The Vancouver Real-Estate Market is Completely Insane

[mbarrick]

OK, the question of renting vs. buying came up in a friend's journal today. Coincidentally a flyer for the Shangri-La (the 60-storey hotel/apartment building going up a block away) arrived today at home. Looking at the floor plans for the apartment starting at $2,050,000.00 I was struck by three things:

1. The boldface lie on the flyer about 360° views when the floor-plans clearly show solid walls on at least two sides of the apartments. Given the shape of the building the best possible panorama from these apartments in the $2-3 million dollar range is about 135°
2. None of the floor plans show any separation between the formal living room, the dining room, the "family" room (I don't expect there will be a lot of families in these two-bedroom apartments) and the kitchen. For over two million dollars I don't want my my fridge, stove and kitchen sink basically sitting in the middle of the living room. They are trying to pass off one big room with the with the kitchen appliances off to one side and and a kitchen island taking up space (and immovable because it contains the sink) floating off-centre in the middle of the room as 4-5 "rooms" (kitchen, breakfast nook, family sitting room, dining room and living room). These are much more like the open studio spaces I've had in the past, only with separate bedrooms of to the side.
3. The size. On the "cheap" end of the scale (i.e. $2,050,000.00) the apartments are just shy of 2400 sq. ft.  The floor plan actually says, "2387 sf 2-Bedroom + Family Room" - and as I mention, the "Family Room" is actually one end of the the kitchen/living-room/sitting-room with no division. A 25-year mortgage on $2,050,000.00 assuming 95% funding with the CMHC first-time homeowner programme and a locked-in interest rate of 6.75% gets you the convenient monthly payments of $13,341.35. Now, here I have two bedrooms, a separate kitchen with a pantry, a dining room with pocket doors to close it off from the living (the dining room is being used as an office), a sitting room, and a full bath, coming in about about 1,900 sq. ft. Believe me, I am paying significantly less than $13,341.25/month. What does waay over $10,000 get extra? The view from an apartment 35 storeys higher than the tallest ladder truck the VFD has, 1½ extra bathrooms (but no claw-foot tub), two walk-in closets, in-suite laundry, and a gas fireplace, totalling about the 500 square foot difference. Even considering allowable rent increases, I'd have to live to be about 100 years old and stay in this apartment for the next 60 years for my rent paid to approach $2,000,000.00. It would take two people with no kids each earning net $100,000/year to afford one of these apartments with enough money left over to maintain the same lifestyle Elaine and I have. The people buying these apartments are idiots.

Renting vs. buying in downtown Vancouver these days? No contest.

Comments

[sheilamarie.livejournal.com]

Well, in 5 years if they decide to move, they'll have some of the money they've been paying towards the mortgage plus "instant" equity while you might get your deposit back. Usually people who can afford 2.5 million dollar apartments aren't first time buyers (if they are, they are making much more than 200K a year). The earlier you buy into such a place, the higher the "instant" equity goes up once it's built (we have roughly 50,000 in our home simply because we bought in before the ground was cleared) So, from a purely financial stand point, it makes much more sense to buy unless you plan to be in a place less than a year.

Putting emotions back into the mix, anything on land of less than a 1/4 acre sounds completely unappealing to me.

[mbarrick.livejournal.com]

Everything you say would be entirely true for someone buying a home on the outskirts of the city, or was true of anyone who bought strata-title more than five years or so ago. Problem is, you're applying the rules of a normal market to a the very abnormal situation that exists in this city and with this building in particular. The equity only exisits if the market stays level or goes up. And I don't think your "emotional" feeling that anything less than a ¼ acre isn't worth it, we are talking about strata-title here, not land, and there has been an unprecedented change in the market for strata properties in Vancouver this year that anyone paying these prices is clearly not paying attention to. There are thousands of apartments being built in the downtown core as I write this because height restrictions have recently been loosened by 33% (this tower will be the first 600-foot tower in a zone previous capped at 450-feet, and there are scores of 450-foot towers going up in what was previously the 338-foot zone) and speculation around the supposed "boom" the 2010 Olympics will bring (no one, it seems, remembers how quickly the shine faded after Expo 86 and that it took over a decade to recover). The only thing that makes these apartments "worth" the money being asked for them is that this building will temporarily be the tallest in the city and the apartments start above the level of the current tallest buildings. The "uniqueness" of these units, and their value with it, disappears the mintue another another building goes over 40 storeys. A block north of this building a 42 storey apartment is already being constructed. Directly across the street there is a proposal for a 52 storey apartment. These apartments are poised to drop in value dramatically not only when they lose their uniqueness, but when the bubble bursts on the inflated market that exists in this city at the moment. Right now only someone with more money than brains would buy anything downtown.

You're also completely right about the $200K income. No one making that would actually be able to get a mortgage on one of these apartments. The debt to income ratio wouldn't fly with any lender. I know of two people who have in fact already puchased two of the most expensive suites in the building. The top floor, which is one large apartment, is going to one of the associates in the development company handling the construction and marketing of the building. Another of the upper floors has been sold to some guy from a small town outside Seattle named Bill, who certainly won't even blink over losing a million or five a few years from now.

These are strange days for this city.