I, if I could for a minute, we still have, what, eight days to vote. So, our choice is let’s continue to add congestion to our highways. Let’s slow down truckers and jobs and let’s use our tax dollars to widen roads, more policing, more emergency vehicles.
And let’s spend more of our tax dollars maintaining roads and let’s force our Millennials, who don’t want a car, to pay car insurance and risk their lives. But I can’t tell you how to vote. But, please vote. (laughs)
I could have guaranteed a “yes” outcome in the transit vote by having record voter turnout by adding just one more question to the ballet. Not advocating, just asking, “Do you believe we should legalize marijuana?” Not advocating, just asking. (laughter) Both boxes transit and marijuana would be checked yes, yes, by youth in a record turnout.
I do believe that this is how they got gay marriage through in Washington State. Yes, legalize marijuana, I don’t care what they do, Yes. (laughter) I would have also put something on for seniors, but we didn’t. And we would have had the data to know where we should go with it.
Since I saw you last year, we simplified our energy centre theory down to if we can walk to get a stick of butter, a cup of coffee and a prescription, you can build it and I can brand it. And I can brand it in the community. Strathcona Village is a great example, with a No Frills grocery down the block at Clark and Hastings.
I believe that it was Urban Fare that changed Terry Hui’s Concord. I believe No Frills is changing the Clark and Broadway area, just east of the downtown east side. Now that you can get that stick of butter, that cup of coffee and your prescription, it is livable, walkable and you don’t need a car.
I had 15 to 20 people email me a Bloomberg interview that David sort of alluded to earlier last month. Half was from my art world and half the emails were from real estate world. And, the article read, “Gold’s traditional role as a store of wealth has been usurped.”
According to Lawrence D. Fink, head of BlackRock, the world’s largest asset manager, quoted in his Bloomberg interview from Singapore, “The two greatest stores of wealth internationally today, one is contemporary art,” yes. And he said, “I don’t mean it as a joke. I mean it as a serious asset class of Fink. And, two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, and apartments in London.”
“Historically gold was a great instrument for storing wealth. Gold has lost its luster and there’s other mechanisms in which you can store wealth that are inflation-adjusted, contemporary art and condos, contemporary art and condos in New York and London and Vancouver.” The article went on to say, “Since peaking in 2011, gold has lost 38%.”
My takeaway is that gold is just one more example of why our risk-averse aging population runs back to the basics of real estate and the tenant pays off your mortgage. And our big win is we get rental supply. Okay, back to Larry Fink.
The problem is pretty powerful stuff from voices like Larry Fink and they’re, they’re not just listened to, they’re reacted to. So, you know what’s going to happen now from a Bloomberg article like this is there’s going to be a lot more pressure and a huge spotlight on contemporary art. (laughter) But if you want to talk about contemporary art, you’d have to stay until dinner, so I’ll leave that for another time.
But, on Larry Fink and condos, we’re a very special place on the planet. The pressure from this spotlight is added pressure to Vancouver. Comments like Larry Fink’s, TED Talks, we just touched on our weather, Expo ‘86, the Olympics, they’re all affecting our affordability and I don’t think we should pretend anymore. It’s really happening.
So, we’ll try and switch topics here. So what does Don Mattrick’s house, that sold for $51.4 million on Drummond at UBC, and Strathcona Village’s 230 homes that sold for under $399K on Hastings Street have in common? Nothing. Yet, we let economists convince us that these two products can be talked about in relation to affordability and average incomes in the same average home sales analysis. It makes great blog and Twitter fodder and earns us the most expensive title, but it is so misleading.
I don’t know whether you are, but I’m very concerned when Twitters and blogs sort of take on a party game mentality screwing with our market rather than offering us solutions. I’m always trying to understand why Vancouver works and why greater Vancouver works. And one of the best ways we have found to find the inventory that matches the incomes is by taking out the top 20% of those 21,000 condos and those 22,000 single family homes that registered in our Land Registry office last year.
So, we’ve removed the 20% and with the remaining 80%, it’s 17,000 single family homes and 16,000 condominiums, enough inventory to work with local incomes. A new realization yesterday, actually, in an interview I was doing, is when we are looking at the prices of condominiums.
We’re looking at registers through the Land Registry office and we’re always running 24 to 36 months behind because we sell it today, but it doesn’t get registered until two or three years later. So there might be a little bit of a false read happening there in the pre-sale condominiums.
So, before I break out the 80% at the City of Vancouver’s Affordability Summit last fall, my, my caution is, you know, again, should we be solving affordability on the most expensive land in Canada. But affordability is a regional problem, but this 1,000 square foot, three-bedroom condo that we’re trying to create, that three bedroom unit in the bottom of a tower for, what, $750,000.
Addition, the project we’re doing on Hornby, I believe will be the last development that we see for a long time in downtown Vancouver under $800 per square foot. So purchasers considering a 1,000 square foot, $750,000 three-bedroom family unit, they’re not just shopping tower to tower anymore.
They’re looking at a detached home in Squamish, at Crumpit Woods where you would get a 3,000 square foot lot and a new home in the mid-sevens. It’s no longer in the fives. They’re comparing the $750,000 condo downtown to a new home in Tsawwassen, out at Tsawwassen Shores under 600,000. Or they’ll take a great townhouse in Coquitlam, or they’ll take 25% more product in a tower in Burnaby.
Let me share a real conversation with you. My girlfriend and I thought… I can’t remember the last time I said that. (laughter) Get it, do you get it? (laughs) My girlfriend and I thought Delta or Surrey, we wanted, knew one day we’ll want to raise a family.
This is the thought process of a 28-year-old, fully tattooed out Japanese hipster, they gave me permission to say this, that sells designer clothing at Roden Gray at Gastown. He and his common-law wife bought a $640,000 home in Langley. They didn’t buy on Main Street at the Independent. They didn’t buy in Yaletown at Yaletown Park. They didn’t buy at Strathcona Village.
So much for all this demographic profiling that we try and put the right figure in each ad and we try and figure out who’s going to buy it. So, the top 20% of 200 of last year’s sales has nothing to do with local incomes and it has more to do with China and rich guys with their massive home equity.
Of the 642,000 home, household home occupiers in greater Vancouver they’re sitting on $311 billion dollars in wealth. Just to let you know the amount of tax free money that’s floating out there, and a sense of entitlement that might come with a lot of their children. 271,000 of the 642,000 are clear title. Of those 75-year-olds, 83% of their homes are all clear title.
Our aging Baby Boomer population over 55 is sitting on 71% of greater Vancouver’s clear title housing. That’s 193,000 homes. And just look at that aging population, add 15 years to these 55 year olds, when they’re 70, 85, and 90-years-old, so the ones sitting on the 157 billion.
So, another big influencer on purchasing power is this transfer of wealth. Between 2009 and 2014, there were 4,500 homes sold in greater Vancouver each year due to mortality, moving to an institution, or moving out of the province. And so you go, “Okay, that’s everyone leaving the province,” but 95% of them were over 75-years-old, so it’s mortality.
In 2001, there was $800 million transferred from this demographic. Last year there was $3.2 billion. And, by 2024, it’ll be over $5 billion. That’s not all coming into the housing market, but that is money that is being distributed that helps with a lot of down payments out there.
The 80%, the 17,000 single family homes and the 16,000 condominiums does address local incomes. The reason that we split out the 20% and the 80% is I’m trying to understand, and we should all understand, who’s in the Bentley dealership and who’s in the Prius dealership. 2014’s 22,000 single-family homes averaged $1,072,000, for Vancouver, that’s 1.7 million plus.
The top 20% averaged 2.4 million, but that remaining 80%, the average drops on those 17,000 homes down to $729,000 would require a household income of $106,000. So, two people earning $53,000 a year, but they would need $182,000 down.
The affordability story gets better with condos. The average 21,000 condos last year was $435,000, the top 20% that averages 866 with the most expensive condo sold last year in Vancouver was $16.6 million. But, that 80%, the average drops to 327,000 that with 25% down, $82,000, you only have to earn $47,900 a year. So, then we start to find that affordability. Or, in a two-person household, if you just put 10% down, you put $32,000 down, it works with $106,000 also.
So, I told you earlier that our in-depth polling found that 89% of Baby Boomers are recommending home ownership. 48% of visible and non-visible minorities will help their kids, so it all starts to add up. When we have this much inventory that works with local incomes and our polling shows that our under 35-year-old Millennials are reporting in at 80% say that we’re on the right track. They’re happy.
So I point the 80% out that if buyer sentiment and confidence isn’t there, it doesn’t matter what we built. With the Millennials, it is there. I’m also convinced that the aging Baby Boomers sitting on the 157 billion in clear title, they’re a lot happier than they’re reporting. I’m putting them in my passive aggressive file.
And those 2,307 sales at Brentwood and Burnaby, Strathcona Village, Independent and Wall Centre, with only 2.2% of the sales being off shore and 1.1% from Europe, demonstrates clearly that the demand we’re seeing over 60% being within 10 kilometers, that the local demand is there. Even if the buyers are lying, multiply it times three. Tell me there’s 6.6% are off shore, it’s still locals that are driving it.
We need the rental stock. We have to figure out how to get that supply. And, I will throw this into the mix as much as possible at transit stations, get us out of the car. For Grandview and Woodlands, I’ll be shot for this, but build towers, but build them without parking. Take that congestion away from the community, but give me the density of transit. Can we get ahead of the curve and not take the two to three years, as I already said, to get through the density?
We need an emerging pattern that interests me, is how today’s homeowner gathers information. They look at what I call the meat in the sandwich. If we look at New Westminster, New Westminster and the homebuyer both reacted to Surrey to the east and Metrotown to the west. Robert Fung is sitting on one unsold unit and occupancy permit at T & H, Trapp+Holbrook in New West.
And every time Rize, Colin Bosa and Shawn Hodgins had success in Surrey, then breaking $450 per square foot. And, I believe today Rob Macdonald and Jon Stovell are selling micro suites and they’re breaking 500 per square foot. But every time that Surrey broke $450 per square foot and had success that helped T+H and at the same time Anthem and Beedie were breaking then 625 a foot in Metrotown.
New Westminster became the meat in the sandwich and T+H would have a run on sales as consumers saw value in New West compared to the shouldering cities. So, look for that meat in the sandwich and try to understand how consumers react. And now that downtown, with everything breaking $800 per square foot, everything east of it is going to react to it.
I was reading through earlier UDI talks and one that I gave in 2013, I was warning you about all these economists’ predictions. Economists pushing what believed home buyers to the sidelines with the refusal to understand that not all greater Vancouver sales are reliant on local incomes, which is why we do the 20%. In, in 2013, we had the TD Bank, uh, fore … Are they sponsoring? (laughter)
We had the TD forecasting a 10% drop. Fitch Ratings predicted a 20% drop. And Capital Economics had their David Madani out without a leash on protecting a 25% drop. So, what does that do when these economists come out with that? They just push first time buyers to the sidelines. The parents go, “It’s going to fall and now look where we’re at.”
Back in 2013, in a column that journalist Allen Garr wrote in the Courier, it’s all anecdotal. There are no concrete facts. These are all myths. Where are the facts? So, my fear is that without real data and only sound bites we send local buyers, as I said, to the sidelines while the world realizes what a wonderful, safe, clean, smart place to live Vancouver is.
Foreign money isn’t speculating. We read it all wrong. If you, if any of us lived in a country where there’s a threat of sudden government intervention and taxation, forfeiture, seizure and oversight, we would look for a safer place, a place with certainty, a place that accepts diversity.
Here we go, the water cooler conversation is do we tax foreign investment? What I find wonderful is we’re debating this in front of our Squamish, Tsleil Waututh and Musqueam First Nation bands, some being in the room. The fact that we are worried that China is taking our land and we’re taxing them for doing so, taxing foreign investment on residential housing.
So residential real estate is my core competency, so I think I have to answer the question. But, first the conversations aren’t about foreign taxation. The conversations are about China. That’s the elephant in the room. Should we tax foreign investment? Thank you very much. (laughter)
Should we tax foreign investment? I don’t know why I felt that I should address it, but it just seems to be something that we’re talking about so much and I want to get it away from race. So I say, no. Big surprise. I say it is not about foreigners. We’re all foreigners except for a few gentlemen in this room. It is speculation that we should be concerned about.
Australia restricts foreign investors to new properties. In an 810 page report, the findings are that it is locals with debt finance speculation that have caused the huge price increases, not the 15% of foreign investment in Australia. When I see an Independent and a Strathcona Village having over 60% of their buyers from within 10 kilometers, it’s a misread.
The Asians that are buying are locals. The over $4 million homes, well, they’re over $4 million because we don’t have supply. If I thought a tax would create more of them, let’s tax them. It’s not going to create more of them. I do not like the current conversations.
To me, the most racist word is the world is white. It’s used to describe those that aren’t white. This isn’t the Canada that we all think we live in. I’m concerned that we will be sending out a message to all of our foreign investors from India to Indonesia that if you tax foreign investment on housing on a Monday that you may tax foreign investment on technology, on LNG, and on manufacturing by Friday, hurting job creation.
I suggest we look at a declining tax that sees a percentage of profits taxed if a home is sold whether it’s three months, whether it’s six months, or if it’s sold within 18 months to where the government is already collecting 23.5% capital gains tax after you rent something out and own it for whatever your tax is.
I’m leaning in this direction for two reasons. The first is I hate the racist undertone that is rampant out there, so I think we need a visible, measurable gesture. It’s why I’m suggesting the declining tax. And, second if speculation is a huge negative contributor to affordability then let’s repatriate some of the money back to our first-time buyers that we collect.
Perhaps a $5,000, $10,000 or $15,000 grant based on length of residency or income. Or if you can prove that you don’t have a parent or a grandparent sitting on part of the 157 billion. I don’t know the answer. The vacant home discussion, varies city to city, so that might be a surcharge on your property taxes. Why? Why should we do that? I think to create a cut your grass fund and a fire and safety monitoring fund.
Let’s look at it on logic. So I dropped the pebble in the pond. Someone a lot smarter than me can figure out where this conversation needs to carry on. It’s a tough one for me to come up with, but I put a lot of thought into it and I just think that, you know, we’ve got the Feds here with Collin Metcalf. We’ve got the city here. We’ve got the who’s who from the province, but I think if we could just start talking about these things logically. And, if we do none of it, at least it’s through conversation.
So next year, a few things that we might be talking about that I see as big game changers. Emily Carr University will change the False Creek Flats forever. St. Paul’s Hospital on the existing site … Maybe this is the first city land that we’ll see under a 99-year lease, seeing that Bob Lee is part of that board and UBC, with their 99-year lease, I wouldn’t be surprised. The new site, watch the city center shift, tearing down the Georgia Viaduct will blur the lines between the downtown east side and the Concord lands.
The post office redevelopment by Bentall will start to move the city center east. The transit vote. I don’t think I need to say anything else. Lougheed Town Center, watch affordability be solved with a new energy center. Jericho Lands, will we see density? So, density, but will we see transit that go to the Jericho Lands.
So we covered a lot of ground today, some really tough topics. We’re all at a crossroads. Neighborhoods and communities are sacred and they’re scared. Just move the letters around. How do we want to keep families, youth and energy and how do we want to keep our seniors in the city? And we want to keep good government in office. The political risk is tough.
But we cannot ignore the fact that we are trying to do it on the most expensive land in Canada and with the most limited supply of single family and affordability is a Vancouver issue and it’s a regional issue.
You know, the dilemma, I don’t know whether this makes sense to you, is we’re all running around wanting yesterday back, but we’re holding an iPhone. So, you can’t have them both. We’re moving along. So can I tell you one last story, then I’ll step down.
So, 17 of us were invited to spend two hours over tea with the Dalai Lama when he was in Vancouver, I think it was in November. And tea was to be on a Tuesday and on the Friday before I phoned over to the organizers and phoned them that I don’t think I should be attending. “I think I’m only there for the photo opp. That’s not fair to His Holiness and I really don’t know whether I’m prepared to support the Dalai Lama Center for Peace.”
They said that “His Holiness is not asking you to support it. We just would like you to be there so that we could explain it to you.” They asked me think about it and call them on Monday. I thought about it and I called back on the Monday and I said, “I’ll attend.” It seemed very Buddhist to me, very balanced. They weren’t asking and I didn’t have to commit.
The Dalai Lama came into the room and seriously, like a school kid, all is I could think of is, “I don’t have a question. I don’t have a question.” So what, do I need anything answered. Nothing. And I was starting to get embarrassed in my head, right? So, as I sat through and listened to others.
And all of a sudden I put up my hand, like I was in grade three, and I said, “Your Holiness,” I said, “As I look around the table, everyone at this table has resources, not financial, but we have the resources that we can, if we have a problem, even though we just met, we can all phone each other and try and resolve our problems. Or they can point us, we’re six degrees of separation from anything we need.” I didn’t say the six degrees to him. (laughs)
“And, when I hear, when I hear Yuri at the end of the table tell me that when, with A&W, that when he hires 16-year-olds they come to work looking for the parental guidance that they don’t get at home. And then when I see what’s going on in America. And I said to him, We’re not India. We don’t have a caste system. We’re not happy with our lot in life, where everybody is understands their position in life and they all work together with a diversity.”
“In North America, we’re all taught that everybody can have it all. Yet, what we’re seeing in America now, where people have nothing to lose, they will resort to anything because there’s no risk of loss. And I don’t like what I see going on in America. I’m worried. Your Holiness, what should we do?”
The Dalai Lama placed his hands on the table and he said, “I like this thinking. I like that we’re thinking like this.” And he leans over to his interpreter and he says something to him and he looks back and he says again, “This is good. We like you thinking like this.” And, all is I can think of is, Yes, I passed. I passed the quiz. (laughs)
And then before His Holiness could speak the moderator hits the desk and says, “Let’s bring this to a wrap.” I didn’t get an answer to my question. So I came back to the office and I said to them, “I was looking for a magic answer. I was looking for magic beans, a civil, a silver bullet, but there is no answer.” We have to figure it out ourselves, but we have to be prepared to ask the question.