Does anyone else wonder how someone can pay $2 million in cash to buy a home and the vast majority of sales are generated through referrals? Does this not set off alarms bells for you? Click here to read the full story or an excerpt below.
As far as overheated markets go, Vancouver’s is without equal in Canada. The average sale price for a detached house in the city proper stood at $2.2 million in September 2015; in the city of Toronto, by comparison, the equivalent number was $1.05 million while in Calgary it was $523,434. And nowhere has the action been more intense than on Vancouver’s west side, where the median sales price was pushing $2.87 million by September 2015 and where most of what might be considered “luxury” homes—those selling for over $4 million—were sold. In the first six months of this year, 206 houses in Vancouver sold for more than $4 million and 722 for between $2 million and $4 million. In Toronto, by contrast—a market three times as big as Vancouver’s—only 70 homes sold for more than $4 million and 790 for between $2 million and $4 million over the same time period.
To better understand what is driving Vancouver’s luxury market, BCBusiness dove deep into a number of transactions on one westside street: Angus Drive. We looked at a random sample of 40 of the 52 homes that sold between 2012 and 2014 on the north-south street bisecting Shaughnessy and Kerrisdale, and spoke to seven realtors and a variety of real estate experts to understand what’s moving the market to unprecedented heights. What do we mean by heights? In one case, a house that sold for $2.1 million in 2009 sold again for $6.95 million in 2013. A property that went for $2.9 million in 2012—with a Tudor teardown quickly replaced by a “Tudor-inspired” mansion with double the square footage—went for $7.96 million two years later. And sales are far from cooling down. In a normal six-month period, 20 to 30 houses sell in Shaughnessy; in the first nine months of 2015, the number was 110. “The market is crazy, crazy nuts,” says Les Twarog, a realtor with Re/Max Crest Westside who has specialized in the area for the last five years.
A key concern with the rapid rise in prices is the disconnect between those prices and local incomes. The average household income in Toronto’s pricey Bridle Path and Lawrence Park neighbourhoods (the equivalent of Vancouver’s west side) is $205,000 while the median selling price is $2.87 million; in Shaughnessy, where the average selling price in the first six months of 2015 was $6.5 million, the average household income is just over $135,000. According to many of the realtors BCBusiness spoke to, it’s not local incomes buying those homes. “Vancouver doesn’t pay steep enough salaries for these sorts of properties,” says Greg Carros, a westside realtor with Engel & Völkers. “Years ago he we would see doctors, lawyers, but not at these price levels.”
According to Vivian Li, a realtor with Sutton Realty—who sold $120 million worth of property, around 60 per cent of it in Shaughnessy, in the first nine months of 2015—it’s business owners, often with overseas interests, who are buying in Shaughnessy. Many of those buyers tend to be immigrants, largely from Mainland China, say realtors—although that’s not universally the case. “Newcomers don’t immediately buy a $5-million house,” says Peter Saito of Sutton Realty. The majority of buyers are trading up, he says: having lived in Vancouver for a few years, they or their family are now moving from a $2-million property to a $4-million or $5-million one. And according to BCBusiness’s research, 30 per cent of the homes sold on Angus Drive between 2012 and 2014 were paid all in cash.
Regardless of whether they’re wealthy immigrant investors or residents trading up, taking out a mortgage or paying in cash, what they all have in common, say realtors, is that they don’t shop at open houses and they rarely use MLS. The vast majority of sales are generated through referrals: friends, relatives, business partners—and immigration consultants. Indeed, several realtors credit at least half of their business to referrals from immigration consultants. Many of those consultants, based in Vancouver and Toronto, run websites and operate booths at exhibitions in Shanghai and Beijing; along with brokers from Australia, California, New Zealand and Europe, these firms market the Canadian lifestyle (clean air, good schools and a house with a yard) with links to listings. One firm—Can-Reach (Pacific) Consultants, with offices in Richmond—even offers to set up prospective immigrants with a mortgage broker, realtor, lawyer and local furniture store.
“If you’re a landed immigrant, you’re pulling in money from somewhere else,” says Cameron Muir, economist at the B.C. Real Estate Association. “And if that’s the definition, then we’re all foreign investors. Of the money that you and I and everyone else have invested in the Canadian pension plan, 60 per cent comes from abroad. Are you suggesting we all give that up and divest?”
3. Buyers on Angus Drive are typically businessmen, homemakers or numbered companies
Of the transactions analyzed, 10 owners listed on the title were identified as homemakers, 15 as businessmen and 16 were a combination of the two; two were students, two were doctors (surgeon, hematologist), one was a media agent, while one property was owned by a numbered company registered at the same address as an immigration lawyer. “The role of ‘unconventional buyers’– housewives, students and self-employed–is notable,” says UBC’s David Ley.